In a bid to strengthen management of approving foreign investment in the service sector and tighten approval in sectors involving the inflow of huge amount of capital such as venture capital investment and equity investment and management, the Ministry of Commerce (MOFCOM) announced that the authority of approving and managing certain foreign investments will be delegated to provincial-level commerce departments while the approval of certain foreign investments will be waived.

The above information came from the circular on issues concerning the work of foreign investment management released on MOFCOM’s website.

According to MOFCOM, project confirmation letters of foreign-invested enterprises (FIEs) under the encouraged category with a total investment not exceeding US$300 million will be handled by commerce departments at provincial level in accordance with the relevant rules and regulations, while foreign merger and acquisition with a transaction amount not exceeding US$300 million will be approved by commerce departments at provincial level. For the establishment of branch companies not subject to special conditions within the Chinese territory and the list of equipment imported as capital contribution, approval by commerce departments will no longer be required. The FIEs concerned may complete the formalities with the relevant departments directly.

As for foreign-invested listed companies, the circular provides that the approval document of foreign-invested joint-stock companies listed in China must record the particulars of the foreign investors and the shares they hold. If any foreign investor reduces his stakes by an accumulated amount exceeding 5% of total capitalization, then an application must be submitted to the commerce department for making changes in the approval document.

The circular clarifies that foreign-invested partnership enterprises with investment as their core business will be deemed foreign investors. When any foreign investor applies for permission to invest in China with renminbi obtained from cross-border trade settlement or obtained offshore by legal means, the provincial-level commerce department must first submit a written report to MOFCOM and can only handle the relevant formalities after receiving a written reply of approval from MOFCOM. The currency and amount of the capital contribution must also be specified clearly in the approval document.