Investing Into China - The Regulatory Environment: A Tale ...Macau Portuguese colony until 1999 1999 onwards t SAR of PRC ^Kv }µv ÇU Á} Ç u _ o] Uses Portuguese civil law system

Investing Into China - The

Regulatory Environment:

A Tale of Two Phases

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https://en.wikipedia.org/wiki/File:CHN_orthographic.svg

My Co-Presenter and Other Contributors

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China: The Old And The New

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China: A civilisation older than 4,000 years

2,100 BC - Start of the First Chinese imperial

dynasty

1912 - End of the last imperial dynasty (Xing)

of China

1912 – 1949 - The Republic of China

1927 – 1949 - Chinese civil war

1949 to present - The People’s Republic of China –

Mainland China

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China: A civilisation older than 4,000 years

(cont.)

1949 to present - Taiwan - The Republic of China (regarded by the

PRC as its 23rd province)

1978 onwards - Significant economic reforms in PRC

2012 - Xi Jinping elected general secretary of

the CCP.

Large scale economic reforms

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Hong Kong

UK colony from 1841 until 1997

1997 onwards - Special Administrative Region of PRC

“One country, two systems” – Hong Kong retains:

• Its capitalist economic system

• Own currency (HK dollar)

• Legal system (uses English common law)

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Macau

Portuguese colony until 1999

1999 onwards – SAR of PRC

“One country, two systems” applies

Uses Portuguese civil law system

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PRC

Population: Approx 1.4billion

Time zones: 5

Legal system: Adapted continental European civil law systems with:

• Strong local Chinese legal characteristics.

• Strong socialist elements.

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South Africans will recognise this:

• Exchange control

• Labour law highly protective of employees

• Local ownership requirements

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Challenges (Perceived or Real) and Upside

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Challenges (Perceived or Real)

• Restrictive foreign investment approval systems

(nationwide “negative” list)

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• Concerns about IP protection

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• Concerns about IP protection

• Compulsory technology transfer

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Upside

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Upside

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Upside

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What do you want to do?

Trading Trading

with X in

China China

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Foreign Investment Categories

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Popular Foreign Investment Structures

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1. Representative Office

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2. WFOE (wholly foreign owned enterprise)

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3. Joint Venture with Chinese partner

• “Restricted sectors” – compulsory to use JV

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The Current Phase:

Pre-Approval and

Business Licence

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STEP 1 - PRE-APPROVAL OF BUSINESS

Ministry of Commerce

Approval: In case of Restricted sectors

Notification: In case of Permitted and

Encouraged sectors

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STEP 2 – REGISTER AND BUSINESS LICENCE

• State Administration for Industry and Commerce

• Includes Permitted and Encouraged sectors

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The Pending New Phase - New Foreign Investment

Law

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New Foreign Investment Law

• Passed 3 March 2019

• Takes effect 1 January 2020

• Applies to WFOEs and JVs (and to investors from HK, Macau and Taiwan)

• “Umbrella Law” – detail in implementation regulations

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New Foreign Investment Law (cont.)

If not on “Negative List”, won’t need:

• pre-approval by Ministry of Commence;

• “foreigner” business licence from with Administration of Industry and Commerce

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New Foreign Investment Law (cont.)

• Chinese JV partners may not “appropriate” IP and technology

• Government officials may not force “technology transfers”

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Quick Word About Hong Kong

• No capital flow restrictions in Hong Kong

• Stock Exchange of Hong Kong:

• Main Board and Growth Enterprise Market Board

• Largest IPO (new listings) market / exchange in 2018 by funds raised

• 40% of investors on the exchange are non-Hong Kong

• Ease of starting a company / business

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The Bottom Line

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The Bottom Line

• Get specialist help to find your way

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The Bottom Line - It is much more than just a language

challenge

issue

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Useful Contacts

In South Africa

Kai-Lie Chen Attorneys

(Rivonia, Gauteng)

Ref: Kai-Lie Chen

[email protected]

082 807 8832

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mailto:[email protected]





Useful Contacts

In South Africa

Knowles Husain Lindsay Inc. Attorneys

(Sandton, Gauteng and Cape Town)

Ref: Francois Terblanche or Nosipho Mkhize

[email protected] or [email protected]

011 669 6096 or 011 669 6120

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Useful Contacts

In South Africa

For commercial and practical guidance on Hong Kong

Conrad Hendry

Regional Manager Southern Africa

Hong Kong Trade Development Council

Illovo, Gauteng

+(27)10-5907974

+(27) 83 3016013

[email protected]

www.hktdctrade.com

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http://www.hktdctrade.com/

Useful Contact In Hong Kong

For legal advice on Hong Kong law

Hong Kong (also in Beijing, Shanghai and Yangon)

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Useful Contact In the PRC

For legal advice on the PRC’s law

(More than 24 offices throughout the PRC and abroad)

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Documents

Investing Into China - The Regulatory Environment: A Tale ...Macau Portuguese colony until 1999 1999 onwards t SAR of PRC ^Kv }µv ÇU Á} Ç u _ o] Uses Portuguese civil law system