MOFTEC Changes FIE Approvals: Headway or a Headache?

MOFTEC has overall responsibility for foreign investment in China. Last year it issued a circular and co-issued an opinion (collectively two circulars) that mean that FIEs can now receive approval from local authorities rather than having to deal with MOFTEC in Beijing. While it is part of the general decentralization trend, MOFTEC in Beijing requires the local authorities to register the proposals. This means that MOFTEC in Beijing retains quasi-approval authority.

As anyone familiar with the China market knows, China seeks to control and monitor foreign investment in mainland China. It does this through a system of government approvals, without which the required documentation cannot come into force. Such documentation includes the Articles of Association (the Articles) and, where applicable, the contract establishing a foreign investment enterprise (FIE) such as a Sino-foreign equity or co-operative joint venture or a wholly foreign-owned enterprise (the Contract).

In most cases, the examination and approval authority (Approval Authority) for a project involving foreign investment will be the Ministry of Foreign Trade and Economic Co-operation (MOFTEC) or one of its local arms, often known as the Commissions for Foreign Trade and Economic Co-operation (COFTECs) and/or other industry-specific Approval Authorities.