Going Back to the JV Well: China Issues Add’l FDI Rules

2009-12-02

Just saw this in the news, haven't read the regs yet.

China announced Wednesday a regulation to standardize and encourage the establishment of joint venture enterprises by overseas investors.

According to the regulation, which will take effect from March next year, the government is to encourage overseas investors with advanced technology and management experience to set up joint ventures in an effort to promote the development of industries such as the modern servicing sector.

The regulation defines those joint venture enterprises as those set up by more than two overseas investors or by an overseas investor and a Chinese investor.

The regulation, issued by the State Council, covers both enterprise and individual investors.

It also applies to investors from the Hong Kong Special Administrative Region (SAR), Macao SAR and Taiwan.

The amount of foreign direct investment into China rose for the third consecutive month in October, up 5.7 percent year on year to 7.1 billion U.S. dollars, according to statistics from the Ministry of Commerce. (Xinhua)

I assume that the news writeup is missing a lot here, but that's OK. There is already of course a great deal of existing law on Sino-foreign JVs, so my first question is what the heck is new here (i.e., why was this issued?). Maybe this was a 20-year-old article that Xinhua ran today by mistake . . .

One area mentioned in this article and in some other stuff I've seen today is the government's push for the development of the service sector. Is this the way that China will rebalance away from a manufacturing-based economy?

This seems a bit like a throwback to days of yore when the government let in certain kinds of foreign investors, limiting the FDI to minority shareholding in JVs with SOE partners. Technology transfer and knowledge spillover ensued, and we are where we are today in the manufacturing sector.

Are they now trying to replicate this in the service sector? Seems to me that a lot of foreign investors are already here, so I'm not sure (again) what part of this is new.

Tags: China Law