The laws and regulation of foreign investment mainly include three aspects: project approval, investment guidance and foreign exchange controls. And the related authorities are Ministry of Commerce, National Development and Reform Commission and the Administration of Foreign Exchange. The general regulation are as follow: “Management measures on foreign investment” issued by Ministry of Commerce, “Interim Measures on approval of foreign investment projects” issued by National Development and Reform Commission, and “Regulations on foreign exchange control” issued by Administration of Foreign Exchange
2.“Management measures on foreign investment”(“the Measures”)
The Measures is the most important rules regulating foreign investment which becomes effective on May 1, 2009. The officers of Ministry of Commerce explains the key points of the measure. First, to promote the facilitation of foreign investment; secondly, strengthen the service for the enterprises.
2.1 Promotion foreign investment facilitation
2.1.1 The approval authority mainly belongs to the provincial departments.
2.1.2 To simplify the approval process and enterprise application materials to reduce approval time. According to Article VIII of the Measure, the enterprises only need to file the application form and can get the foreign investment Certificate within 3 days.
2.1.3 To reduce the procedure of consultant views from the relative department of diplomacy overseas.
2.2 Key points of the management
The Ministry of Commerce and its local departments mainly review the project of foreign investment in such aspects as bilateral political and economic relations, national economic security, fulfilling international obligations, and etc.
2.3 Emphasis on service
The Ministry of Commerce and its local departments will establish “the service system of foreign investment and cooperation” to provide information and advices, and establish and improve multilateral/bilateral trade and economic cooperation mechanism. Foreign investment can be promoted through the multilateral/bilateral trade and economic discussion and trade promotion mechanism. By signing the bilateral investment promotion agreements and avoidance of double taxation agreement, the authorities will also strengthen the communication with other governments and create the friendly international environment.
2.4 application and approval
2.4.1 Approval authority. The Measure clarify the approval authority. 5 types of foreign investment are to be approved by The Ministry of Commerce while 4 types are to be approved by the provincial authorities.
2.4.2 The time limits for approval
According to the Measure, application documents shall be accepted or returned within 5 working days, and then be approved or disapproved within 15 working days regardless of the authority of approval. As to other investment, the authorities shall conduct formal examination and make decisions within 3 working days upon receipt of the application documents.
2.4.3 Validity Term of Approval
The Measure provides that the commercial authorities will issue the “foreign investment approval certificate of P.R.C” when the application is approved. The Validity term of the Certificate is 2 years. Therefore the enterprises shall go through relative formalities within 2 years upon receipt of the Certificate.
3. " Interim Measures on approval of foreign investment projects" (“Interim Measures”)
On October 9th, 2004, the National Development and Reform Commission (“Commission”)issued the “Interim Measures which have general provision on the management and approval of foreign investment with resources development or projects of foreign investment which need large amounts of foreign currency.
Resources development project is the investment in overseas oil exploration and development, mining and other resource projects. The National Development and Reform Commission have the authority to approve the projects which the investments are more than 30 million U.S. dollars, and among which if the investments by the Chinese investors are more than 200 million U.S. dollars, the project shall be approved by the State Council.
Projects of foreign investment which need large amounts of foreign currency means the amounts of foreign currency needed is over 10 million U.S. dollars, and such project shall be approved the Commission.
Requirement of project approval: to comply with state laws and regulations and industrial policies, do not harm to national sovereignty, security and public interests, not contrary to international law; meet the requirements of economic and social sustainable development, conducive to the development of strategic resources required for national economic development; meet the requirement of industrial restructuring.
4. Bilateral investment protection agreements / Avoidance of double taxation agreements
Bilateral investment protection agreements and the avoidance of double taxation agreements as the important part of commercial laws of China, encourage and protect capital flows in two-ways. These agreements play an active role in absorbing foreign capitals and promoting overseas investment. At present, china has signed bilateral investment protection agreement for the more than 110 and entered into double taxation agreements with more than 80 counties.
Bilateral investment protection agreements /avoidance of double taxation agreement can increase the security of foreign investors, avoid and eliminate double taxation of transnational taxpayers; Meanwhile the agreements can provide security for the overseas investment enterprises.