Guides of investing in China for Foreign Investors in Shanghai

Shanghai Foreign Investment Commission (FICS) is responsible for the examination and approval of foreign-invested projects. Except those subject to examination by the competent departments of the State Council, foreign-invested enterprises to be established in Shanghai should be examined and approved by the FICS and its entrusted Administration Commission of Pudong New Area and Administrative Committee of Waigaoqiao Free Trade Zone and people’s governments at district or county level, or the relevant industrial bureaus (hereinafter referred to as a whole as the examination and approval authorities).

1. A manufacturing project with its total investment of over USD 30 million, and other project with needs t be approved by the competent department of the State Council, shall be preliminarily examined by FICS and all related departments of the Shanghai Municipality and then submitted by FICS to the relevant department of the State Council for approval.

2. If a project with its total investment under USD 30 million is located in Pudong New Area, it shall be examined and approved by Shanghai Pudong New Area Administration Commission; If it is located in Shanghai Waigaoqiao Free Trade Zone, it shall be examined and approved by the Administrative Committee of Shanghai Waigaoqiao Free Trade Zone. For certain restricted projects, their projects proposals shall be pre-examined by FICS and related government departments and then submitted by FICS to the relevant department of the State Council for approval. An encouraged project shall be examined and approved by the people’s government at district, county level where the said project is located.

3. An encouraged or permitted project with its total investment under USD 10 million shall be examined and approved by the examination and approval authorities at district, county or bureau level where the said project is located.

4. Other projects except the said No. 1, 2, 3, shall be examined and approved by the FICS.

(A) Procedures for Establishing an Equity Joint Venture or a Contractual Joint Venture

1. Preparing and presenting project proposal

Chinese or foreign investors may choose their partners through various ways. After they are well acquainted with their counterpart’s business scope and credibility, and have reached agreement of cooperation, the Chinese party shall work out a project proposal and present it to the examination and approval authority. The examination and approval authority shall give a reply (approval or disapproval) within 20 days on receipt of the proposal.

The Chinese party shall apply to Shanghai Administrative Bureau for Industry and Commerce for the enterprise’s name registration after a positive reply.

2. Preparing and submitting feasibility study report

After the project is approved, the Chinese and foreign partners shall jointly prepare a feasibility study covering items such as market survey, financing, technological process, equipment, raw material (parts), site selecting, environment protection, labor protection, fire protection, infrastructure facilities, marketing, economic results, foreign exchange balance, etc. The examination and approval authority shall help to coordinate if there are any problems.

3. Submitting contract and articles of association

While the Chinese and foreign partners are preparing the feasibility study report, they may also draw up the contract and articles of association and submit them jointly to the examination and approval authority. The examination and approval authority shall give a reply (approval or disapproval) with 30 days on receipt of the feasibility study report, contract and articles of association.

4. Application for company identification code

On the strength of the approval certificate of contract and articles of association, the investor shall apply for the company’s identification code with the city’s corporate identification code office.

5. Application for the issuance of the approval certificate

After the feasibility study report, contract and articles of association have been approved, the Chinese part shall apply for the approval certificate from the examination and approval authority.FICS, and its entrusted Administration Commission of Pudong New Area, Administrative Committee of Waigaoqiao Free Trade Zone, people’s governments at district or county level shall issue the approval certificate within 3 days after the receipt of application.

6. Application for business license

The Chinese and foreign parties may register with Shanghai Administrative Bureau for Industry and Commerce with 30 days after receiving the approval certificate and apply for the business license. Shanghai Administrative Bureau for Industry and Commerce shall issue the business license with 10 days to those projects approved by the examination and approval authorities of Shanghai.The enterprise is deemed as established on the date when the business license is issued.

(B) Procedures of Establishing a Wholly Foreign Owned Enterprise

For establishing a wholly foreign owned enterprise, the foreign investor is required to entrust the authorized consultative bodies or agencies with the tasks of application and documents submission for approval.The procedures for establishing an equity joint venture or a contractual joint venture can be consulted as a reference.