China Updates- Inbound Investment

Inbound Investment

The Ministry of Commerce (MOFCOM) has issued a draft of a new Foreign Investment Law for public comment. The proposed changes to the current foreign investment regime are far-reaching, and – for example – would replace and consolidate the existing laws on foreign inbound investment, namely the Sino-foreign Equity Joint Venture Law, the Wholly Foreign-owned Enterprise Law and the Sino-foreign Contractual Joint Venture Law. As with recent tax reforms, this will result in more equal treatment between foreign and domestic companies.

Other key points are:  the requirement for pre-approval of foreign investments (now more widely defined to include, for example, M&A and financing arrangements) has been removed (as with recent changes to SAFE regulations) except for industries on the restricted list; a new reporting regime (basically, within 30 days of its establishment plus an annual report); subjecting all investments (not just those in specific industries) to possible national security review; bringing VIEs (Variable Interest Entities) under control as foreign investing firms.

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