Foreign Investment in China under the New Regulatory Regime: Reestablishment and Reorganization of Existing Companies

Abstract

Since January 1, 2020, a new legal framework has governed foreign investment in China. With the entry into force of the Foreign Investment Law, the previously known special laws regulating wholly foreign-owned enterprises, equity joint ventures and cooperative joint ventures have been abolished. From now on, the same regime of corporate law in China applies to both foreign and domestic investors. This article introduces the basic concepts of the new law and describes its impact on the establishment and reorganization of foreign-invested enterprises. Since a five-year transition period has been granted to existing companies, matters of adaptation to the new governance structure are discussed, including those matters that may potentially lead to disputes between shareholders. In this context, the registration practice of the competent Chinese authorities in this field is addressed as an important parameter in the transition process.