Qian Zhan East China Normal University Representative office Branch Sino-foreign Equity Joint venture

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  • Qian Zhan

    East China Normal University

    July 2, 2014



  • Introduc)on   China’s Accession to WTO: Dec 2001 Ø Significant event: Chinese + Foreign Investors Ø Expected Result: Trade Liberalization + increased opportunities Ø Fastest growth rate: Large markets for international business


  • Content

    Part I China Legal


    State structure


    Judicial  system

    Part II Foreign

    Investment Enterprises

    Five FIE vehicles

    Pros & Cons

    Key  considerations



  • 4

    I General Government


    5 Ethnic

    Autonomous Regions

    4 Municipalities Directly under

    Central Government

    II. 23 Province

    III. Municipality

    IV. Country

    V. Township

    VI. Village

    2 Special

    Administrative Regions

    1.1  The  overall  state  structure  

    Xinjiang Tibet

    Inner Mongolia Ningxia Guangxi

    Hong Kong 1997

    Macau 1999

    Beijing Shanghai Tianjin


    Six Levels State Hierarchy

  • 5

  • 6

    National People’s Congress

    & Standing Committee ☆

    ☆ State council



    Supreme People’s


    Supreme People’s


    Central Military


    Communist Party 1921

    1.1  The  overall  state  structure  

    Central level Legislative power Highest Organ

    Judicial power Procuratorial power

    Political power


    Military power Executive power

    Highest Organ

  • 7

    1.1  The  overall  state  structure     National People’s Congress

    1. Highest organ of state power + Highest legislative body

    2. Citizens exercise power; Composed of deputies elected (3000) ;

    3. Term: 5 years; In session annually

    4. Main functions: A. amend the Constitution and supervises; B. enacts and amend basic laws C. appoints and remove top officials D. examines and approves state budget E. approves the establishment of political regions

    5. Permanent body: NPC Standing Committee

  • 8

    1.1  The  overall  state  structure     State Council

    1. Highest organ of state administration 2. Composition: Premier, Vice Premier, state councilors, ministers, Auditor-general, and Secretary-general

    3. Term: same as NPC; No more than two consecutive terms.

    4. Main functions: A. Adopts and enact administrative regulations B. Issues decisions and orders in accordance with the Constitution and laws; C. Formulate and implements national economic plan and state budget;

  • 9

    China:  Separa)on  of  Power  ?

    Q: Whether China has the doctrine of separation of

    power ? • YES---Various organs hold different power; perform different functions

    •  NO--- NPC have the highest power and supervise all other organs; power to interpret laws

  • 10

    People’s Congress

    Standing Committee

    Local Government People’s Court

    People’s Procuratorate

    1.1  The  overall  state  structure  

    Local level Same structure

    Higher-level Local

    Government Higher-level

    Court Higher-level

    Procuratorate Accountable

    Legislative power Highest Organ

    Supervisory power Municipal vs Provincial

    Village vs Township

  • 11

    Legis lation



    Constitution ☆ Adopted and Amended By NPC

    Basic Laws NPC & Standing Committee (Criminal/ civil/government organ)

    Administrative Regulations

    State Council (Implement basic law)

    Government Rules

    1. Ministerial & Departmental rules

    2. Local Governmental rules

    Local Regulations People’s Congress (Actual circumstance; practical needs)

    Self-governing regulation Specific rules

    People’s Congress: Auto-Regions (political, economic, cultural features)

    1.2  Legisla)on

  • 1.2  Hierarchy  of  legal  norms


    Basic Laws

    Administrative Regulations

    Local Regulations

    Local Rules


    Supreme law

    Not Contravene

    Take 2nd precedence

    Take 3rd precedence

    Local regulations take precedence over local rules enacted by the same level

    Conflicts in norms: Specific over General

    New over Old

  • 13

    1.3  Interpreta)on  of  legal  norms Legal


    Legislative Interpretation


    Administrative Interpretation

    (Administrative regulation) (Governmental rules)

    Judicial Interpretation


    NPC Standing

    Committee State Council Subordinates

    Supreme People’s


    1981 NPC Resolution

    Least weight Middle weight Greatest weight

    Non-trial application Exclusive interpreters Common to indicate

    No authorization Uniform application

    At Trial Source of law

    Where necessary: Concrete meaning

    Legal basis Same effect as law

    Legal Significance

  • 1.3  Judicial  System


    Four Levels


    Two-trial system

    Supreme People’s Court

    High People’s Court (32: province; auto-regions;

    municipalities directly)

    Intermediate People’s Court (380: municipalities)

    Basic People’s Court (3000:country)

    Divisions: Criminal

    Civil Administrative

    Special Courts: Forest

    Railway Military


  • 2.  Foreign  Investment  Enterprises  in  China


    According to the statistics:

    from Jan to Dec 2013, Newly

    Approved Foreign-invested

    Enterprises amounted to 22,773;

    Actual use of foreign investment

    reached USD 117.586 billion.

  • 2.Foreign  Investment  Enterprises  in  China


    Top 10 nations investment

    1. Hong Kong (USD78.302b),

    2. Singapore (USD7.327b), 3. Japan (USD7.064b),

    4. Taiwan Province(USD5.246b), 5. U.S.A. (USD3.353b), 6. R.O.K.(USD3.059b),

    7. Germany (USD2.095b), 8. Holland (USD1.281b), 9. U.K. (USD1.039b)

    10. France (USD762million)

  • 2.  Foreign  Investment  Vehicles




    Representative office Branch


    Equity Joint venture


    Sino-foreign Cooperative Joint venture


    Wholly Foreign Owned

    Enterprise (WFOE)

    Foreign Investment Enterprises (FIEs)

    Chinese legal person

    Core FDI instruments

    Preparatory Nature

    Limited Business Activities

    Decide appropriate forms Depend on business strategy

    China open its door in 1978

  • 2.1  Representa)ve  Office   Applicable laws

      Regulations on Administration of Registration of Resident Offices   of Foreign Enterprises (2011 by State Council)

      Requirements

    1. Definition: working bodies established by foreign enterprises within CN

    2. Legal Status: Not legal person

    3. Title: “Country + Enterprise Name + City Name + RO”

    4. Composition: A chief representative + 1-3 representatives

    5. Scope of Activities: No profit-making activities ①  Market surveys, displays and campaigns; ②  Liaison activities (sales, service, procurement and investment)


  • 2.1  Representa)ve  Office


    Formal Application

    Domicile certification 2-year Business license

    Articles of Association

    Organization Agreement

    Commission Documents

    Identification papers & Resumes

    Certificate of capital credit (issued by financial institutions)



    Lawful right to use residency site

    State AIC &

    Authorized Local AIC

  • 2.2  Equity  Joint  Ventures  (EJV)   Applicable laws

    1. Sino-Foreign Equity Joint Ventures Law (1979) (1990/2001) 2. Sino-Foreign EJV Implementing Regulations (2001)

      Definition: An equity joint venture is a Chinese legal person with limited liability,

    which is established on the basis of a joint venture contract between Chinese and

    foreign parties after approval by the Ministry of Commerce.

      Investor: Foreign companies, enterprises, economic entities, individuals   Form: Limited liability company (Chinese legal person)