Circular on Delegating to Lower-level Authorities the Authority to Examine and Approve the Investment in, and Establishment of, Companies with an Investment Nature by Foreign Investors

(Issued by the Ministry of Commerce on, and effective as of, March 6 2009.)

Competent commerce departments of provinces, autonomous regions, municipalities directly under the central government, cities with independent development plans, Harbin, Changchun, Shenyang, Jinan, Nanjing, Hangzhou, Guangzhou, Wuhan, Chengdu, Xi'an and the Xinjiang Production and Construction Corp:

With a view to thoroughly implementing a scientific development outlook and the spirit of the Second Plenary Session of the 17th Central Committee of the Communist Party of China, further intensifying reform of the administrative system, transforming government work functions, improving the examination and approval of foreign investment and facilitating investment, we hereby notify you of the revisions made to the authority for the examination and approval of companies with an investment nature invested in and established by foreign investors as follows:

1. When a foreign investor wishes to invest in and establish a company with an investment nature with registered capital of US$100 million or less or change particulars thereof (with the exception of single capital increases exceeding US$100 million), the competent commerce department of the province, autonomous region, municipality directly under the central government, city with independent development plans, the Xinjiang Production and Construction Corp or sub-provincial municipality (including Harbin, Changchun, Shenyang, Jinan, Nanjing, Hangzhou, Guangzhou, Wuhan, Chengdu and Xi'an) where the investment company is to be registered (the Provincial-level Competent Commerce Department) shall be responsible for examination and approval. The Provincial-level Competent Commerce Department may not further delegate the examination and approval authority to a lower-level department or appoint another department to carry out such examination and approval.

2. Subsequent changes in the particulars (with the exception of single capital increases exceeding US$100 million and changes in the investors) of a company with an investment nature whose establishment was approved by the Ministry of Commerce shall be subject to the examination and approval of the Provincial-level Competent Commerce Department.

3. When a Provincial-level Competent Commerce Department accepts and examines the application of a foreign investor, it shall strictly abide by the relevant provisions of the Provisions for the Establishment of Companies with an Investment Nature by Foreign Investors (Order of MOFCOM [2004] No.22) and the Supplementary Provisions for the Establishment of Companies with an Investment Nature by Foreign Investors (Order of MOFCOM [2006] No.3) on the requirements in respect of the qualifying conditions of investors, registered capital, method of capital contribution, business operations and application documents, and, in respect of whether the foreign investor and its domestic investee enterprises have committed any violations of the law, seek in writing the opinions of the provincial-level tax, industry and commerce and foreign exchange administrative departments of the provinces where the enterprises are located and those of its own province. If violations of regulations have been committed, approval for the establishment of a company with an investment nature may not be granted.

4. The foreign investor (legal representative) shall issue a written undertaking (the format of which is attached hereto) to the effect that the submitted application complies with the requirements of relevant laws and regulations and that the relevant materials and the signature of the legal representative or his agent are true, accurate, complete and valid.

5. The scope of investment of a company with an investment nature may not involve sectors in which foreign investment is restricted or prohibited or industries subject to macro-economic control. If the scope of investment involves a permitted industry as provided in special foreign investment provisions, the Provincial-level Competent Commerce Department shall, in accordance with the prescribed procedure, seek the consent of the state department in charge of the industry.

6. The projects invested in by a company with an investment nature must comply with relevant laws, regulations and industrial policy, and applications for approval of specific investment projects shall be made separately in accordance with the relevant procedures prescribed by the state. If the investment made in the form of foreign exchange by a foreign party (namely, the investment company or other overseas investor) in an enterprise invested in by a company with an investment nature or in an enterprise invested in jointly with other investors accounts for not less than 25% of the registered capital of the investee enterprise, it shall be eligible for treatment as a foreign-invested enterprise.

7. Once a Provincial-level Competent Commerce Department has approved a foreign investor's application, it shall complete an information record-filing form concerning a company with an investment nature (divided into three forms, one for new establishment, one for changes and one for investee enterprises, the formats of which are attached hereto) in a timely manner through the System for Administration of Foreign-invested Enterprises through Examination and Approval and forward the completed and printed record-filing form (bearing the official seal of the local commerce department), approval document (the format of which is attached hereto) and (a photocopy of) the approval certificate to the (Department of Foreign Investment Administration of the) Ministry of Commerce for the record.

8. Following approval by the Provincial-level Competent Commerce Department, a company with an investment nature must additionally report its business position and details of its investee enterprises in a timely manner through the Foreign-Invested Enterprise Administration Network (http://fic.wzs.mofcom.gov.cn) of the Ministry of Commerce and, at the time it collects its approval certificate, carry out the procedures for network access. Companies with an investment nature are encouraged to join the Working Committee of Companies with an Investment Nature of the China Association of Enterprises with Foreign Investment.

9. This Circular shall be effective as of the date of issuance.

Annex

1. Format of the approval document for a company with an investment nature (omitted)

2. Written undertaking of a foreign investor (legal representative) (form) (omitted)

3. Record-filing form for the establishment of a company with an investment nature, record-filing form for changes and record-filing form for investee enterprises (omitted)