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Measures for the administration of foreign investment in the commercial sector

Measures for the administration of foreign investment in the commercial sector

Article 1 These Measures are formulated in accordance with such laws and regulations as <The Law of the People’s Republic of China on Chinese and Foreign Equity Joint Ventures>, <The Law of the People’s Republic of China on Chinese and Foreign Cooperative Joint Ventures>, <The Law of the People’s Republic of China on Wholly Foreign-Owned Enterprises>, and <The Company Law of the People’s Republic of China>.

Article 2 These Measures apply to Commercial foreign-invested enterprises (“Commercial FIES”) established by foreign companies, enterprises, or other economic entities or individuals (“Foreign Investors”) in the PRC.

Article 3 Commercial FIES refers to FIES engaging in:

  1. Commission agency: Where an agent, broker, auctioneer, or other distributors engage in the sale of goods of others and provide the auxiliary services by agreement and in exchange for fees.
  2. Wholesaling: Sale of goods to retailers, industrial, commercial, and institutional customers, or other distributors, and provision of the related services.
  3. Retailing: Sale of goods to individual or group customers at a fixed geographic location, on television, by phone, by mail, on the World Wide Web, through automated vending machines, and provision of the related services.
  4. Franchising activities: Granting the right to use one’s trademark, trade name or operating model to others by agreement and in exchange for remuneration or franchising fees.

Foreign companies, enterprises, and other foreign economic entities or individuals may only engage in the business activities in Clauses 3(1), 3(2), 3(3) and 3(4) above through the establishment of Foreign Invested Enterprises (“FIES”).

Article 4 Commercial FIES shall abide by the laws, rules, and regulations of the PRC. Their legitimate business activities and legal rights shall be protected by the laws, rules, and regulations of the PRC.

Article 5 The Ministry of Commerce (“MOFCOM”) and its regional departments are the competent approval and supervision authority.

Article 6 Foreign investors must have good standing and credit, and must not have violated Chinese laws, rules, or regulations. Foreign investors that possess comparatively strong economic power, advanced marketing skills and managing experiences, and wide international marketing network are encouraged to establish Commercial FIES in the PRC.

Article 7 Commercial FIES shall meet the following conditions:

  1. Minimum registered capital under the <Company Law of the People’s Republic of China> and the related regulations;
  2. Abiding by the relevant regulations on the registered capital, and on the total amount of investment for FIES; and
  3. In general, the operating period shall not exceed 30 years, 40 years for central and western regions.

Article 8 Where Commercial FIES seek to open stores, the following conditions shall be met:

  1. Where the application to establish a Commercial FIE and the application to open a store are submitted at the same time, such arrangement must adapt to the commercial development plans of the cities where they are located.
  2. Where an approved Commercial FIE applies to open a store, in addition to meeting the condition set out in Clause 8(1), the following conditions shall also be met:
    1. The Commercial FIE shall participate in the annual inspection for Commercial FIES in a timely manner, and shall pass the inspection; and
    2. The Commercial FIE’s registered capital shall be fully paid up.

Article 9 Subject to approval, Commercial FIES may engage in the following business activities: A retailing Commercial FIE is allowed to engage in the retail of merchandise, to import merchandise for its own use, to procure domestic products for exportation and to carry out other auxiliary activities. A wholesaling Commercial FIE may carry out wholesaling, commission agency (excluding auctions), import and export, and other auxiliary activities.

Commercial FIES may transfer franchising rights to third parties to open stores.

Subject to approval, Commercial FIES may engage in one or more of the sales activities mentioned above. The types of merchandise shall be specified under the business scope in the joint venture contract or the articles of association of the Commercial FIE, as the case may be.

Article 10 The following procedures shall be followed for the establishment of Commercial FIES and the opening of stores:

  1. The project proposal, feasibility report and application for the establishment of the Commercial FIE shall be examined and approved or rejected after one review;
  2. Except where Clause 10(3) or Clause 10(4) provides otherwise, investors proposing to establish a Commercial FIE, or established Commercial FIES proposing to open a new store shall submit the documents listed under Article 12 or Article 13 (as the case may be) to the provincial level commercial authority of MOFCOM overseeing the Commercial FIE’s place of registration or proposed place of registration. After a preliminary review by the provincial level commercial authority of MOFCOM, all of the application documents would be transferred to MOFCOM within one month of the submission of the application documents. MOFCOM shall make a final decision as to approve or to reject the application within three months of receiving all of the application documents. A “Commercial FIE Approval Certificate” will be issued in respect of an approved application, and MOFCOM will state the reasons for each rejected application.

    MOFCOM reserves the right to delegate its approval authority to its provincial level commercial authorities.

