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(1) Equity Joint Venture
An equity joint venture is an enterprise jointly set up by a company,
enterprise, other economic organization or individual from a country or
region outside China, together with a Chinese company, enterprise or other
economic organization on the principle of equality and mutual benefit
and is ratified by the Chinese Government. It is a company with legal
status in China with limited liabilities. The ratio of investment will
be negotiated by the parties of the joint venture investment (overseas
investment shall not be less than 25% of the total investment). The parties
will jointly manage the venture, share the risks and benefits. Investment
can be in the form of cash, buildings, workshops, machinery and equipment
or other materials, industrial or intelectual property rights, expertise
right to use sites etc. As per the share of capital, profits will be split
according to the ration of their participation in the registered capital
of investment.
(2) Contractual or Cooperative Joint Venture
This is a Chinese-Overseas contractual joint venture. The parties shall
prescribe in the contract such matters as the investment or conditions
for cooperation. The contract is subject to approval by the Chinese Government
and is protected and administered by the Chinese partner contributes the
right to use the land, laborers and labor services or accessible buildings,
equipment and materials. On the principle of equality and mutual benefit,
the parties to the joint venture shall decide through negotiation the
appropriate form of administration and profit distribution and profit
proportion. The proportion of the overseas investment shall be in general
not less than 25% of the registered capital. The major difference between
an equity joint venture and a contractual joint venture is that the latter
neither necessarily calculates shares in the form of currency nor distributes
profit in proportion to their shares, but share profit according to the
form of investment and the ration of profit distribution as per the contract.
(3) Wholly Owned Foreign Enterprises
A wholly owned foreign enterprise is one which is set up in Tianjin by
an overseas company, enterprise or other economic organization or individual
with the entire capital funded from overseas. This does not include branches
set up in china by overseas enterprises and other overseas economic organizations.
The investor owns all profit earned from the wholly owned foreign enterprise.
(4) Overseas Funded Joint Stock Limited Liability Company
The entire capital is composed of equal-value shares. Shareholders bear
relevant responsibilities for the company with the shares they purchase.
The company should take full obligation for its debts on property. Shares
purchased and owned by overseas shareholders should account for no less
than 25% of the registered capital. Such a company can be set up by way
of sponsorship or donation.
(5) Overseas Funded Investment Company
A company established in China solely by overseas investors or jointly
with Chinese investors in the form of a limited liability company to engage
in direct investment.
Applications for setting up such companies should meet the following
requirements:
The overseas investor should be of excellent credit standing and has the
financial capability for the establishment of an investment company. The
total assets of the investor in the previous year should be no less than
US$400 million and the investor should have set up an enterprise with
overseas capital in China with an actual contribution of registered capital
exceeding US$10 million and the investor should have more than three investment
projects with approved proposals; or the investor should have over ten
overseas funded enterprises engaged in production or infrastructure construction
with an actual contribution of registered capital over US$30 million.
For a joint venture investment company, the Chinese investor should be
of excellent credit standing and have the financial capabilities needed
for the establishment of an investment company. The total assets of the
Chinese investor should be no less than RMB 100 million and the registered
capital of the investment company should be no less than US$30 million.
(6) Overseas Funded Financial Institutions
Overseas funded financial institutions, include branches invested and
set up by overseas financial institutions in China and conducting financial
operations, incorporated foreign owned institutions and incorporated joint
venture financial institutions. The overseas funded financial institutions
operating in China include overseas funded banks, overseas funded financial
companies and overseas funded insurance companies. The business scope
of overseas funded banks and financial companies in China is presently
limited only to foreign exchange. For the application to establish an
overseas funded financial institution, the applicant should have total
assets of considerable worth. There must be a strict financial supervisory
system in the applicant's country and additionally they must have had
representative offices in China for over two years. An application must
be submitted in accordance with the related laws and regulations for the
establishment of an overseas funded financial institution and is subject
to approval by the State financial administration.
(7) Build-Operate-Transfer (BOT)
This refers to the cooperative pattern in which the government signs a
contract with a project company from the private sector (in China it refers
to overseas investment). The project company will raise funding and construct
the infrastructure project. The project company, within an agreed period,
will own, run and maintain the facilities and recoup investment and make
reasonable profit by collecting use or service charges. At the termination
of the contract, the ownership of the project will be transferred to the
government free of charge. BOT is applicable primarily to the construction
of infrastructure such as toll roads, power plants, railways, waste water
processing facilities and urban subways.
(8) Transfer of Management Right
For overseas investors who set up overseas-funded enterprises by purchasing
assets or ownership of share from Chinese enterprises, entire payment
should be made within 3 months from the date when license is issued to
the overseas-funded enterprises. Those who need to delay for special reasons,
with endorsement from the approval authorities, should pay a minimum of
60% of the total payment within 6 months from the date when license is
issued, and should complete the payment within 1 year, and to share the
profit in accordance with the ratio of investment each party actually
made. The shareholding investor has no right in decision-making until
full payment is made.
Investors in the Sino-overseas joint-venture should make simultaneous
payment agreement. The party unable to make simultaneous payment for special
reasons should obtain endorsement from the approval authorities of the
project and profit will be distributed according to the ratio of actual
investment of each party. The shareholding party of the equity cooperative
joint-venture (including relative shareholding party) will not have the
right in decision-making until its subscripted quota is fully covered.
There are also applicable to Sino-overseas cooperative joint-ventures
and solely overseas-funded enterprises accordingly.
(9) Mergers and Acquisitions
Overseas investor can establish overseas-funded enterprise by bidding,
auction, contractual transfer or other forms of transfer, to purchase
entire or part of ownership of existing enterprise or shareholdings of
existing incorporated enterprises in Tianjin. With endorsement from the
approval authorities, overseas-funded enterprise may purchase, contractor
or rent existing enterprises in Tianjin and expand the business scope
or scale.
(10) Project Fund-raising
Project fund-raising is to raise foreign exchange outside China for the
construction projects in China and bear the responsibility of payment
of debt solely with anticipated income or assets of the project.
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