Basic Methods for Direct Foreign Investment in China

Basic Methods for Direct Foreign Investment in China

In terms of foreign investment introduction, there are, as usual, direct investment method and other investment methods. Most of the direct investment comes in the forms of sino-foreign cooperative enterprises, sino-foreign joint ventures, wholly foreign-owned enterprises and joint development. Other investment methods include compensation trade, processing and assembly etc.

(1) Sino-foreign Joint Venture

Sino-foreign Joint Venture, also known as Stock System Joint Venture, is a venture jointly formed by foreign corporation, enterprise as well as other economic organizations or individuals and China 's cooperation, enterprise as well as other economic organizations, which is situated in the territory of China. Each stakeholder invests into and operates the said venture in combination, who also shares risks, losses and profits together in accordance with investment contribution ratio. Each capital contribution accounts for a certain share of the total investment and foreign stakeholders should make at least a capital contribution accounting for 25% of the total investment. Sino-foreign Joint Venture is the method for China to utilize foreign investment directly at the right beginning and at highest frequency. At present, such a method contributes to a considerable share in the total foreign investment.

(2) Sino-foreign Cooperative Enterprises

Sino-foreign Cooperative Enterprises, also known as Contract Joint Venture, is a venture jointly formed by foreign corporation, enterprise as well as other economic organizations or individuals and China's cooperation, enterprise as well as other economic organizations or by the provision of cooperation conditions, which is situated in the territory of China. And each interested party contracts to define corresponding rights and obligations. In the case of Sino-foreign Cooperative Enterprises, the foreign party usually provides the entire or a large portion of capital investment and the Chinese party offers land, factory building, utilizable equipments and facilities, a certain amount of capital sometime.

 (3) Sole Foreign Investment Venture

Sole Foreign Investment Venture is a venture solely invested by foreign corporation, enterprise and other economic organization as well as individuals in accordance with laws and regulations of China, which is situated in the territory of China. As for the Laws of Foreign Investment Enterprise, the enterprise solely invested by foreign investors should promote our national economy to develop and be in compliance with at least one of conditions presented as follows: international advanced technology and equipment adopted; all or almost products to be exported. The organizational form for foreign investment enterprise is usually corporation with limited liabilities.

(4) Cooperative Development

Cooperative Development is short for the Ocean & Land Petroleum Cooperative Exploration. It is a wildly adopted economic cooperation method in the international natural resource industry, featuring characteristics such as high risk, high investment and high profit. Cooperative Development falls into 3 stages, namely, detection, exploration and production. The above-mentioned 3 methods in the Cooperative Development account for a small share.

(5) New Investment Methods
As expending the investment field and opening the domestic market further, we have to grope and adopt new investment methods.

1. BOT: BOT has already been put into practice in the infrastructure field, BOT project in the Guangxi Laibing Power Plant, for instance, which was already approved.

2. Investment Corporation: In April 1995, the Foreign Economic & Trade Administration issued the Temporary Regulations about Investment Corporation invested by Foreign Investors in a bid to stimulate foreign large-scale companies to implement their investment proposals. At present, more than 160 investment corporations are founded, intensifying their own investment activities.

3. Foreign Investment Stock System Corporation: A stock system corporation can be established via either promotion or fund raising and a foreign investment stock system corporation can shift to the stock system limited corporation following application.

4. Acquisition: Multinational acquisition is one of major international direct investment methods. Currently, relevant policies are under construction.