It is well-known that there are numerous PRC State-owned enterprises in need of revitalization and reorganization. The PRC government has now taken some coordinated steps toward doing so. In order to promote the strategic reorganization of state-owned enterprises and create a more streamlined system of operating such enterprises, the State Economic and Trade Commission, the Ministry of Finance, the State Administration for Industry and Commerce and the State Administration of Foreign Exchange all worked together to craft legislation that would govern how foreign entities can participate in the revitalization of state-owned enterprises. Together, they jointly promulgated the Provisional Regulation on Reorganization of State-owned Enterprises Using Foreign Investment. This took place on November 8, 2002 and went into effect on January 1, 2003.

The primary purpose of the Provisional Regulation is use foreign investment to transform state-owned enterprises and corporate enterprises with state-owned equity into corporate foreign invested enterprises (financial enterprises and publicly-listed companies are excluded from the scope of application of this Regulation). The Provisional Regulation provides measures for the transfer of state-owned title or equity, the timing and standards for asset appraisal, the assignment of domestic creditors' rights in state-owned enterprises, the purchase of all (or part of) the assets of state-owned enterprises, and for attracting foreign investment through increases in capital. The Provisional Regulation also sets forth the basic process for reorganization procedures, from initial application, through the submission of a transfer agreement, to approval and settlement and commercial registration and title.

The Provisional Regulation applies to foreign investors from around the world, and also to those from Hong Kong, Macao and Taiwan, as well as foreign invested enterprises already on the Chinese mainland.

─Jason Ju