FAQs---Frequently asked questions

Q: What shall be included in the contract of a Sino-foreign joint venture?
A: (1) The general;
(2) Each party of the joint venture;
(3) The establishment of the corporation;
(4) The purpose, scope and scale of production and management;
(5) Total investment and registered capital;
(6) The responsibility of each party;
(7) Technological transfer;
(8) Sales of product;
(9) Board of directors;
(10) Management organization;
(11) Purchase of equipment;
(12) Preparation and construction;
(13) Management of production;
(14) Taxation, finance and audit;
(15) Term for joint venture;
(16) Handling of property after the term of joint-venture expires;
(17) Insurance;
(18) Modification, alteration and termination of the contract;
(19) Responsibility for breaking the contract;
(20) Force majeure;
(21) Suitability for law;
(22) Settlement of disputes;
(23) Wording;
(24) Effect of the contract and others.

Q: What are the requirements for setting up an investment company?
A: The applicant in applying for setting up an investment company should conform to the following requirements:
(1) a. The foreign investor should have good credit status and solid financial background for an investment company, with no less than USD400 million of total assets in the previous year. Also, the investor should already have set up foreign invested enterprises within China whose registered capital should exceed USD 10 million, and have three projects whose proposals have already been approved.
Or: b. The foreign investor should have good credit status and solid financial background for an investment company. The investor has already set up over 10 foreign invested enterprises engaged in manufacturing or construction of infrastructural utilities, with its actual paid-in registered capital exceeding USD 30 million;
(1) If the investment company is a joint venture, the Chinese investor should have a good credit status, with solid financial; background and no less than RMB 100 million of total assets;
(2) The registered capital of an investment company should be no less than USD 30 million.

Q:What organization is responsible for the examination and approval of Sino-foreign funded financial institutions?
A: The application will be submitted to the General Office of the People's Bank of China for approval after its first examination by the Shanghai Branch of the People's Bank of China.

Q: Are there any differences between cooperative enterprises and joint ventures?
A: The main difference between cooperative enterprises and joint ventures lies in the fact that shares are not calculated merely by capital and that profit is divided not according to the proportion of shares but according to the investment-distribution ratio based on the content.

Q: How does a Sino-foreign joint venture divide its profit?
A: The profit is divided according to the proportion of each party's investment to the total capital.

Q: How does a Sino-foreign cooperative enterprise divide its profit?
A:The profit or product is divided, and risk and loss are shared according to the agreement in the contract.

Q: What if the contract of a Sino-foreign joint venture which has already been signed conflicts with the newly promulgated law?
A:The contracts carried out inside the border of China, such as that of Sino-foreign joint ventures, of Sion-foreign cooperative enterprises and of Sino-foreign collectively exploring and developing natural resources, can still be carried out according to the contract even if there is a new law.

Q: What are the regulations on foreign investor's proportion in a jointly invested or solely foreign-funded enterprise?
A: A foreign investor's investment can not be less than 25% of the registered capital in a Sino-foreign joint venture.

Q: What is the lowest investment quota of overseas businessmen in a jointly invested or solely foreign-funded enterprise?
A: The lowest investment of an overseas businessman in a Sino-foreign joint venture or a wholly foreign-invested enterprise shall be no less than USD 200,000 and that in a foreign funded enterprise shall be no less than USD 200,000.

Q: By what means of forms can a Sino-foreign joint venture pay the investment?
A: Each party of the joint venture can invest by means of either money or other things that can be evaluated in terms of money like buildings, machinery, materials, industrial property right, know-how and land-using right. Each party cannot draw back its capital within the term of joint venture.

Q: What shall be done if the foreign party wants to withdraw its shares?
A: (1) The board of directors shall decide to terminate the joint venture ahead of schedule;
(2) The joint venture shall work out its liquidation account according to the regulations;
(3) The property after liquidation shall be allocated to each party according to the proportion of their investments.

Q: What if a wholly foreign-owned enterprise's fiscal year is different from the calendar year?
A: If a wholly foreign-owned enterprise has some difficulty in paying taxes according to the tax year stipulated in the Tax Law, it can apply to the local tax authorities. After approval, it can pay taxes according to the enterprise's own fiscal year which includes twelve months.

Q: Can a foreign invested enterprise which has already been registered reduce or increase its registered capital?
A:A foreign-invested enterprise can increase its registered capital during its operation period, but the increase must be unanimously approved and decided by board meeting and then it must be submitted to the original approval authority for examination and approval.
If the increased amount exceeds the authority of the original examination and approval authority, the application should be submitted to a higher authority by the original examination and approval authority.
A foreign-invested enterprise usually is not allowed to reduce its registered capital during its operation period. If there are justified reasons, the application should be submitted to the original examination and approval authority according to relevant laws and regulations of the State.

Q: Can a registered foreign invested enterprise enlarge its business scope?
A: A foreign-invested enterprise can enlarge its business scope during its operation period, provided that the investors' capital contribution has been paid up. The application shall be submitted to the original examination and approval authority.

Q: What is an export-oriented enterprise?
A:A manufacturing enterprise whose export volume(including export on its own or via an agent) accounts for over 50% of its annual sales, and who has a surplus of foreign exchange and has made a profit during the year, is deemed as an export-oriented enterprise.

Q: What is an advanced hi-tech enterprise?
A: A manufacturing enterprise which is in conformity with the State's Industrial Guidance and which adopts internationally advanced and applicable process for manufacturing, technology, and equipment, whose products's quality and technology take the lenad in the domestic marker, can be acknowledged as an advanced hi-tech enterprise. In getting that name, a foreign invested company should first apply to Shanghai Foreign Investment Commission and get verified after examination. Examinations will be carried out every year.

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