MOFCOM loosens its grip on foreign investment

China's Ministry of Commerce (MOFCOM) has continued delegating its approval powers to lower government levels, further streamlining the investment pathways for foreign companies by issuing the Circular on Delegating Matters Concerning the Changes to, and Examination and Approval of, Foreign-invested Companies Limited by Shares and Enterprises (关于下放外商投资股份公司、企业变更、审批事项的通知) (Circular 50) and Circular on Delegating Matters Concerning the Examination and Approval of Foreign-invested Commercial Enterprises (关于下放外商投资商业企业审批事项的通知) (Circular 51).

    Previously, foreign-invested companies limited by shares (FICLs) were viewed by the government as too important to the national economy to be handled by a lower level authority, and MOFCOM preferred to retain its approval authority over these entities. Foreign-invested enterprises (FICEs) on the other hand, represented an expansion of the traditional powers granted to foreign invested companies in China, and MOFCOM wanted to retain control at the central level during the initial phase, when a rush of companies filed applications. MOFCOM has now delegated the approval powers for such investments to its local or provincial-level counterparts (COFTECs), meaning international investors do not need to lobby MOFCOM directly.

    Lawyers have welcomed the Circulars acknowledging the process will encourage FICLs and FICEs by making it easier for investors to apply for and gain approval.