On September 3, 2016, the Standing Committee of the National People’s Congress promulgated the Decision of the Standing Committee of the National People’s Congress on Amending the Law of the People’s Republic of China on Foreign-funded Enterprises and Three Other Laws (hereinafter, the “Decision”). The Decision amended the provisions on administrative review in the Law of the People’s Republic of China on Foreign-funded Enterprises, the Law of People’s Republic of China on Sino-foreign Joint Ventures, the Law of the People’s Republic of China on Sino-foreign Cooperative Enterprises and the Law of the People’s Republic of China on Protection of Investment by Compatriots from Taiwan. Beginning from October 1, 2016, the establishment and amendment of foreign-funded enterprises and Taiwan-funded enterprises will essentially only need to follow a registration and recordation procedure unless special administrative measures as stipulated by the state are involved (i.e. on the negative list), which would still require an approval from the commerce and trade authorities. This effectively means that foreign investors in China will be formally governed by an administrative model of “national treatment plus negative list for pre-establishment.”
To accommodate such major amendments, the Ministry of Commerce also promulgated on the same day the Interim Measures for Recordation in the Establishment and Amendment of Foreign-invested Enterprises (Draft for Soliciting Opinions) (the “Interim Measures”) to provide specific details regarding the online recordation process, the supervision and the legal responsibilities involved. It is also stipulated at the same time that the recordation of investment from Hong Kong and Macao shall be governed by such measures. The Interim Measures are regarded as key accommodating measures and are expected to go into effect on October 1, 2016 at the same time as the Decision becomes effective.
According to the experiences with the national treatment plus negative list model in the four free trade pilot zones in Shanghai, Guangdong, Tianjin and Fujian and according to the Interim Measures, the current “case-by-case review and approval system” will be replaced by the “registration and recordation system,” which will greatly reduce the amount of paper materials to be submitted, and the processing time can be cut down from 20 working days to less than three working days if complete materials are submitted.