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Local business incentives - Legal forms of companies - Registration and licensing procedures - Legal framework - Foreign exchange control - Regulations concerning equity investment - FDI inflows - Expertise of the political risk

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 Ta´wan) 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, repatriated 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.  

Foreign Direct Investment inflows in China

FDI inflows 2003 2004 2005 World rank (*)
FDI inflows (USD million) 53 505 60 630 72 406 55/141
Source : UNCTAD - World Investment Report
Note : (*) World Rank = UNCTAD Inward FDI Performance Index. It is a measure of the extend to which a host country receives inward FDI relative to its economic size. It is calculated as a ratio of the country's share in global FDI inflows to its share in global GDP.


Last modified in 2006 - ongoing update
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