  3. Where a retail Commercial FIE purports to open a store in the provincial jurisdiction where it is located, provided that the following conditions are satisfied, and that its business scope does not include sale of goods on television, by phone, by mail, on the World Wide Web, through automated vending machines, or any merchandise listed in Article 17 or Article 18 of these Measures; the provincial level commercial authority of MOFCOM could approve the application in lieu of MOFCOM. The provincial level commercial authority of MOFCOM should then file records of the application with MOFCOM.
    1. The business area of any single store of the Commercial FIE is 3,000 square meters or less, and the total number of stores does not exceed 3; furthermore, the total number of stores of the same kind opened by the same foreign investor in China through establishing Commercial FIES does not exceed 30;
    2. The business area of any single store of the Commercial FIE is 300 square meters or less, and the total number of stores does not exceed 30; furthermore, the total number of stores of the same kind opened by the same foreign investor in China through establishing Commercial FIES does not exceed 300.
  4. Where the trademark or trade name of the Chinese foreign equity joint venture or Chinese foreign cooperative joint venture is owned by domestic enterprises or Chinese natural persons, and where Chinese investor(s) is/are the controlling shareholder(s) of the Commercial FIE, and the Commercial FIE’s business scope does not encompass any merchandise listed in Article 17 or Article 18 of these Measures, then an application to establish the Commercial FIE or to open an associated store could be submitted to the provincial level commercial authority of MOFCOM overseeing the place where the Commercial FIE is located. The opinion of the provincial level commercial authority of MOFCOM in the jurisdiction where the store is intended to be located must also be sought for an application to open a store in a province or province equivalent territory other than in the province or territory where the Commercial FIE is located.

Provincial level commercial authorities of MOFCOM must not exercise any of the approval authorities referred to in Clause 10(3) and Clause 10(4) above without first receiving MOFCOM’s express delegation of authority in this regard.

Article 11

The investor shall, within ONE month of receiving the approval certificate from the relevant commercial authority, bring the “Commercial FIE Approval Certificate” to proceed with registration at the local Administration of Industry and Commerce.

Article 12 The following documents should be submitted in order to establish a Commercial FIE:

  1. Application letter;
  2. Feasibility report compiled by all operators;
  3. Joint venture contract and articles of association (articles of association only in the case of Wholly Owned Commercial Foreign Invested Enterprises (Commercial WFOES)) and schedules;
  4. Bank’s certification on property and credit, certificate of registration (photocopy), legal representative certificate (photocopy); where the foreign investor is an individual, the individual’s identification documents;
  5. The audited financial reports of all operators for the most recent financial year;
  6. (If Chinese operator makes investment with State-owned property) the confirmation document of state-owned property managing departments on the assessing report concerning the Chinese operator’s investing state-owned property;
  7. The Commercial FIE’s draft import and export merchandise list;
  8. The list of the members of the board of directors of the Commercial FIE, and letters of appointment of the directors of all operators;
  9. Business name approval document issued by the relevant local authority of the Administration of Industry and Commerce;
  10. Land use right certificate (photocopy) and/ or lease agreement (photocopy) for the space where the store to be opened would be located, unless the store’s business area is less than 3,000 square meters;
  11. Documents issued by the local government overseeing the planned location for the store, showing that the project meets the commercial development plans and requirements of the city where the store will be located.

Document not signed by the legal representative must be accompanied by a power of attorney signed by the legal representative.

Article 13

Where an established Commercial FIE applies to open a store, the following documents shall be submitted:

  1. Application letter;
  2. Revised joint venture contract or articles of association, if any;
  3. Feasibility report concerning the opening of the store;
  4. Board resolution to open the store;
  5. The Commercial FIE’s audited financial report for the most recent financial year;
  6. The Commercial FIE’s asset verification report (photocopy);
  7. Certificate of registration (photocopy) and legal representative certificate (photocopy) of all operators;
  8. Land use right certificate (photocopy) and/ or lease agreement (photocopy) for the space where the store to be opened would be located, unless the store’s business area is less than 3,000 square meters;
  9. Documents issued by the local government overseeing the planned location for the store, showing that the project meets the commercial development plans and requirements of the city where the store will be located.

Document not signed by the legal representative must be accompanied by a power of attorney signed by the legal representative.

Article 14 Where the Commercial FIE has entered into an agreement concerning the use of trademark and trade name, technological transfer, management agreements, service agreements, such agreements shall be attached to the joint venture contract (or the articles of association of Commercial WFOE) as a schedule, and be submitted to the relevant commercial authority altogether.

 

Skills

Posted on

2004-05-03