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Doing Business in China
 
 
 
Doing Business in China

China has abundant resources, beautiful environment and amiable climate, which is suitable for foreign investments with various types and various scales. The area of Chinese land is more than 9,600,000 sq. km., which is only next to Russia and Canada. The climate is characteristic in both continental monsoon climate and complicated climate. From the south to the north, it covers equatorial zone, tropical zone, subtropical zone, warm temperate zone, temperate zone, and cold temperate zone. The regional natural conditions differ greatly and the variety is obvious.

In terms of resources, the Chinese agricultural resource is abundant. Various planting and breeding such as farming, forestry, livestock breeding and fishing are all advanced. The specifications are complete and the production system is perfect. Several dozens of mineral resources list in the first several places in the world. The natural reserves are great. China is one of several big countries in resources in the world. Thus, China has advantages in introducing resources and foreign investment. Meanwhile, the abundant natural resources also provide foreign investors of various manufacturing even service industry with excellent support.

In recent years, the construction of Chinese infrastructure has been improved greatly. The infrastructure in transportation, communication, and the supply of water, electricity and natural gas is almost complete. The ability of supply and quality of energies, raw materials and components has been improved obviously, which provides foreign investors with excellent external conditions in production and operation.

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The foreign investments are basically divided into direct investment and other means of investment. The direct investment, which is widely adopted, includes Sino-foreign joint ventures, joint exploitation and exclusively foreign-owned enterprises, foreign-funded share-holding companies and joint development. The other means of investment includes compensation trade and processing and assembling.

1. Sino-foreign joint ventures
Sino-foreign joint ventures are also known as share-holding corporations. They are formed in China with joint capitals by foreign companies, enterprises, other economic organizations and individuals with Chinese companies, enterprises, other economic organizations and individuals. The main feature is that the joint parties invest together, operate together, take risk according to the ratio of their capitals and take responsibility of losses and profits. The capitals from different parties are translated into the ratios of capitals, and in general the capital from foreign party should not be lower than 25%.
The Sino-foreign joint ventures are among the first forms of China's absorption of foreign direct investment and they account for the biggest part. At present they are still a great part in the absorption of foreign investments.

2. Cooperative businesses
Cooperative business is also called contractual cooperation businesses. They are formed in China with joint capitals or terms of cooperation by foreign companies, enterprises, other economic organizations and individuals with Chinese companies, enterprises, other economic organizations and individuals. The rights and obligations of different parties are embedded in the contract. To establish a cooperative business, the foreign party, generally speaking, supplies all or most of the capital while Chinese party supplies land, factory buildings, and useful facilities, and also some supply a certain amount of capital, too.

3. Exclusively foreign-owned enterprises
Exclusively foreign-owned enterprises, which are totally invested by foreign party in China by foreign companies, enterprises, other economic organizations and individuals in accordance with laws of China. According to the law of foreign-funded enterprises, the establishment of foreign enterprises should benefit the development of our national economy and agree with at least one of the following criteria: the enterprises must adopt international advanced technology and facility; all or most of the products must be export-oriented. The foreign funded enterprises often take the form of limited liability.

4. Joint exploitation
Joint exploitation is the abbreviation of maritime and overland oil joint exploitation. It is a widely adopted measure of economic cooperation in the international natural resources field. The striking features are high risk, high investment and high reward. The joint development is often divided into three steps: exploitation, development and production. Compared with the other three means mentioned above, joint cooperation accounts for a small ratio.

5. Foreign-funded share-holding companies Foreign companies, enterprises, other economic organizations and individuals can form foreign funded share-holding companies in China with Chinese companies, enterprises, and other economic organizations. The total capital of the share-holding company is formed by equal shares,shareholders will take due responsibilities for the company according to shares purchased; company will take responsibilities for all its debts through all its assets and the Chinese and foreign shareholders will hold the shares of the company. Among them, the shares purchased and held by foreign investors account for more than 25% of the total registered capital of the company. Limited company can be founded either by means of starting-up or raising, and the limited liability company invested by the foreigners can also apply to turn into share-holding companies. The qualified enterprises can also apply to issue A & B share and list abroad.

6. New types of foreign investment While expanding areas and opening-up domestic market, China is also exploring and expanding actively its new types of utilizing foreign investment such as BOT, investment company and so on. Since multinational merger and acquisition has become the major type of international direct investment, Chinese government is now researching and enacting related policies so as to facilitate the foreigners to invest in China by means of merger and acquisition.

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Currently, service industry plays a more and more important role in economy development. It has become a trend for global economy development to greatly development service industry. As we can see from the history of economy development all over the world that the rule shown due to industry structure change is that the shares agriculture accounts for in the economic regulation lessen consistently, industry shares in the industrialization phrase increase rapidly, the output ratio of service industry is even relatively but rises nonstop and finally keeps a steady status at a high level, and meanwhile, the labor forces transfers from manufacturing industry to service industry and creates a service industry-leading situation.

Recently, with China 's national economy developing rapidly, industry structure upgrades gradually, China 's service industry also makes great progress. In 2007, Chinese service industry realization added value reached RMB9.60t, up by11.4% year-on-year. However, the situation of service industry development lagging behind hasn't changed fundamentally, and the ratio of national service industries in GDP declines. Compared with developed countries, the ration is rather low. Thus developing service industries is significant, which embodies in such respects as enlarging employment scope, changing ways of economy growth and fulfilling scientific outlook on development.

Regarding the opening up, after joining WTO, China broadened the degree of opening up in service industry proactively and orderly. Chinese governments issued new laws, regulations and rules on entry into the foreign capital markets for important service trade fields. The law system of China 's service industry absorbing foreign capital is improving. Transparency of policies is further raised. China will continue to enlarge opening-up fields and the scale of absorbing foreign direct investment. In 2007, projects of service industry utilizing foreign capital was 16736, accounting for 44.20% and actual utilizing foreign capital amount stood at USD31b, accounting for 41.55%.

At present, on the base of promise, China has fulfilled WTO responsibilities in lots of service departments such as commerce, communication, building, distribution, finance tourism, transportation, etc. According to the practical situation, China even fulfilled its promise made when joining WTO ahead of time in such fields as insurance service and tourism service.

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