Circular on Further Improving the Examination and Approval of Foreign Investment

(Issued by the Ministry of Commerce on March 5 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, state-level economic and technology development zones and state-level border economic cooperation zones:

With a view to further implementing a scientific development outlook, complying with the important requirements of the spirit of the Second Plenary Session of the 17th Central Committee of the Communist Party of China and the State Council with respect to promoting the reform of the administrative examination and approval system in order to create service-oriented government, and taking measures to expand domestic demand so as to maintain sound and relatively rapid development of the Chinese economy, the Ministry of Commerce has decided to continue intensifying the reform of the system for administration of foreign investment through examination and approval and further expand the authority of administration of foreign investment through examination and approval of competent local commerce departments and state-level economic and technology development zones. We hereby notify you of relevant matters as follows:

1. The examination, approval and permission for the advance lifting of surveillance of equipment imported by foreign-invested enterprises is abolished. The administration of the establishment of branches in China by foreign-invested enterprises is changed to a record-filing system (except where special provisions expressly require examination and approval) with enterprises carrying out record-filing procedures directly with the competent local commerce departments of the places where they are registered.

2. The establishment, capital increases, contracts/articles of association and changes in the particulars of foreign-invested enterprises (including companies limited by shares) in the encouraged category that now fall under the examination authority of the Ministry of Commerce and that do not require comprehensive balancing by the state shall be subject to examination by the competent commerce departments of provinces, autonomous regions, municipalities directly under the central government, cities with independent development plans, the Xinjiang Production and Construction Corp, sub-provincial municipalities (including Harbin, Changchun, Shenyang, Jinan, Nanjing, Hangzhou, Guangzhou, Wuhan, Chengdu and Xi'an) (Provincial-level Competent Commerce Departments) and state-level economic and technology development zones. The establishment of an offshore (sub-) branch by a foreign-invested enterprise shall be subject to the examination of the Provincial-level Competent Commerce Department or of the competent prefectural city-level commerce department authorised by the provincial people's government of the place where the enterprise is registered and shall require the written consent of the economic and commerce section of the Chinese embassy (consulate).

3. Capital increases by existing foreign-invested automobile, agricultural transport vehicle and automotive engine producers to expand their production capacity for the same type of products and add new products (including the establishment in a region other than their home regions of production work units without independent legal personality to produce the same kind of products), capital increases by existing foreign-invested motorcycle producers to expand their motorcycle and motorcycle engine production capacity, capital increases by foreign-invested automotive, agricultural transport vehicle and motorcycle part and component producers to expand their part and component production capacity and foreign investment in the establishment of new motorcycle producers, and new automotive, agricultural transport vehicle and motorcycle part and component producers shall be subject to examination by competent local commerce departments with reference to relevant provisions of the Policy for the Development of the Automotive Industry. The relevant authority of the local people's government shall complete the project approval or record-filing procedures before the competent local commerce department grants its approval.

4. A change in the particulars of a foreign-invested enterprise whose establishment was approved by the Ministry of Commerce, other than capital increases above the limit subject to the approval of the National Development and Reform Commission and equity transfers that result in the transfer of control from the Chinese party to the foreign party, shall be subject to examination by the competent local commerce department.

5. Where a foreign investor or a foreign-invested enterprise is to acquire a domestic enterprise, and the domestic enterprise is in the encouraged or permitted category and the transaction amount is less than or equal to US$100 million, or the domestic enterprise is in the restricted category and the transaction amount is less than or equal to US$50 million, such acquisition shall be subject to examination by the competent local commerce department in concert with relevant departments such as the industry and commerce department, tax department and/or foreign exchange department pursuant to relevant laws, regulations and the Provisions for the Acquisition of Domestic Enterprises by Foreign Investors. If the domestic enterprise is a listed company, the consent of the China Securities Regulatory Commission shall be required. If the domestic enterprise is a state-owned enterprise or involves state-owned assets, matters shall be handled in accordance with relevant provisions and the consent of the state-owned asset department shall be obtained. If an anti-monopoly review is involved, matters shall be handled in accordance with relevant laws and regulations.

