Supplementary Rules (II) to "Tentative Provisions for the Establishment of Investment-type Companies by Foreign Investors"

Issued: May 31, 2001
Effective: as of the date of issue
Issuing Authority: Ministry of Foreign Trade and Economic Cooperation ("MOFTEC")

Main Contents:
The Rules further expands the business scope of investment-type companies by foreign investors (the "Investors") and permits the Investors to establish a foreign investment company limited by shares as an overseas promoter or to hold un-listed legal person shares thereof. According to the Rules, the Investors may expand the business scope with the following businesses after approval: (i) the Investor provides technical training for the domestic agents and distributors of the invested enterprise's products (the "Invested Enterprise"). Likewise, the Investor shall provide training for domestic companies, enterprises, or their parent companies upon entering into a technology transfer agreement; (ii) The Investor shall also purchase its Invested Enterprise's products for system integration and to sell thereof after system integration in both domestic and offshore markets, and if the these products cannot meet the needs of system integration, the Investor shall purchase the accessories for system integration either inside and outside China; and (iii) The Investor may import products in small quantities from its parent company to sell in China for test-marketing. In order to function properly, the Invested Enterprise should meet the following conditions: (i) the registered capital has been paid in accordance with the time periods provided for in the joint venture contract and articles of association, and the actual paid registered capital shall not be less than US$30,000,000; and (ii) the Holding Company has no record of illegal practice.