Local Governments Allowed to Approve Foreign Investment

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Mar. 13 – China’s Ministry of Commerce (MoC) is allowing local governments to authorize the set-up of foreign-funded ventures to cope with slowing capital inflows, effective immediately.

Local governments can approve foreign investment worth up to US$100 million in sectors that the country wants to develop. Following the new regulation, foreign investors can go to local commerce authorities for approval for local mergers amounting to less than US$100 million.

Previously, all FDI proposals had to pass through the Ministry of Commerce; now proposals will only need to be reported to the Ministry for record keeping. This decentralization will lessen paperwork and cut down on the bureaucracy that investors contend with when doing business in the country.

Foreign investors will still require approval from the Ministry of Commerce  if they plan to invest in companies listed on the mainland, reports Shanghai Daily.

The new regulation also includes giving local governments the authority to permit foreign-funded auto makers to expand production and capacity in addition to going into vehicle parts ventures.

Local authorities will also be able to approve foreign investors wanting to set up holding companies with as much as US$100 million in registered capital.

The MoC has simplified foreign-direct investment regulations because of plunging investments coming into the country. In January, FDI investments dropped by 32.7 percent to US$7.54 billion, on its fourth straight monthly decline.