China Officially Opens Cross-Border RMB-Denominated FDI
Oct. 18 – Following the issuance of a circular draft concerning cross-border RMB-denominated foreign direct investment (FDI) in August, the Chinese Ministry of Commerce (MoC) has recently fixed and released the official legal document, which can be used as a guidance for foreign investors who intend to conduct FDI with RMB legally obtained overseas.
The “Circular on Issues Concerning Cross-border RMB-denominated FDI (shangzihan  No.889),” issued on October 12, does not present significant differences compared to the previous draft version, in which the definition of “RMB legally obtained overseas” is given and approval procedures for RMB-denominated FDI projects are specified.
While Circular No.889 emphasizes that cross-border RMB-backed FDI shall not be used on securities, financial derivatives, entrusted loans or loan payback, it adds that legally-obtained RMB capitals may participate in private share placement or agreement-based share transfers by domestic listed companies, but related approval procedures will be required according to the “Method for the Administration of Foreign Investors’ Strategic Investment into Listed Companies (Decree  No.8 by MoC, CSRC, SAT, SAIC and SAFE).”
All foreign-invested enterprises that intend to conduct FDI with RMB legally obtained overseas shall also comply with the existing FDI-related laws, industrial policies and regulations on security as well as anti-monopoly inspections of mergers and acquisitions. Specifically, cross-border RMB-backed FDI into China’s real estate industry shall follow the existing approval and filing system for foreign-invested real estate projects.
The Circular took effect on October 12, 2011.
Using Hong Kong for China Operations
An examination of the different types of holding companies that are available to foreign investors and the advantages they can impart, from ease of incorporation to a favorable tax regime. We also run through the incorporation procedures for establishing a company in Hong Kong and lay out the accounting and financial requirements that affect Hong Kong companies. A brief introduction to Hong Kong’s double tax agreements is also provided. (PDF US$10)