How to establish a foreign-funded enterprise in China?

How to establish a foreign- funded enterprise in China?

It is naturally most important that foreign investors understand the procedures which need to be followed in order to establish foreign- funded enterprises in China. The regular steps which must be taken in this regard shall now be examined.

(1) Choice of Projects, Co- operation of Partners and Relevant Office Approval

The logical first step for foreign investors to take is to decide upon a project to undertake. Foreign investors have two options to choose from in this respect; they may chose a project proposed by enterprises or institutions across China or they may propose investment projects by themselves.

If the first option is taken, it should be noted that institutions and enterprises across China have proposed numerous projects, some of which have government approval and some that do not. It is therefore best to select those projects which have been officially approved in order to secure the approval of the relevant authorities.

The second option requires awareness as to whether the chosen project conforms to China's industrial policies, and whether the project belongs to a field which they are officially allowed to invest in.

In addition to this, attention should be paid to attaining reliable Chinese partners for investment. When applying for joint ventures or co-operative ventures, it is the responsibility of the Chinese partner to submit the application for the establishment of investment projects to the competent authorities for approval.

For wholly-owned foreign ventures, investors should seek assistance from the consultants who shall assist in the establishment of the presence in China.

(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 needs to contain the following 10 items:

Outline of implementation
Background and history of the project
Marketing and production capacity
Materials and inputs
Site location
Design of Project
Organisational costs
Construction arrangements
Financial and economic assessments
Foreign exchange equalisation and assessment of risks

Once again, in equity and co-operative joint ventures it is for the Chinese partner to submit the feasibility report. However, the foreign party should maintain an effective channel of consultancy to screen through the papers and process. For investors in a wholly foreign- owned venture, the report should be submitted along with the application for establishment by consultants to the relevant local government authority.

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