China Regulatory Brief: Loosened FDI Regulations, Private Economy Demonstration Zone in Wenzhou

April 13, 2015 Posted by China Briefing Reading Time: 5 minutes

SAFE Releases New Rules for Foreign Exchange Capital Funds Settlement

On April 8, the State Administration of Foreign Exchange (SAFE) released new regulations for settlement of foreign exchange capital funds. Under the new rules, foreign-invested enterprises (FIEs) registered in China will be allowed to make foreign exchange capital account settlement at their own discretion, starting June 1. This means that FIEs in China will be allowed to buy and sell RMB from designated banks in unlimited amounts. SAFE also allows enterprises to freely choose the timing for foreign exchange settlement. The same rules were first implemented in the Shanghai Free Trade Zone (FTZ) in 2013 and further expanded to 16 Chinese main financial reform cities last year. The rules are expected to enable FIEs to better manage and avoid foreign exchange risks.

China to Roll back Preferential Policies for Foreign Investors

China’s State Council recently issued guidelines requiring local governments to roll back their regional tax incentives and preferential policies for foreign-invested enterprises. The Chinese government stated that the move is made to create a fair market and investment environment for both domestic and foreign enterprises. Foreign enterprises including Foxconn, the world’s largest electronics manufacturer, are currently negotiating with local governments to keep previously promised subsidies. Along with lower economic growth, China is now facing a slowdown in tax revenues and massive local debt.

China to Strengthen the Supervision of Fresh Milk Production

China Food and Drug Administration recently released a Circular to strengthen the supervision of the production and sale of fresh milk, stipulating that fresh milk should be processed and sold within the same day. The relevant business operators need to obtain a valid catering service license and have necessary equipment for milk purifying, sterilizing, fermentation and refrigeration. Moreover, the business scope must be limited to the production of pasteurized and fermented milk.

New IP Court Established in the Shanghai FTZ

On April 9, the Shanghai Free Trade Zone (FTZ) officially launched an intellectual property (IP) court, dedicated to handling IP cases. The court will take charge of IP infringement cases incurred in cross-border trade, and import and export procedures. The Chinese government has set up three IP courts in Shanghai, Beijing and Guangzhou in last year, as another step towards a sound IP protection system. For more details on the enhanced legal protection for foreign investors, please refer to our previous article.

Wenzhou to Establish Private Economy Demonstration Zone

The National Development and Reform Commission recently approved the establishment of the Cross-Strait Private Economy Demonstration Zone in the city of Wenzhou, Zhejiang province. The zone is the first of its kind in the nation and will make full use of the local private sector to build itself into an advanced coastal manufacturing base and port logistics base. Wenzhou, among the top five wealthiest cities in China, was the county’s first city to introduce market economy policies and has the most active and developed private economy in China. The city is expected to be built into an important region connecting the Yangtze River delta and Midwest China.

Guangdong Releases Simplified Approval Procedures for Foreign Employees

The Guangdong provincial government recently released simplified approval procedures for foreign employees working in Guangzhou. According to the Circular, the Guangzhou Human Resources and Social Security Department will take charge of the following approval items for foreign employees starting May 1, 2015:

Employment approval for foreigners working in Guangzhou local government departments
Employment approval for Taiwan, Hong Kong and Macau personnel working in local government departments

Previously, foreigners working in Guangzhou local government departments would have to obtain the work permit with the Guangdong provincial social security bureau.

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