Several Opinions on Further Improving the Work of Utilizing Foreign Investment (State Council Circular 9) - 国务院关于进一步做好利用外资工作的若干意见
Released and effective on April 6, 2010
The State Council issued the Several Opinions on Further Improving the Work of Utilizing Foreign Investment (Guo Fa [2010] No. 9, “State Council Circular 9”), which provide some new guidelines for foreign investment in China and reaffirms the positive policy of Chinese central government to encourage foreign investment. This circular may trigger a new wave of foreign investment in China. We believe that the implementation regulations and rules in connection with this circular will be promulgated by the relevant authorities of the State Council, such as Ministry of Commerce, State Administration of Industry and Commerce, State Administration of Taxation, and National Development and Reform Commission.
Industry Upgrading and Foreign Investment:
According to State Council Circular 9, China encourages foreign investment in hi-end manufacturing industry, high technology industry, modern service business, new energy industry, energy-saving and environmental protection business, and outsourcing service business. On the other hand, foreign investment in polluting and energy-intensive projects and in industries running at overcapacity will be subject to more strict restrictions. State Council Circular 9 proposes to amend the Catalogue of Foreign Investment Industry Guide (the latest version was issued in December 2007), which we believe will be more consistent with the nation's industry upgrading goals. Furthermore, qualified foreign-invested projects that fall under the encouraged category will be able to enjoy lower land prices.
In addition, foreign investors are also encouraged to establish regional headquarters, R&D centers, procurement centers, finance management centers, settlement centers, and accounting centers in China.
“Go Midwest”:
Foreign investors are encouraged to increase their investment in China's central and western regions, particularly in environmentally friendly and labor-intensive projects. In order to maintain the trend of growing foreign investment in the Midwest of China, tax preferential treatment will continue to be provided.
In addition, policy support will be given to foreign invested companies that would like to relocate from China's eastern coastal regions to the central and western area.
Various Modes of Foreign Investment:
According to State Council Circular 9, China will support foreign investors to invest in domestic A-stock listed companies and will also support qualified domestic companies to go listing on overseas security exchange.
China will continue to support foreign investors to set up venture capital and private equity firm and will improve the exit strategies.
China will support qualified foreign-invested companies to go listing, issue corporate bonds or medium-term bills in China.
More Efficient Approval and Registration Procedures:
According to State Council Circular 9, the total investment threshold for foreign-invested projects that require central level approval will be raised from USD100 million to USD300 million for projects that fall under the “encouraged” or “permitted” categories, which reflects that China will further transfer the jurisdiction for examining and approving foreign investment to lower government levels.
It is also stipulated that the relevant authorities will simplify approval and registration procedures, narrow the approval scope, and shorten the approval period.