Circular of the Ministry of Commerce on Issues Concerning Foreign Investment Administration

Commercial departments of provinces, autonomous regions, municipalities directly under the Center Government, cities specifically designated in the state plan and Xinjiang Production & Construction Corps.

In 2010, the Decision concerning Items (V) with respect to Which Administrative Examination and Approval Are Cancelled or Adjusted (Guo Fa [2010] No.21) and the Some Opinions on Better Utilization of Foreign Investment (Guo Fa [2010] No.9) promulgated by the State Council, delegated some authorities of examination, approval and administration of foreign investment to commercial departments at the provincial level and cancelled some items originally subject to foreign investment examination and approval. For the purpose of doing good works concerned, this Circular is hereby promulgated:

I. On administration of the items with respect to which administrative examination and approval are cancelled

1. With respect to establishment of a branch in China not subject to any requirement of special provisions and any schedule of equipment imported to be contributed as investment, commercial departments will not make any examination and approval anymore and foreign-invested companies may directly undergo formalities with the relevant department.

2. With respect to change of legal address (exclusive of that under different jurisdictions of examination and approval agencies), name, or names of investors, of a foreign-invested company, the company shall, within 30 days after undergoing formalities for change of industrial and commercial registration, file with the competent commercial department on the strength of its application, the decision of its agency of power, the instrument on the amendment of contract or articles of association, evidencing documents concerning the items changed, the original approval certificate for a foreign-invested company and the copy of the business license after change. The competent commercial department shall re-issue an approval certificate for a foreign-invested company for the company upon receiving all of such materials.

II. On administration of foreign-invested joint-stock companies (listed companies)

The approval certificate of a foreign-invested joint-stock company that is listed in China shall state the company’s foreign investors and their shares. If any of such investor reduces its shares, which cumulatively exceeds five percent of the total shares, the company shall file with the competent commercial department for change of its approval certificate.

III. On Administration of foreign merger and acquisition

Any foreign M&A with the transaction amounts fewer than the limit shall be subject to the examination and approval by commercial departments, except for those subject to the examination and approval by the Ministry of Commerce as specified in the Provisions on Merge and Acquisition of Domestic Enterprises by Foreign Investors (No.6 MOFCOM Decree, 2009), which shall be handled by the Ministry of Commerce, regardless of transaction amount.

IV. On handling of confirmations of a foreign-invested project encouraged by the state

Pursuant to the principles for adjustment of the authorities of examination and approval of foreign-invested companies, the confirmation of a foreign-invested project encouraged by the state with the total investment fewer than USD300 million shall be handled by the commercial departments at the provincial level according to the relevant laws and regulations.

The confirmation shall be issued in accordance with the Circular of the Ministry of Commerce on Issues concerning Handling of the Confirmation of a Domestic-invested or Foreign-invested Project Encouraged by the State for Foreign-invested Companies (Shang Zi Fa [2006] No. 201) and other laws and regulations concerned. The Ministry of Commerce will enhance its efforts on supervision and examination of those departments, asking a department to make correction or cancel a confirmation if it fails to file the confirmation in time pursuant to relevant provisions or violates any provision to issue the confirmation. In some serious circumstances, such department’s authority to issue confirmations will be suspended.

V. On making any investment in RMB by foreign investors

For prudent regulation, by consultation with the People’s Bank of China and the State Administration of Foreign Exchange, an application by a foreign investor for investment in China (including establishment of a new company, increase of investment in an existing company, M&A of a Chinese company and provision of loans) with its incomes denominated in RMB obtained through cross-border trading settlement or otherwise duly obtained abroad, shall be filed with the Ministry of Commerce (to the Department of Foreign Investment Administration) by the commercial departments at the provincial level. The relevant formalities may be handled until the Ministry of Commerce (Department of Foreign Investment Administration) gives its consent by reply in which the form and amounts of currency shall be stated.

VI. On investment in China by a foreign-invested partnership

A foreign-invested partnership whose main business is investment shall be deemed as foreign investor and it shall observe the laws, administrative regulations and rules regarding foreign investment when investing in China. Commercial departments at all levels shall conduct review and administration of those companies pursuant to the relevant provisions and enhance communication and cooperation with industrial and commercial departments, foreign exchange departments and etc.

VII. On enhancing review and administration of foreign investment in the service sector

Commercial departments at all levels shall conduct review and administration of foreign investments in the service sector in accordance with laws, regulations and other provisions concerned. With respect to industries subject to special provisions including financing and lease, international express delivery, advertisement and auction, as well as value-added telecommunication service within a province, a municipality or an autonomous region, sensitive industries including small-loan granting, market survey, credit rating and security services, and industries with large fund inflows including entrepreneurship investment and equity investment and management, commercial departments at the provincial level, in performing their functions, shall conduct strict examination and approval, keep close cooperation and enhance communication with other departments concerned at the same level, and report to the Ministry of Commerce (to the Department of Foreign Investment Administration) in a timely manner if there is any difficult issue. [Ministry of Commerce]