Ever since China began opening up to the outside world, the right of foreign-invested enterprises ("FIEs") to make equity investments within the People's Republic of China (which for these purposes refers to Mainland China excluding the Hong Kong and Macau Special Administrative Regions and Taiwan (the "PRC" or "China"), using capital contributions (i.e., registered capital or a capital increase) has been a privilege rather than a right: the unqualified right to re-invest was reserved for certain specific types of FIE, including (i) foreign-invested investment enterprises (also known as foreign-invested holding companies), (ii) foreign-invested venture capital investment enterprises, and (iii) qualified foreign limited partner funds (collectively, "Investment-type FIEs"). Establishment of Investment-type FIEs was historically something of an obstacle course, with qualification criteria to meet and minimum capital thresholds, and they were subject to quite heavy regulatory scrutiny at the point of establishment due to sensitivities around domestic reinvestment by FIEs.
Historically, FIEs which were not Investmenttype FIEs ("Non-investment FIE") were only permitted to make domestic equity investments using retained profits derived from their operations, except for generic FIEs having "investment" included in their business scope, which has been, in practice, almost impossible to include or add into the business scope in recent years due to sensitivities around misuse of reinvestment rights. However, more recently there has been renewed momentum to relax these restrictions
