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Investment Opportunities in China / 中国的投资机会


Author: Cao Zhentao
Date: April 5, 2014

Investment Opportunities in China

– “Catalogue of Industries for Guiding Foreign Investment ”

The “Catalogue of Industries for Guiding Foreign Investment (2011 Revision)” is one of China’s most important guides for FDI and industrial government policy. The guide is issued by the Ministry of Commerce and the Commission on Development and Reform. Since its first edition in 1995, it has been revised at different intervals to meet the needs of a changing economy and opening up to the outside world.
The most recent printing was in 2011, and this was its fifth edition. The guide is divided into three parts based on type: encouraged, restricted, and prohibited. The government determines industrial categories based on the economic development situation as well as industries’ needs for foreign investment. In the most recent guide of 2011, there were 354 encouraged categories, 80 restricted, and 39 prohibited. An important thing to notice is that if one does not find the sector desired for investment, that sector automatically belongs to the permitted category; the government does not have specially restricting or specially encouraging policies. Thus, this is the most important catalogue to read as a guide on FDI.
In terms of encouraged industries, the Chinese government actively encourages foreign investors in these sectors by providing real and exceptional “benefits.” These “benefits” include: no tariffs for importing production line, and tax-free and tax returns for high tech industries (details can be found in tax law and tax bureau documents). During the set up and inspection/approval process, Chinese local governments will also actively help these industries to help the investors save time and money (note: Chinese tax collection law power lies in the People’s Congress and the State Council. The local government’s government and tax organs do not have the authority to grant excessive assistance, only the benefits that fall under local jurisdiction). Using Beijing municipality as an example, on August 30, 2010, the Beijing Municipality Industry and Commerce Bureau issued “Beijing Municipality Industry and Commerce Management: Views on Better Serving Foreign Investment to Encourage Development.” Among the listed rules was, “Program for Strict Enforcement of the ‘Foreign Investment Industries Guide’ to Encourage Foreign Investors.” Following this proclamation, the Industry and Commerce Bureau issued an internal document describing the process for changing encouraged FDI industries and requesting every bureau to concentrate efforts toward this change and leaders relevant to these bureaus were in charge of inspection. Although the cost did not change (companies registering $1 million in capital still spend 5,340 rmb in fees) the time has shortened enough to dramatically reduce companies’ initial costs. In the final analysis, if the capital is not able to be used after registration, especially in cases where capital is borrowed, there is a cost for the capital each day.
It’s not hard to see why the government is willing to provide special incentive programs. In many places in China, the ability of an official to attract foreign investment affects his promotion, and government officials will try their best to give the “bottom line” of benefits. Investors must understand the content and changes of the encouraged category, otherwise they will likely run into economic losses or miss industry opportunities. To use food products as an example – the 2007 guide said: “natural food additives, food ingredients (limited to joint ventures, cooperative ventures)” while the 2011 guide said: “natural food additives, food ingredients.” By removing restrictions on the form of investment, the Chinese government feels that this industry is already quite mature and can begin to have competition. Foreign investors coming into this industry should adjust their hopes – it’s likely that competition in this sector is fierce, and unfit for investment.
In the current catalogue, high tech industries account for the most listings in the encouraged category. Since high tech has a close connection to intellectual property right, before investors put up capital in China they must assess their own intellectual property and have a plan – the most important part being how to preserve their intellectual property. Given the current status of China’s intellectual property protection, if one’s own trademarks and trade secrets, and other Intellectual Property are not well protected, the Chinese market might not be able to produce predicted profits or losses in technology. Generally, independently owned enterprises are the best form for such companies.
However, because of many restrictions, wholly foreign owned enterprises are usually not set up – instead investors must cooperate with local enterprises. In this case, an experienced local lawyer is essential. Investors must undertake a complete inspection of the enterprise with which they will cooperate, and at the same time create a contract outlining limits and rights of the other party (including related business surveys, key articles, anti-competitive mechanisms, etc.) to prevent trade secrets being leaked. There are numerous examples of investment difficulties due to incomplete terms of the contract. For many foreign investors who bring technology and capital and who cooperate with local Chinese companies, the results reported have been consistently low, but after inspections found that their Chinese “partners” were using the technology to do their own business. At the same time, it is important to note that the directory applies not only to newly established enterprises, but also applies to mergers and acquisitions.

