Practical implications of China's 25% or less rule

China''s Ministry of Foreign Trade and Economic Cooperation (Moftec) may have opened the gates for foreign investment in Mainland companies of 25% or less, but questions still remain on the practical implications of the rule change say Linklaters partners

On January 1 this year Moftec, in conjunction with other relevant Government departments, released Circular on Relevant Issues Concerning Strengthening the Administration of Examination and Approval, Registration, Foreign Exchange and Taxation Matters of Foreign Invested Enterprises..

In essence, the Circular implicitly provides that foreign participation in the registered capital of Sino-foreign equity joint ventures or cooperative joint ventures may be less than 25%. This is the first time that a Moftec rule has recognised the possibility of foreign entities holding less than 25% in such joint ventures. Interestingly, the Circular states that the examination, registration and approval procedures required for such an investment shall be identical to those where foreign participation is...

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