On August 26, 2008, the Ministry of Commerce (MOFCOM) issued the Circular on Further Simplifying and Standardizing the Administrative Permit for Foreign Investment (the Circular), which came into effect on its date of issuance. The Circular simplifies and standardizes the administrative licensing procedures for foreign investment by delegating certain authority to provincial-level commerce departments.
According to the Circular, with respect to foreign-invested enterprises established through MOFCOM’s approval, MOFCOM now authorizes provincial-level commerce departments to examine and approve non-substantial changes made to such enterprises. These non-substantial changes include changes in the following aspects: the name of the enterprise, the names of investors, business address within the same city, number of directors, and the lawful operational period. If the provincial-level commerce authorities approve the changes, they must file the approval and a photocopied version of the approval certificate with MOFCOM.
In accordance with the Decision of the State Council on Reforming the Investment System issued in July 2004, for any changes made to foreign-invested enterprises that are approved by MOFCOM and have an investment amount lower than the threshold set by MOFCOM, provincial-level commerce departments now have the authority to review and approve these changes before filing the approval with MOFCOM. Previously, if a foreign-invested enterprise was approved by MOFCOM, any changes made to it were also required to be reviewed by MOFCOM. However, this relaxed rule does not apply to changes made to investment companies or foreign-invested companies related to special provisions, specific industrial policies, or the national macro-control industry.
Under the Circular, MOFCOM will establish a system for conducting random monthly reviews of the enterprises. MOFCOM will notify the provincial-level commerce departments of the enterprises subject to review each month, and the provincial-level authorities, in turn, will send the relevant information of the enterprises to MOFCOM for review. If MOFCOM finds that such a department has made two approvals in violation of laws and regulations, then MOFCOM shall order it to rectify the violations within a time limit. If the necessary reforms are not made within the deadline, MOFCOM shall withdraw its authorization from the provincial commerce department.