Writer: Cao Zhentao, Hopkins Nanjing Center MA ’13

作者:曹镇韬
2014年04月05号

中国的投资机会

——《外商投资产业指导目录》

《外商投资产业指导目录》是我国指导外商直接投资的重要产业政策文件,由商务部与发改委联合发布。,自1995年首次颁布以来,根据经济发展和对外开放的需要,每隔一段时间都要适时进行修订,最近一次是2011年,为是第5次修订。这份文件是指导外商投资的最重要的产业政策文件之一。指导目录分为三大类别:鼓励类、限制类、禁止类;国家根据经济发展的情况以及行业对外资的实际需要来确定具体行业归属于哪一类别。2011年最新目录下鼓励类有354小类,限制类有80小类,禁止类有39类。值得注意的是,如果在目录中找不到想投资的产业,那么这个产业就属于允许类,政府并没有特别的限制或者鼓励。这个目录对于外国投资者来说可以说是第一份必须要了解的文件。
对于鼓励类产业,中国政府鼓励并且希望外国投资者来中国投资这些产业并且因此会为投资者提供非常实在的“好处”。,这些“好处”包括:在进口生产线时免收进口关税,高科技企业享受免税退税等待遇(详见税法以及税务总局相关文件)。在设立程序以及审批流程上,中国地方政府对于该类产业的投资者也会尽量帮助他们节省时间和费用(中国的税收立法权在全国人大以及国务院税务总局,地方人大及税务机关无权在对税收方面给予太大让步,只能在其权限内给予优惠)。以北京市为例,2010年8月30日,北京市工商局发布了《北京市工商行政管理局关于进一步服务外商投资企业发展的若干意见》:其中规定“严格执行《外商投资产业指导目录》,大力支持外商投资鼓励类项目”。随后工商局以内部文件的形式对鼓励类外商投资企业的设立程序进行修改,要求各部门对于此类设立集中办理,并且由相关领导对每个设立个别监督。虽然整费用(注册资本为100万美元的企业的注册费用约为5340元人民币)没有变化,但是处理时间的缩短会大大降低企业成本。毕竟,在注册资本到位后如果不能使用,尤其在资本是通过借贷而获得的情况下,每一天都会提高商务成本产生资本成本费用。
关于政府愿意提供各项优惠这一行为其实不难理解,在中国的很多地方,吸引外国投资的多少仍然是衡量地方政府政绩的指标,官员政客们会尽量给出不越过“底线”的优惠。投资者对于鼓励类的内容以及变化必须有足够的了解,否则可能会遭受经济损失或者错过商业机会。以食品制造业为例,2007版中“天然食品添加剂、食品配料生产(限于合资、合作)”在2011版中调整为“天然食品添加剂、食品配料生产”。对于投资形式限制的取消表明中国政府认为该行业已经比较成熟,可以放开竞争。那么外国投资者在进入该行业前也要谨慎调查,可能现在市场竞争已经比较激烈,不适宜投资。
从现在的目录看,鼓励类的产业大多为高新科技产业,跟知识产权有密切的关系。那么,投资者在来华投资前还必须要做就是对自有的知识产权进行规划,其中最重要的就是对其进行保护。鉴于目前中国知识产权保护的现状,如果不能很好对自有的商标和商业秘密等知产进行给予很好的保护的话,很可能会在中国市场既不能获得预期的利润又丢失技术。一般认为,独资企业是最好的形式。但是,由于诸多限制往往不能设立独资企业,而必须与本地企业合作。那么,这时有经验的本地律师就显得非常重要。投资者必须彻底调查即将与你合作的企业,同时通过合同来限制对方的权利(包括关联企业调查,锁定条款,非竞争机制等),以防商业秘密遭到泄露。由于合同条款不完备而导致投资受损的例子不胜枚举。很多外国投资者带着技术与资本与中国本地企业合作,结果回报一直不高,调查以后才发现他们的中国“伙伴”拿着他们的技术在做自己的生意。同时要说的是,目录不仅适用于新设企业,它也适用于并购。