6. Foreign investment in industries that have special provisions or specific industry policies or in industries subject to macro-economic control shall continue to be handled in accordance with existing regulations (except where the Ministry of Commerce specifically issues a document authorising or appointing the Provincial-level Competent Commerce Departments to handle examination). Strategic investments in listed companies by foreign investors shall continue to be reported in accordance with relevant provisions to the Ministry of Commerce for examination and approval.

7. The foregoing foreign investment matters whose examination the Ministry of Commerce has delegated to competent local commerce departments shall be examined by them in strict accordance with the requirements of state laws and regulations. At the time of approval they shall fill out a Record-filing Form for Examination and Approval of Foreign-invested Enterprises or Form for the Record-filing of a Foreign-invested Enterprise in the Encouraged Category Above the Limit (see Annexes) through the System for the Administration of Foreign-invested Enterprises through Examination and Approval and submit it together with the approval document and (a photocopy of) the approval certificate to the (Department of Foreign Investment Administration of the) Ministry of Commerce for the record.

8. With respect to matters of administration through examination and approval previously delegated to Provincial-level Competent Commerce Departments by the Ministry of Commerce, competent sub-provincial municipality commerce departments and state-level economic and technology development zones shall enjoy equivalent authority of administration through examination and approval from the date of the issuance hereof.

9. State-level border economic co-operation zones shall, in accordance with the relevant requirements of the Measures for the Administration of the Issuance of Approval Certificates for Foreign-invested Enterprises and Taiwan, Hong Kong, Macao and Overseas Chinese-invested Enterprises issued by the former Ministry of Foreign Trade and Economic Co-operation, establish and improve as soon as possible a System for the Administration of Foreign-invested Enterprises through Examination and Approval and a National Online Joint Annual Inspection System for Foreign-invested Enterprises and, following vocational guidance, training and acceptance by the Provincial-level Competent Commerce Departments, report the same to the (Department of Foreign Investment Administration of the) Ministry of Commerce for the record so as to create the conditions for the delegation of examination and approval authority to state-level border economic co-operation zones.

10. Work Requirements

(1) Duly carrying out organisational planning and enhancing the quality of the use of foreign investment: local commerce departments should take very seriously the great significance of the adjustment being made to the authority of administration of foreign investment through examination and approval, and apply a scientific development outlook to guide the use of foreign investment in their jurisdictions and the overall situation of the administration of foreign investment through examination and approval, duly prepare medium- and long-term development plans for the use of foreign investment and apply efforts to enhance the quality of the use of foreign investment.

(2) Carrying out administration through examination and approval in accordance with the law and improving the level of foreign investment administration: local commerce departments should intensify the vocational training of personnel for administration through examination and approval, improve examination and approval procedures, standardise examination and approval and duly perform their duties of administration of foreign investment through examination and approval in accordance with the law. In their administration of foreign investment through examination and approval, they should thoroughly implement a scientific development outlook, strictly implement state laws, regulations, industrial policy and foreign investment access policy, include proprietary innovation, energy saving, environmental protection, comprehensive and intensive use of resources, protection and promotion of employment, etc. as key elements in their administration of foreign investment through examination and approval, reflect the relevant requirements in approval documents and improve foreign investment examination and approval efficiency and the level of foreign investment administration.

(3) Strengthening record-filing oversight and providing more complete services: with respect to major foreign-invested projects approved in their jurisdictions, local commerce departments should complete an information record-filing form through the System for the Administration of Foreign-invested Enterprises through Examination and Approval and regularly carry out record filing with the (Department of Foreign Investment Administration of the) Ministry of Commerce. Local commerce departments should endeavour to be innovative in rendering services to foreign-invested enterprises, expand the breadth of their services and improve service efficiency. If, in the course of implementation, a local commerce department encounters any problems, it should report the same to the (Department of Foreign Investment Administration of the) Ministry of Commerce in a timely manner.

Annex:

1. Record-filing Form for Examination and Approval of Foreign-invested Enterprises (omitted)http://wzs.mofcom.gov.cn/accessory/
200903/1236822455457.doc

2. Form for the Record filing of a Foreign-invested Enterprise in the Encouraged Category Above the Limit (omitted)