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companies desiring to set up business operations in China must go
through a multi-tier screening process. Different levels of approval
authority that have been delegated to local governments vary depending
upon local, regional, and national politics. Major projects are always
approved at the central level.
In the establishment
of a representative office, the foreign company presents an application
to a sponsor, which in turn will seek approval from the relevant
ministry. Once the sponsor's approval document is obtained, it is
submitted to the local Administration for Industry and Commerce
(AIC) along with the supporting documents and a RMB 600 (US$ 70)
registration fee. These documents are reviewed in a summary fashion
and a Registration Certificate is issued which is valid for one
year. The approval process for a representative usually takes thirty
to sixty days.
MOFTEC is authorized
to review all proposals for joint ventures, cooperative ventures,
or wholly foreign owned enterprises regardless of size. MOFTEC or
lower reviewing offices will assess proposals to insure that they
satisfy relevant regulations and policy priorities. After approval
is granted, the foreign investor and the Chinese partner undertake
the completion of a feasibility study on all aspects of the project.
During the course of the feasibility study, reports are submitted
to each related local agency, stating what cooperation will be necessary
for the success of the project.
The feasibility
study becomes the basis for composing a contract between the Chinese
and foreign parties which sets out the rights and obligations of
each partner. All related documents including the proposal, the
feasibility study, and the contract are submitted to MOFTEC or its
local counterparts for interagency review, final examination, and
approval. With MOFTEC's approval, the contract is finalized and
resubmitted to MOFTEC for final approval after which an Approval
Certificate . The approval process by MOFTEC for a joint venture
or cooperative venture usually takes forty-five to ninety days.
The approval process for a wholly foreign owned enterprise can take
longer.
The Law on Chinese-Foreign
Joint Ventures allows the Chinese government to requisition the
foreign interest when the public interest requires. If it is necessary
to requisition the foreign interest, reasonable compensation must
be paid to the foreign investor.
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