作者:曹镇韬,中美中心国硕士2013

Author: Cao Zhentao
Date: April 5, 2014

Investment Opportunities in China

– “Catalogue of Industries for Guiding Foreign Investment ”

The “Catalogue of Industries for Guiding Foreign Investment (2011 Revision)” is one of China’s most important guides for FDI and industrial government policy. The guide is issued by the Ministry of Commerce and the Commission on Development and Reform. Since its first edition in 1995, it has been revised at different intervals to meet the needs of a changing economy and opening up to the outside world.
The most recent printing was in 2011, and this was its fifth edition. The guide is divided into three parts based on type: encouraged, restricted, and prohibited. The government determines industrial categories based on the economic development situation as well as industries’ needs for foreign investment. In the most recent guide of 2011, there were 354 encouraged categories, 80 restricted, and 39 prohibited. An important thing to notice is that if one does not find the sector desired for investment, that sector automatically belongs to the permitted category; the government does not have specially restricting or specially encouraging policies. Thus, this is the most important catalogue to read as a guide on FDI.
In terms of encouraged industries, the Chinese government actively encourages foreign investors in these sectors by providing real and exceptional “benefits.” These “benefits” include: no tariffs for importing production line, and tax-free and tax returns for high tech industries (details can be found in tax law and tax bureau documents). During the set up and inspection/approval process, Chinese local governments will also actively help these industries to help the investors save time and money (note: Chinese tax collection law power lies in the People’s Congress and the State Council. The local government’s government and tax organs do not have the authority to grant excessive assistance, only the benefits that fall under local jurisdiction). Using Beijing municipality as an example, on August 30, 2010, the Beijing Municipality Industry and Commerce Bureau issued “Beijing Municipality Industry and Commerce Management: Views on Better Serving Foreign Investment to Encourage Development.” Among the listed rules was, “Program for Strict Enforcement of the ‘Foreign Investment Industries Guide’ to Encourage Foreign Investors.” Following this proclamation, the Industry and Commerce Bureau issued an internal document describing the process for changing encouraged FDI industries and requesting every bureau to concentrate efforts toward this change and leaders relevant to these bureaus were in charge of inspection. Although the cost did not change (companies registering $1 million in capital still spend 5,340 rmb in fees) the time has shortened enough to dramatically reduce companies’ initial costs. In the final analysis, if the capital is not able to be used after registration, especially in cases where capital is borrowed, there is a cost for the capital each day.
It’s not hard to see why the government is willing to provide special incentive programs. In many places in China, the ability of an official to attract foreign investment affects his promotion, and government officials will try their best to give the “bottom line” of benefits. Investors must understand the content and changes of the encouraged category, otherwise they will likely run into economic losses or miss industry opportunities. To use food products as an example – the 2007 guide said: “natural food additives, food ingredients (limited to joint ventures, cooperative ventures)” while the 2011 guide said: “natural food additives, food ingredients.” By removing restrictions on the form of investment, the Chinese government feels that this industry is already quite mature and can begin to have competition. Foreign investors coming into this industry should adjust their hopes – it’s likely that competition in this sector is fierce, and unfit for investment.
In the current catalogue, high tech industries account for the most listings in the encouraged category. Since high tech has a close connection to intellectual property right, before investors put up capital in China they must assess their own intellectual property and have a plan – the most important part being how to preserve their intellectual property. Given the current status of China’s intellectual property protection, if one’s own trademarks and trade secrets, and other Intellectual Property are not well protected, the Chinese market might not be able to produce predicted profits or losses in technology. Generally, independently owned enterprises are the best form for such companies.
However, because of many restrictions, wholly foreign owned enterprises are usually not set up – instead investors must cooperate with local enterprises. In this case, an experienced local lawyer is essential. Investors must undertake a complete inspection of the enterprise with which they will cooperate, and at the same time create a contract outlining limits and rights of the other party (including related business surveys, key articles, anti-competitive mechanisms, etc.) to prevent trade secrets being leaked. There are numerous examples of investment difficulties due to incomplete terms of the contract. For many foreign investors who bring technology and capital and who cooperate with local Chinese companies, the results reported have been consistently low, but after inspections found that their Chinese “partners” were using the technology to do their own business. At the same time, it is important to note that the directory applies not only to newly established enterprises, but also applies to mergers and acquisitions.

