China Foreign Investment
China Foreign Investment1.0 Introduction
The purpose of this essay is to advise a potential investor on the legal aspects relevant to making an investment in the Peoples' Republic of China (PRC). The first part discusses the main methods of establishing operations in the PRC. It identifies the main legal and procedural steps. The essay also details intellectual property law in the PRC focusing on the protection of patents, copyright, trademarks and trade secrets. The essay notes the importance of human rights recognition in a business.
2.0 Background
The Sino-Foreign Equity Joint Venture Law in 1979 was seen as a first step by the Chinese government to build a legal structure governing foreign investment. The PRC has continued to develop its legal system that protects investor's rights as well as the rights of their foreign partners. Zhixin (1988) notes that a substantial number of foreign-related tax laws and regulations have been enacted to develop international economic relations.
3.0 Establishing operations in the PRC
There are five main methods of establishing operations in the PRC, these include:
� Setting up a representative office;
� Setting up a branch office under the Company Law;
� Establishing an equity joint venture;
� Entering into a cooperative joint venture; and,
� Setting up a wholly foreign owned enterprise.
3.1 Representative Office
Many firms choose to set up a representative offices in China initially as this helps the firm gain experience and acquire a better understanding of the size and potential of the market in the PRC. These offices function as a liaison between a firm's home office and trade organisations and related industries in China. Representative offices are useful for conducting market research and establishing contacts with prospective customers and potential partners.
3.1.1 Registration requirements
Representative offices are subject to restrictions. They cannot engage in certain activities and may not receive fees for services they provide, directly generate income, or sign contracts that would generate income. Representative offices, are however allowed to negotiate contracts which are later signed in the name of the home office located outside the PRC.
Representative offices also need to be registered. Upon registration it may then lawfully: employ Chinese nationals, open a bank account, import personal effects duty-free, import office equipment without an import license, and obtain direct telecommunication lines, display signs with the company name, or to use business cards that identify the company's presence in China. Completed registration of the representative office also allows the representative of a company to obtain a multiple entry visa or legally rent an apartment with a commercial domicile registration booklet.
Representative offices also provide intangible benefits. It may no other purpose but to present an image to the prospective Chinese customers and potential partners. The visual impression of a representative office is very important in China because the Chinese are often unable to visit the home office...
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