Foreign-Invested Partnerships: The Third Road in China

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BEIJING, Jun. 3 – Richard Hoffmann, the senior legal associate for Dezan Shira & Associates in Beijing, held a business seminar last week on the recent legislation that makes partnership enterprises available to foreign investors.

The seminar, held in conjunction with KPMG’s Tracy Zhang at the Kempinski Hotel Beijing on May 26, was an excellent opportunity for investors to learn about the most recent legal entity for foreign investment.

Foreign-invested partnerships are seen to be essential for China to attract foreign management expertise as well as advanced technologies. They are part of China’s overall economic strategy of moving from low productivity, low value manufacturing into high productivity, high value wealth creation.

The focus of the FIP legislation is not primarily on foreign capital since this can be provided from within China now after three decades of foreign capital inflow. But rather it also seems to provide young creative entrepreneurs with a platform to develop their ideas supported by domestic as well foreign partners.

Mr. Hoffmann covered the major changes in opportunities for foreign investors to invest in China.

Some of these changes included:

  • Flexible capital contribution in form of cash and in-kind contributions, such as services, IP rights
  • No time constraint for contributing capital
  • Pre-registration approval by the Ministry of Commerce only in cases with investment considered restricted by the Foreign Investment Industrial Guidance Catalogue
  • No corporate income tax on partnership enterprise level
  • Increased flexibility for management structure
  • Improved distribution of dividends

In contrast, there are still many things unclear about the new regulation:

  • Detailed information on implementation of in-kind contributions
  • How State Administration of Foreign Exchange will deal with the new regulations
  • How the General Administration of Customs is involved
  • Cooperation of government agencies

Mr. Hoffmann’s presentation is available for complimentary PDF download.

For further advice or comment on China’s foreign-invested partnerships, please contact Richard Hoffmann at

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