China seeks to create a better domestic enterprises and oversea investors involved in cross-border trade and investment though introducing new reforms to ease the financing control, issued by China’s State Administration of Foreign Exchangen (SAFE) , on October 23.
The notice announces 12 new facilitatiomeasures to facilitate domestic and oversea investors.
Remove the restrictions on domestic equity investment of capital fund of foreign investment enterprises not engaging in investment activities.
The new rules give foreign investors more options in the investment structure. Comparing to earlier policy, foreign investment enterprises are not allowed to participate in investing only new equity from other enterprises with retained profit. The new policy announces that foreign investment enterprises could invest domestic equity investment with capital fund only if complain by China policy.
Expand the polit scheme to facilitate foreign exchange of capital
In pilot scheme, it is efficiency for new companies of transactions using the capital fund, foreign debt, and funds raised by overseas to pay for domestic payment without providing supporting documents to bank. In others words, new registered companies do not give supporting documents to the bank to testify credibility before the foreign exchange settlement.
The pilot scheme has been carries out in 12 free trade zones, and some provinces and cities. This reform will expand six more new free trade zones setup in 2019.
Ease the restrictions on the use of foreign exchange settlement if capital account
The new rules reduce the processing time of transactions between Chinese businesses and foreign investors. In the new policy, restrictions placed upon the use of foreign exchange settlement in the domestic asset realization account will be deleted. Foreign investors’ could use deposit fund to invest in China and pay the bills.
Simplify the receipt and payment of the cross-border e-commerce trade for small-to-micro enterprises
Small and micro cross-border e-commerce enterprises that handle the collection or payment of foreign exchange of trade of goods less than US$200,000 accumulated per year, are exempt from the registration of “list of enterprises engaged in foreign exchange trade receipt and expenditure.”
Facilitate the registration of enterprise branches
When an enterprise branch need to be registered, changed, or deregistered with China’ State Administration of Foreign Exchange, the only required documents are original and one duplicate business license.
Under these circumstances, it is becoming more important for investors to get familiar with the changes in China’s business landscape, identify areas of risk, and accordingly take steps to mitigate their exposure. Only in this way, investors can stay nimble and opportunistic in an otherwise challenging time.
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