Measures for the Administration of the Establishment of Partnership Enterprises in the Territory of China by Foreign Enterprises or Individuals (“Measures”) were announced by Decree No. 567 of State Council on November 25, 2009 and will become effective on March 1, 2010. To cooperate with the implementation of Measures, Registration and Administration Rules on Foreign Invested Partnership Enterprises (“Rules”) were announced and will come into force on March 1, 2010, too. With the implementation of aforementioned Measures and Rules, in addition to Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures, wholly foreign owned enterprises, foreign investors could establish another type of enterprises: foreign investment partnership enterprises.

The implementation of Measures and Rules will be helpful to further attracting the foreign investments, extend the foreign economic cooperation in following aspects:

1.    Simplify the procedures of establishment: Quite different from the establishments of Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures and wholly foreign owned enterprises, which need approvals from Ministry of Commerce, State Administration of Foreign Exchange and etc, and in accordance with the Rules, Chapter Two, the establishment of foreign investment partnership enterprises will only be required to be registered in relevant industrial and commercial administrative bureaus (however, if the business scopes of the foreign investment partnership enterprises involve the business that is required to be approved before its registration according to laws, administrative regulations or rules of State Council, prior approvals need to be obtained and submitted to the registration organs.).

2.    Various manners of the establishment of partnership enterprises in the territory of China by foreign enterprises or individuals, which include:

(1)   to be established by more than two foreign enterprises or individuals in the territory of China, which means all the partners are foreign enterprises or individuals;

(2)   to be established by foreign enterprises or individuals and natural persons, legal persons and other organizations in China;

(3)   Chinese natural persons, legal persons and other organizations establish a partnership enterprise and foreign enterprises or individuals join in the partnership enterprise as new partners thereafter.

3.    Meaningful to the foreign investment partnership enterprises, which take investment as their major business: it is provided in Article 14 of the Measures that “In the event that the State lays down other provisions governing partnership enterprises established in the territory of China by foreign enterprises or individuals and principally engaged in investment business, those provisions shall be complied with.” Therefore, it is not regulated in the Measures that the foreign investment partnership enterprises engaging in investment business are forbidden, and it leaves room for the State to promulgate more detailed rules concerning this issue.

We believe the implementation of Measures and Rules will create a new commercial environment, regulate the establishment of partnership enterprises in the territory of China by foreign enterprises or individuals, be convenient for foreign enterprises or individuals to invest in China by the means of establish partnership enterprises and extend foreign economic cooperation and technological exchange.