China is the first country which successfully controls the COVID-19 and the only economy which achieve economic growth in year 2020. Many foreign investors are seeking to buy the stock in the Chinese market or plan to form a new business in China. Please bear in mind the following quick notes before invest in China, considering the Chinese market is very particulr in many aspects compared with other economies.
First of all, China is a country which adopts foreign exchange control for all international investment in China. Injection of investment capital into China, use of such capital, even the loan from a oversea parent company as well as withdrawal and remittance back of such capital are all strictly supervised by the State Administration of Foreign Exchage Bureau (“SAFE”). Thus the investors must consider how to plan the whole process before investing in China.
Secondly, foreign investment is governed the same as a domestic legal entities, accompanying the effectiveness of Foreign Investment Law, and the foreign invested entites (most of which are LLC) is governed by the Company Act of the China, which is the same as stipulation to the domestic legal entities in China. To this point, the invest need to think about the entity form and learn about the liabilities of each different legal entites.
Furthermore, tax planning and structuring of the invested entity is very important, for which the investors need to consider the tax treaties between China and the investors’ home country and avoid double taxation during the operation of the invested entity. It makes a great difference under different investment structure.