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	SUPPLEMENTARY PROVISION OF THE ESTABLISHMENT OF FOREIGN-FUNDED INVESTMENT COMPANIES

	(Order of the Ministry of Commerce of the People's Republic of China (No.3 [2006]), May 26, 2006: adopted at the 5th meeting of the Ministry of Commerce through deliberation on May 17, 2006, are hereby promulgated, and shall come into force as of July 1, 2006)


SUBJECT : FOREIGN-FUNDED INVESTMENT COMPANIES
ISSUING DEPARTMENT : THE MINISTRY OF COMMERCE OF THE PEOPLE'S REPUBLIC OF CHINA
ISSUE DATE : 05/26/2006
IMPLEMENT DATE : 07/01/2006
LENGTH : 1,114 words
TEXT :

With a view to further encouraging trans-national companies to invest in China, and improving the functions of the investment companies, we hereby make the following supplementary provisions on the Provisions of the Establishment of Investment Companies by Foreign Investors (No.22 [2004] of the Ministry of Commerce, hereinafter referred to the Order No.22), which were promulgated on November 17, 2004 by the Ministry of Commerce:

I. Article 7 of the Order No.22 shall be revised as: "A foreign investor shall use a convertible currency or the Renminbi profits it has obtained within the territory of China or the lawful Renminbi proceeds it has obtained due to share transfer or liquidation, as the registered capital it contributes to the investment company. A Chinese investor may invest in Renminbi. If a foreign investor uses its lawful Renminbi proceeds as the registered capital it contributes to the investment company, it shall submit the documents of approval for capital item foreign exchange business of reinvestment in China with Renminbi profits or other lawful Renminbi proceeds, and other relevant certification documents and tax payment receipts. The capital contributed within two years from the day when the business license is issued shall be no less than USD 30 million, and the remaining capital contributions in the registered capital shall be paid off within 5 years from the day when the business license is issued."

II. Investment companies are allowed to undertake services contracted out by overseas companies.

III. Article 11 of the Order No.22 shall be revised as:

"An investment company engaging in the import or export of goods or technologies shall meet the requirements mentioned in the Measures for the Archival Filing and Registration of Foreign Trade Business Operators issued by the Ministry of Commerce. An investment company shall handle export tax refunds according to the relevant provisions when exporting products.

An investment company may sell at home the commodities it imports or purchases at home by way of commissioned agents (excluding auctions) or wholesale. The special commodities and the commodities sold by retail or franchising shall comply with the relevant provisions."

IV. Investment companies are allowed to make strategic investment on listed companies according to the relevant state provisions, and the investment companies shall be regarded as the overseas shareholders of the joint stock companies.

V. The investment companies that comply with the requirements of Article 15 of the Order No.22 may, before the enterprises invested by them are put into production or before the new products of the enterprises invested by them are put into production, and for the purpose of developing product market, import relevant products for domestic trial sale, and may entrust other domestic enterprises to produce or process their products or the products of its parent companies for sale both at home and abroad.

VI. Article 16 of the Order No.22 shall be deleted.

VII. In case a foreign investor uses the Renminbi profits it has obtained within China or the lawful Renminbi proceeds it has obtained due to share transfer, liquidation. as the registered capital of an investment company it contributes (or for increasing capital), the investment company may use all or part of this portion of registered capital to establish enterprises in China. The enterprises established by an investment company by using the aforesaid registered capital may, upon the strength of the documents of approval of the examination and approval organs for foreign-funded enterprises, documents of approval of the departments of foreign exchange control for the capital-item foreign exchange business of foreign investors who use Renminbi profits or other lawful Renminbi proceeds to make capital contributions (increased capital) to the investment company, and the written statements issued by the investment company on the Renminbi capital contributions to the enterprises it invests in, which originates from the aforesaid registered capital, apply for going through foreign exchange registration on foreign-funded enterprises and confirmation request for capital verification to the department of foreign exchange administration at its locality, and does no longer need to handle the documents of approval for the capital-item foreign exchange business of the domestic investment in Renminbi by the investment company.

Where a Sino-foreign joint venture investment company establishes an enterprise within China by using the Renminbi registered capital contributed by the Chinese investor, it does not need to handle foreign exchange registration on foreign-funded enterprises, foreign exchange registration on foreign investments in the form of foreign exchange upon the assignment of stock rights, confirmation request on capital verification, and foreign exchange registration on foreign investments, or other foreign exchange administration formalities, it may go through the formalities for capital verification as usual according to the relevant provisions of general domestic enterprises.

VIII. Sub-item (1) of Item (2) of Article 22 of the Order No.22 shall be revised as: "Businesses prescribed in Articles 10, 11, and 15 of the present Provisions."

IX. Upon the approval of the Ministry of Commerce, an investment company that is determined a regional headquarters may undertake operational leasing and finance leasing businesses.

X. An investment company that is determined a regional headquarters is allowed to entrust other domestic enterprises to produce/process products and sell them both at home and abroad, and undertake the business of processing trade on the commission basis with all the products being sold overseas.

XI. An investment company that exercises the functions of financial centers or capital management centers and is determined a regional headquarters may, upon the approval of the department of foreign exchange administration, make collective management on the foreign exchange capital of domestic connected companies, or may open offshore accounts in a domestic bank to manage collectively the foreign exchange capital of its overseas connected companies and the foreign exchange capital used for making loans overseas upon the approval of the department of foreign exchange administration. The fund transfer between the offshore accounts and other domestic accounts shall be managed as the transfer of trans-boundary funds.

XII. An investment company shall, before June 1 each year, report its investments, operations, and other information of the previous year to the Ministry of Commerce for archival filing in light of the required contents, designs, and ways, and submit the relevant information in a timely manner according to the requirements of the Ministry of Commerce. The Ministry of Commerce shall have the obligation of keeping confidential the information reported by the investment company.

XIII. In case any investment company fails to submit the relevant information required in Article 12, the Ministry of Commerce shall give it a punishment according to the relevant provisions.

XIV. The present Provisions shall be implemented as of July 1, 2006. In case there is any inconsistency in Order No.22 with the present Provisions, the present Provisions shall prevail.