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Local business incentives

China first encourages foreign investments targeting high technology industry and sectors aimed at developing exports. The government created various zones which grant tax exemptions or tax advantages, in order to attract foreign investments. 5 special economic zones and about 14 coastal cities are concerned.
The special zones are: Shenzen (on the border of Hong-Kong), Zhuha? (near Macau), Shantou, Xiamen (in front of Taiwan) and the island of Hainan. They were chosen because they were totally underdeveloped.
The 14 coastal cities are: Dalian (in the province of Liaonong), Shanga?, Ningbo, Wenzhou (in Zhejiang's province), Fuzhou (in the province of Fujian), Guangzhou, Zhanjiang (in the province of the Guangdong), Beihai (in the autonomous region of Guangxi Zhuang), Tianjin, Yantai, Qingdao (in the province of Shandong) and Lianyungang, Nantong (in the province of Jiangsu). Over the last few years, other cities have been considered as coastal cities benefiting from the same status. Unlike the 5 special zones, these were not underdeveloped, but key industrial areas in China. Foreign investments allowed to improve infrastructures and to create other new and more advanced areas.
Corporate tax reductions, rapatriated dividends tax exemptions for a limited time are granted to foreign investors.
The Ministry of Foreign Trade & Economic Co-operation (MOFTEC) should be contacted for further information about investment rules and incentives.

Legal forms of companies

Form Number of partners/shareholders Minimum and/or maximum capital Liability Registration fee Release of financial documents
Youxian zeren gougsi is a Private Limited Company.   Minimum 2.
Maximum 50.  
Capital varies from RMB 300,000 to 500,000 depending on the activity of the company.   Liability is limited to the amount contributed.     No  
Gufen youxian gougsi is a joint-stock company.   Minimum 5.   RMB 10 million   Liability is limited to the number of shares held.     Yes  

Registration and licensing procedures

For the establishment of the status, no specific procedure is required. Capital and status must be registered with the Provincial Department of Trade and Industry. The company by-laws and registration should be registered with the Trade Register.

Foreign exchange control

Currency exchange controls have been maintained, but operations on current accounts are no longer subject to it. As for free conversion of currencies, the Renminbi is not freely convertible yet. Finally, as for the right to transfer, the investor can transfer profits generated by his activity and invested capitals, without any delay of permanence.

Regulations concerning equity investment

Majority holding of capital of a local company is authorized in China. For the Gufen youxian gougsi, foreign partners must hold at least 35% of the shared capital.  

FDI inflows in China

FDI inflows (millions US$) 2000 2001 2002 World rank
Foreign Direct Investments (F.D.I.) 9682   13624   34035   7 / 196
Sources : UNCTAD Database FDI/TNC

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