On 6 November 2015, the Ministry of Commerce (“MofCom”) of the People’s Republic of China (“PRC”) and the State Administration of Foreign Exchange (“SAFE”) of the PRC jointly promulgated the Notice for Further Improving the Filing for Record by Foreign Invested Enterprise in Real Estate Industry (关于进一步改进 外商投资房地产备案工作的通知) (“Joint Notice”) which came into force on the same date. Prior to the issuance of the Joint Notice, a foreign invested enterprise (“FIE”) in real estate industry must apply to MofCom for filing. Only after that, the FIE in real estate industry will be allowed to make use of its injected registered capital for payment purposes.
The Joint Notice abolished the filing procedure by foreign invested enterprises in real estate industry with MofCom. As a result, the FIE will just need to follow the normal approval procedure now, i.e.:
- To apply for establishment with local branch of MofCom;
- To proceed to complete the foreign exchange registration upon registration; and
- To make use of the capital for payment purpose after foreign exchange registration, including payment of the land grant price.
The Joint Notice is targeted specifically at FIEs in real estate industry and represents a further relaxation of the control of the government over foreign investment in real estate industry.
On 28 October 2015, MofCom issued a Decision on Amendments to Certain Rules, Regulations and Notices (关于修改部分规章和规范性文件的决定) (“Decision 2”) in relation to certain requirements on foreign investment and reinvestment by FIEs in China in various industries. Decision 2 became effective on the date of promulgation. The amendments in Decision 2 include:
- Abolishment of minimum registered capital requirements for FIEs in certain industries;
- Abolishment of the statutory capital contribution timeline requirements; and
- Re-investment by FIEs in China is now allowed before full contribution of its subscribed registered capital.
These amendments give foreign investors more flexibility in planning their financing with regard to capital injections.