How to establish a foreign funded enterprise in China?Updated: 2012-12-08
It is important for foreign investors to understand procedures to establish foreign funded enterprises in the country.
(1) Choice of projects, co operation of partners and relevant office approvals
The first step for foreign investors to take is to decide a project to undertake. Foreign investors have two options to choose from; they may chose a project proposed by enterprises or institutions across the country or they may propose investment projects by themselves.
If the first option is taken, institutions and enterprises nationwide have proposed numerous projects, some of which have government approval and some that do not. It is best to select officially approved projects.
The second option requires awareness over whether the chosen project conforms to China's industrial policies, and whether it belongs to a field in which they are permitted to invest in.
Attention should be paid to attain reliable Chinese partners. When applying for joint ventures or cooperative ventures, it is the responsibility of the Chinese partner to submit the application.
For wholly owned foreign ventures, investors should seek assistance from consultants.
(2) Submission of feasibility study reports and relevant official approval
Investors in a joint venture or a co operative joint venture can only mount a feasibility study on a project once the application for establishment has been approved. A feasibility study report usually contains the following items:
Outline of implementation Background and history of the project Marketing and production capacity Materials and inputs Site location Design of Project Organizational costs Construction arrangements Financial and economic assessments Foreign exchange equalization and assessment of risks
In equity and cooperative joint ventures it is the Chinese partner that is expected to submit the feasibility report. However, the foreign party should maintain an effective channel of consultancy to screen through papers and process. For investors in a wholly foreignowned venture, the report should be submitted along with the application for establishment by consultants to relevant local government authority.