Types of Foreign-invested Enterprises
Foreign-invested enterprises are mainly classified into the following kinds: Chinese-foreign Joint Venture, Chinese-foreign Cooperation Enterprise, Wholly Foreign-owned Enterprise, Foreign-invested Enterprise Co., Ltd, Investment Company
Chinese-foreign Joint Venture, Chinese-foreign Cooperation Enterprise, Foreign-invested Enterprise are the main forms of foreign enterprises in China, other investment ways includes Foreign-invested Enterprise Co., Ltd, Investment Company, Cooperation Development, BOT and so on.
I. Chinese-foreign Joint Venture
Chinese-foreign Joint Venture is also called Equity Joint Venture. It is established in China by foreign companies, enterprises and other economic organizations or individuals and domestic companies, enterprises and other economic organizations, and invested by both foreign and domestic sides. Its characteristic is that parties of joint venture shall share risks and profits and manage the joint venture in accordance with the respective proportions of their capital contributions.
The Chinese-foreign Joint Venture is Limited Liability Company as Legal Person in China.
Generally, the foreign investors shall provide no more than twenty-five percents of registered capitals. Parties of the venture may make capital contributions in cash or in kind, with buildings, workshop, machinery equipment and other materials, industrial property rights, proprietary technology, land-use right, the values of which are assessed.
The profits and other legal rights allocated to the foreign investors can be remitted abroad ,also can be reinvested in China.
II. Chinese-foreign Cooperation Enterprise
Chinese-foreign Cooperation Enterprise is also called Contractual Joint Venture. It is an enterprise established in China by foreign companies, enterprises and other economic organizations or individuals and domestic companies, enterprises and other economic organizations, subject to the cooperation conditions offered by both parties.
All parties of Chinese-foreign cooperation enterprise shall negotiate on the issues which shall be stipulated in enterprise contract, such as conditions, rights, and revenue distributions that are offered by each party, undertaking corresponding responsibility of risks and debts,the management methods of enterprises,dealing the property after expiration. Generally,for establishing a cooperation enterprise, the foreign investors offer the whole or partial of capitals, technology, key devices and others, the domestic party is responsible for offering land-use right, the existing plant building and equipment or part of capitals and so on.
Chinese-foreign Cooperation Enterprise may or may not have the qualification of legal person.
III. Wholly Foreign-owned Enterprise
Wholly Foreign-owned Enterprise refers to the enterprise established in China by foreign companies, enterprises, and other economic organization or individuals and wholly invested by foreigners in accordance with China laws.
Wholly Foreign-owned Enterprise is Limited Liability Company, not including branch institutions of foreign enterprises and other economic organizations.
IV. Foreign-invested Enterprise Co., Ltd
Foreign-invested Enterprise Co., Ltd is a company established in China by foreign companies, enterprises and other economic organizations or individuals and domestic companies, enterprises and other economic organizations on the principle with equality and mutual benefit through the way of purchasing a certain proportion of shares.
All capitals of foreign-invested enterprise Co., Ltd consists of equal shares. Every shareholder shall take responsibility respectively according to the subscribed shares, the company shall take responsibility for company debts by all property. It is a form of foreign enterprises, for which the relevant stipulations of laws and regulations on foreign enterprises are applicable.
V. Foreign Investment Company
Foreign Investment Company is a company established in the form of individual investment or co-investment with Chinese investors by foreign investors to engage in investing directly. The status of the company is Limited Liability Company.
The foreign investors who apply for establishing investment company shall be with good credit, have a considerable economic strength, and have established a quite number of foreign enterprises whose paid-in contribution of registered capital shall no less than 30,000,000 Dollars.
The investment company approved to be established by government of China is endowed to have wider business scale by our government for the purpose of encouraging transnational cooperation to implement a series of investment activities. At present, the investment company can invest in the fields that the government of China encourages and allows the foreign enterprise to invest, such as industry, agriculture, infrastructure, energy and so on.
Chinese- foreign Cooperation Development
Chinese- foreign cooperation development refers that Chinese company and foreign company carry out cooperative exploration and development toward offshore and onshore petroleum, mineral resources through making risk contracts. It is a widely-used economic cooperation way in the field of natural resources so far in the world, whose obvious characteristics are high risks, high investment, high yield. Cooperation development is generally divided into three stages, namely exploration, development and production.
BOT refers that investors are in charge of a certain industry project or infrastructure project and responsible for construction, operation, maintenance and transfer of the project. Investors can operate in a fixed term and be allowed to take back the investment fees, operation fees, maintenance fees and other fees of the project. After the stipulated term expires, the investors can transfer the project to the government of project party. BOT method to establish projects or companies is being tried to be used in the fields such as highway, power plant, sewage treatment and so on.