Writer: Cao Zhentao, Hopkins Nanjing Center MA ’13


作者:曹镇韬
2014年04月05号

中国的投资机会

——《外商投资产业指导目录》

《外商投资产业指导目录》是我国指导外商直接投资的重要产业政策文件,由商务部与发改委联合发布。,自1995年首次颁布以来,根据经济发展和对外开放的需要,每隔一段时间都要适时进行修订,最近一次是2011年,为是第5次修订。这份文件是指导外商投资的最重要的产业政策文件之一。指导目录分为三大类别:鼓励类、限制类、禁止类;国家根据经济发展的情况以及行业对外资的实际需要来确定具体行业归属于哪一类别。2011年最新目录下鼓励类有354小类,限制类有80小类,禁止类有39类。值得注意的是,如果在目录中找不到想投资的产业,那么这个产业就属于允许类,政府并没有特别的限制或者鼓励。这个目录对于外国投资者来说可以说是第一份必须要了解的文件。
对于鼓励类产业,中国政府鼓励并且希望外国投资者来中国投资这些产业并且因此会为投资者提供非常实在的“好处”。,这些“好处”包括:在进口生产线时免收进口关税,高科技企业享受免税退税等待遇(详见税法以及税务总局相关文件)。在设立程序以及审批流程上,中国地方政府对于该类产业的投资者也会尽量帮助他们节省时间和费用(中国的税收立法权在全国人大以及国务院税务总局,地方人大及税务机关无权在对税收方面给予太大让步,只能在其权限内给予优惠)。以北京市为例,2010年8月30日,北京市工商局发布了《北京市工商行政管理局关于进一步服务外商投资企业发展的若干意见》:其中规定“严格执行《外商投资产业指导目录》,大力支持外商投资鼓励类项目”。随后工商局以内部文件的形式对鼓励类外商投资企业的设立程序进行修改,要求各部门对于此类设立集中办理,并且由相关领导对每个设立个别监督。虽然整费用(注册资本为100万美元的企业的注册费用约为5340元人民币)没有变化,但是处理时间的缩短会大大降低企业成本。毕竟,在注册资本到位后如果不能使用,尤其在资本是通过借贷而获得的情况下,每一天都会提高商务成本产生资本成本费用。
关于政府愿意提供各项优惠这一行为其实不难理解,在中国的很多地方,吸引外国投资的多少仍然是衡量地方政府政绩的指标,官员政客们会尽量给出不越过“底线”的优惠。投资者对于鼓励类的内容以及变化必须有足够的了解,否则可能会遭受经济损失或者错过商业机会。以食品制造业为例,2007版中“天然食品添加剂、食品配料生产(限于合资、合作)”在2011版中调整为“天然食品添加剂、食品配料生产”。对于投资形式限制的取消表明中国政府认为该行业已经比较成熟,可以放开竞争。那么外国投资者在进入该行业前也要谨慎调查,可能现在市场竞争已经比较激烈,不适宜投资。
从现在的目录看,鼓励类的产业大多为高新科技产业,跟知识产权有密切的关系。那么,投资者在来华投资前还必须要做就是对自有的知识产权进行规划,其中最重要的就是对其进行保护。鉴于目前中国知识产权保护的现状,如果不能很好对自有的商标和商业秘密等知产进行给予很好的保护的话,很可能会在中国市场既不能获得预期的利润又丢失技术。一般认为,独资企业是最好的形式。但是,由于诸多限制往往不能设立独资企业,而必须与本地企业合作。那么,这时有经验的本地律师就显得非常重要。投资者必须彻底调查即将与你合作的企业,同时通过合同来限制对方的权利(包括关联企业调查,锁定条款,非竞争机制等),以防商业秘密遭到泄露。由于合同条款不完备而导致投资受损的例子不胜枚举。很多外国投资者带着技术与资本与中国本地企业合作,结果回报一直不高,调查以后才发现他们的中国“伙伴”拿着他们的技术在做自己的生意。同时要说的是,目录不仅适用于新设企业,它也适用于并购。

作者:曹镇韬,中美中心国硕士2013

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