In April 2015, China’s central government piloted record-filing administrative measures for Foreign-Invested Enterprises (FIEs) within the four Pilot Free-Trade Zones (FTZ). The measure was implemented to simplify the procedures for establishment, amendment, equity transfer and other relevant matters related to filing activities of FIEs in industries other than those listed in the special entry administration measures (often referred to as the National Market Access ‘Negative List’).

The measure allowed FIE in industries, other than those listed in the special entry administration measure (often referred as the National Market Access ‘Negative List’), a simplified procedure for establishment, amendment, equity transfer and other relevant matters pro related to FIEs.

As a result of a successful three-year trial, the Standing Committee of the National People’s Congress on 3 September 2016 issued the Decision to expand record-filing administration across the nation. The Decision revised the three Foreign Investment Enterprise laws (the Wholly Foreign-owned Enterprises law, Sino-foreign Equity Joint Ventures law and Sino-foreign Cooperative Joint Ventures law) as well as the Protection of Investment by Taiwanese Compatriots law to accommodate a change in administration. Simultaneously, the Ministry of Commerce (MFCOM) promulgated the interim Measures for the Record-filing Administration of the Establishment and Change of Foreign-invest Enterprises (Draft for Comment) to take effect with the Decision from 1 October 2016, signifying vital reforms to China’s foreign investment administration system and the implementation of a nation-wide ‘Negative List’.

The new ‘Negative List’ was jointly issued in Announcement No. 22 of 2016 by the National Development and Reform Commission (NDRC) and MOFCOM on 8 October 2016. The Announcement specifies the Negative List to be in-line with the requirements for enterprise equity investment and executives within the restricted, prohibited and encouraged industry categories, under the Catalogue for Guidance of Foreign Investment Industries (Catalogue) (Revised 2015). In other words, the new Negative List is an adoption of the three industrial categories within the Catalogue. On the same day, the MOFCOM released the final version of Measures for the Record-filing Administration of the Establishment and Change of Foreign-invested Enterprises and the Interim Measures for FTZ ceased to exist.

Key elements of filing administration

FIEs are subject to a stricter supervision of post-filing administration, setup and operation. Relevant record-filing authorities are encouraged to collaborate with public security, state-owned assets, customs, taxation, industry and commerce, securities, foreign exchange, and so forth, through information sharing, random inspection and inspection upon a reporter.

Any violation to the Measures shall be imposed with penalties of up to RMB 30,000 and any public official found soliciting or receiving bribes in the filing management shall be admitted to administrative sanctions and criminal prosecution if criminal offences are found. In addition, FIE and investors information found in the process of supervision and inspection will be tracked in the MOFCOM’s foreign investment record filing system, which can be shared with relevant administrative departments.

The new record-filing administration sets a higher level of compliance with FIE and operation regulations. However, with the successful results of the FTZ the Negative List administration mechanism will simplify FIE administration procedures of establishment and alteration, ultimately improving efficiency. The Decision and Measures reflect China moving foreign investment policies in line with advanced international practice and promotion of freer investment environment.

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