Several Opinions on Implementation of SAIC functions to Improve Work for Foreign-invested Enterprise Development (SAIC Circular 94) - 关于充分发挥工商行政管理职能作用进一步做好服务外商投资企业发展工作的若干意见
Released and effective on May 7, 2010
Following the State Council's Circular of Several Opinions on Further Improving the Work of Utilizing Foreign Investment ("State Council Circular 9") on May 7, 2010, the State Administration of Industry and Commerce (“SAIC”) promulgated a circular on improving the work for the development of foreign-invested enterprises (“SAIC Circular 94”).
This circular reaffirms some policies provided in the State Council Circular 9, such as encouraging foreign investors to establish regional headquarters, R&D centers, procurement centers, finance management centers, and accounting centers in China, and encouraging foreign investors to increase their investment in central and western regions.
In addition, SAIC Circular 94 introduces some new policies that provide more flexibility for foreign investment:
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Group Company: Foreign-invested holding companies are encouraged to establish a group company. The parent company in the group is allowed to use "Group" or "(Group)" in its name, and the subsidiaries are allowed to use the group’s name or its abbreviation in their own names.
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Conversion of Creditor’s Right to Equity: This circular acknowledges that a foreign investor’s creditor’s right can be converted to registered capital subject to the approval from and approval with the relevant authorities. Although, in practice, conversion of debt to equity in domestic privately-owned companies was common and accepted by company registration authorities, this is the first time that a governmental regulation has acknowledged this approach as a lawful method of capital contribution to foreign invested companies. We believe that the implementation rules in connection with this approach will be promulgated by the relevant authorities such as SAIC and State Administration of Foreign Exchange soon.
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Encouraging Foreign Investment in the Service Industry: According to the relevant regulations, if a foreign invested company wishes to use "China" in its name, its registered capital must be no less than RMB 50 million. Now, this circular changes the threshold to RMB 30 million, provided that (1) the foreign invested company engages in modern service business or high technology business; and (2) its foreign investor holds the majority equity.