Page 13 - Doing Business in China

BUSINESS ENTITIES

FOREIGN-INVESTED PARTNERSHIP INCORPORATION OF BUSINESS
A foreign invested partnership may include a number ENTITIES
of foreign investors (companies or individuals) and
potential Chinese investors� The State encourages APPROVAL AND REGISTRATION PROCEDURE
foreign enterprises or individuals with advanced The State Administration for Market Regulation
technology and management experience to (“SAMR”) is responsible for approving the formation
establish partnerships to promote the development of foreign investment enterprises (“FIEs”) and
of relevant industries in the domestic market� issuing business licences�

A general partnership consists of general partners The approval of FIEs in China depends on the
who are jointly and severally liability for the debts of industry in which the investors intend to invest
the partnership� Where there are special provisions and the business activities that the new company
in the Partnership Enterprise Law on the forms of intends to engage in� In general, foreign- invested
liability borne by general partners, those provisions projects can be divided into the following 2 main
shall prevail� A professional entity with specialised categories:
knowledge and skills that offers paid services to its
clients may form a specialised general partnership� Encouraged Projects
In 2022, the National Development and Reform
A limited liability partnership consists of general Commission and Ministry of Commerce released
partners and limited partners, with the former “The Catalogue of Industries Encouraging Foreign
bearing unlimited joint and several liability for the Investment (2022 Edition)” (“Catalogue”), which
debts of the partnership and the latter bearing came into effect on 1 January 2023� Foreign-
liability for those debts respectively within the invested projects operating in the industries
limits of the capital contribution for which they listed in this Catalogue may enjoy preferential tax
have subscribed� incentives in accordance with laws, administrative
regulations or the provisions of the State Council�
A general partner may make capital contributions
in cash or in kind, or in the form of intellectual Restricted & Prohibited Projects
property rights, land-use rights or other property In 2021, the National Development and Reform
rights, or labour services� A limited partner shall Commission and the Ministry of Commerce
not make capital contributions in the form of labour released the “Special Administrative Measures
services� (Negative List) for Foreign Investment Access
(2021 Edition)” (“Negative List”)� This Negative List
REPRESENTATIVE OFFICE (RO) came into effect on 1 January 2022, and lists the
Before actually investing in China, many foreign industries in which foreign investment is restricted
investors choose to set up representative offices or prohibited�
(ROs) to conduct market research and learn
more about the country, A RO is optional before
making an actual investment in China and does
not constitute an independent legal entity� The
RO activities are limited to promotion or acting as
a liaison office on behalf of the head office� It also
engages in activities that services the head office�

A RO is not allowed to engage in profit-making
activities� It can recruit local staff through approved
employment agencies�

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