On March 30, 2009, China’s Ministry of Science and Technology (MOST) issued a circular to its local offices regarding the examination and approval of foreign-invested venture capital enterprises (FIVCEs) and foreign-invested enterprises licensed to manage venture capital enterprises (FIVCE Managers), which aims to further strengthen the administration of FIVCEs and encourage them to invest in high and new technology industries, comes on the heels of another circular on issues involved in the examination and approval of FIVCEs and FIVCE Managers promulgated by the Ministry of Commerce on March 5 (the MOFCOM Circular). Both Circulars accord with the Administration Provisions on FIVCEs (the Administration Provisions), which were jointly issued by several ministries, including MOST and MOFCOM’s predecessor, on January 30, 2003.
The Circular reiterates the MOFCOM Circular’s authorization of certain local commerce authorities to approve the establishment and modification of FIVCEs and FIVCE Managers, as long as the total investment amount of the FIVCE or FIVCE Manager under consideration is no more than US$100 million. The authorized local commerce authorities include those of provinces, autonomous regions, municipalities directly under the central government, cities under separate planning (currently including Shenzhen, Ningbo, Qingdao, Dalian, and Xiamen), Harbin, Changchun, Shenyang, Jinan, Nanjing, Hangzhou, Guangzhou, Wuhan, Chengdu, Xi’an, the Xinjiang Production and Construction Corps, and all national economic and technological development zones (the Local Commerce Authorities).
Under the MOFCOM Circular, the Local Commerce Authorities must deliver a written decision on all FIVCE-related applications within 30 days upon the complete submission of all relevant materials in accordance with the Administration Provisions. With respect to applications for establishing an FIVCE, the MOFCOM Circular states that the Local Commerce Authorities should seek written advice from the science and technology authorities at the same local level (the Local Science Authorities).
The Circular prescribes detailed rules for the Local Science Authorities’ review process. Under the Circular, when examining an application at the Local Commerce Authorities’ request, the Local Science Authorities should pay particular attention to the investment orientation, sector, target and schedule of the proposed FIVCE or FIVCE Manager, as well as the investment experience in science and technology sectors of the proposed FIVCE or FIVCE Manager’s management team. In addition, the Circular specifically provides, the Local Science Authorities will issue a written opinion on the application under consideration to the Local Commerce Authorities within five days after receipt of the relevant letters and application materials.
In the Circular, MOST also requires the Local Science Authorities to designate a special department and personnel to examine FIVCE and FIVCE Manager applications and coordinate with the Local Commerce Authorities. In fact, MOST explicitly demands that the Local Science Authorities work together with the Local Commerce Authorities to better serve FIVCEs and FIVCE Managers. In addition, MOST exhorts FIVCEs and FIVCE Mangers to redouble their investment efforts in the high and new technology industries encouraged by the central government, as well as in science and technology-oriented small and medium-sized enterprises at the startup and early growth stages.