- Ownership restrictions on foreign investment removed
- Approval application procedures simplified
- Minimum RMB20 million required for opening branch office
China's newly revised administrative regulations on foreign investment in advertising enterprises came into effect on October 1, 2008. The new regulations, promulgated by the State Administration for Industry and Commerce (“SAIC”) and Ministry of Commerce (“MOC”), were set to replace the former regulations issued by SAIC and MOC on March 2, 2004.
The new regulations remove ownership restrictions on foreign investment in advertising enterprises. Although the previous regulations (2004) had permitted the establishment of advertising enterprises in the form of wholly foreign-owned enterprises (“WFOEs”) as of December 10, 2005, such enterprises had difficultly in actually obtaining approval of their applications. The new regulations should facilitate applications to establish a WFOE in China. Application procedures have been simplified, allowing foreign investors to file with the relevant department at the provincial level. The provincial AIC is free to make its own decisions and issue an Opinion Upon the Examination and Approval of Foreign-Invested Advertising Enterprise Projects (“Opinion”). Following the Opinion of the provincial AIC, foreign-invested advertising enterprises may directly submit their contracts and articles of association to the appropriate provincial commerce department rather than the MOC for inspection and approval.
In addition, the new regulations reiterate the business scope and requirements relative to foreign-invested advertising enterprises. Foreign-invested advertising enterprises may engage in design, production, publication and some other types of advertising work for both domestic and overseas clients after receiving official approval.
A Sino-foreign advertising joint venture can be established on the condition that all investing parties are the enterprises engaged in the advertising business and that they have been in operation for more than two years.
To establish a wholly foreign-owned advertising enterprise, an investor is required to be an enterprise with advertising as its main business and also to have been in operation for more than three years.
A foreign-invested advertising enterprise is qualified to apply for establishment of a branch in China only if it has invested the full amount of its registered capital and has a minimum annual operating turnover of RMB20 million.
The new regulations show that China’s government intends to encourage more global advertising agencies to invest in China in the future, which is likely to generate increased competition in the local advertising market.