THE FOREIGN-OWNED FACTORY IN CHINA
Foreign companies, enterprises, other economic organizations or individuals, all of which are established in China (Shanghai, Shenzhen, Xiamen) in accordance with Chinese law, are foreign-owned enterprises that are invested by foreign investors in China. According to the provisions of the Foreign-Funded Enterprise Law, the establishment of a foreign-funded enterprise must be conducive to the development of China’s national economy, and should at least meet the following conditions, that is, the use of international advanced technology and equipment; all or most of the products are exported.
The organization form of a foreign-funded enterprise is generally a limited liability company, or it can be said to be a one-person limited company. However, it does not include foreign companies, enterprises, and other economic organizations located in China (Shanghai, Shenzhen, Xiamen), such as branches, offices, representative offices.
The functions of a sole proprietorship enterprise are mainly reflected in activities that can be freely operated within the scope of business in China and have import and export rights. Secondly, it is possible to issue shares in China and promote the development of the securities market. If you want to go to Shanghai, Beijing, Shenzhen, Xiamen, Kunshan, China, to register an investment company, handle import and export trading companies or factories, you can consult a professional consulting company in advance.
According to different investment methods, distribution methods, risk methods, recovery investment methods, responsibility methods, and liquidation methods, they are divided into Sino-foreign joint ventures, Chinese-foreign contractual joint ventures, foreign-funded enterprises (also known as wholly foreign-owned enterprises) and foreign-invested joint-stock companies.
A wholly foreign-owned enterprise is a type of foreign-funded enterprise. It is an enterprise established in China under the laws of China and whose capital is invested by a foreign investor.
China’s foreign-owned factory regulations
According to the Law of the People’s Republic of China on Foreign Investment Enterprises  promulgated on April 12, 1986, the basic policies and principles for the establishment of wholly foreign-owned enterprises in China are:
- In order to expand foreign economic cooperation and technological exchanges and promote the development of China’s national economy, China allows foreign enterprises and other economic organizations or individuals to set up foreign-funded enterprises in China to protect the legitimate rights and interests of foreign-funded enterprises.
- The establishment of foreign-funded enterprises must be conducive to the development of China’s national economy, and the use of advanced technology and equipment, or the export or export of most of its products. China prohibits or restricts the establishment of foreign-invested enterprises in certain industries. Industries that prohibit or restrict foreign-funded enterprises, including military industries, postal and telecommunications enterprises, and cultural enterprises.
- Investment companies, profits, and other legitimate rights and interests of foreign investors in China are protected by Chinese law. Foreign-funded enterprises must abide by Chinese laws and must not harm China’s social public interests. The Law on Foreign-invested Enterprises also stipulates that China does not nationalize and levy foreign-funded enterprises; in special circumstances, according to the needs of social public interests, when foreign-funded enterprises are imposed according to legal procedures, they are compensated accordingly.
- The application for the establishment of a foreign-funded enterprise shall be examined and approved by the competent department of foreign economic relations and trade under the State Council or authority authorized by the State Council. A foreign-funded enterprise shall invest in China within the time limit approved by the examination and approval authority; if it fails to invest within the time limit, the industrial and commercial administration authority shall have the right to revoke its business license. The investment situation of foreign-funded enterprises shall be examined and supervised by the administrative authorities for industry and commerce.
- The production and operation plans of a foreign-funded enterprise shall be reported to the competent department for the record.
- Foreign-funded enterprises must set up accounting books in China, conduct independent accounting, submit accounting statements in accordance with regulations, and accept supervision by the financial and tax authorities. If the refusal to set up accounting books in China, the financial and tax authorities may impose fines, and the industrial and commercial administration may order them to suspend business or revoke their business licenses.
- Foreign-funded enterprises are taxed in accordance with the Law of the People’s Republic of China on Foreign Enterprise Income Tax and China’s relevant tax regulations. Mainland investment companies may apply for tax-deductible and tax-free preferential treatment. If the profit after paying the income tax is reinvested in China, it may apply for a refund of part of the income tax already paid for the reinvestment.
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