Mar 01 2008
so you want to do business in china? check your business first.
Another very helpful post on China Law Blog this past week entitled, “China FDI — You Got To Know What To Hold, Know What To Fold”, which details what type of work can and cannot be done by foreign companies in China. For those of you contemplating setting up shop in China, this is a good thing to know before you go in. It would be a supreme waste of money, resources, and time to not know this.
Steve Dickinson is pretty knowledgeable about Chinese law, so without further adieu, here are some CLB’s points:
Real Estate. China does not have a problem with foreign investors getting involved in developing and building new real estate projects, but it does have a problem with foreign investors buying existing properties to re-sell. There are restrictions on luxury properties, both in the catalogue and in certain regulations. Nobody seems to know why China wants to discourage foreign investment in luxury properties.
Internet. China has always restricted foreign investment in publishing and its handling of internet foreign investment is just an extension/confirmation of that. China has deemed publishing a website as exactly the same as publishing a magazine and it is going to restrict this in the same way. China is very concerned about access to information.
Market research and social research. Wholly foreign owned entities (WFOEs) are not allowed to do market research. Joint Ventures (JVs) can conduct such research, but WFOEs cannot. Beijing intially thought it would monopolize and monetize market research but now it just is worried about negative research. Steve asks how companies can be expected to invest in a country in which they cannot do legal research and then notes it is completely contradictory to have a catalogue with twenty pages of “encouraged” investments, but no right to conduct market research to find out whether investment makes sense. This prohibition against WFOEs doing market research is “uniformly ignored,” but Steve does have to caution those who do engage in it that they risk an immediate shutdown.
Neither JVs nor WFOEs are allowed to conduct social research.
The new catalogue documents Beijing’s desire to shift China from “Quantity of FDI to Quality” and to move China away from a cheap labor/cheap material economy to one where information, knowledge, efficiency and technology are at a premium.
All good knowledge to have, both for companies wanting to setup in China and the lawyer advising them.
