June 1, 2005
China Committee, ABA Section on International Law
Readers may wish to check out the recently-updated website of the China Committee of the ABA Section on International Law.
There are a number of China-related programs at the upcoming ABA Annual Meeting in Chicago (Aug. 5 to Aug. 9). You can find them on the agenda; a description is appended below.
Real Estate Investment in China: Risks and Opportunities
In light of overheated economy in P.R. China, it is necessary to address the issue of real estate investment. Central government has ordered provincial leaders in China to adopt measures to reduce the price of residential property price. Is this a signal of risks to invest in real estate market in China? The major cities in China, such as Shanghai, Beijing are embracing many opportunities. There are many factors to push the real estate price up. These factors include but are not limited to an increase in city population, Olympic Games, World Exhibition, booming economy, etc. This program will address current transactional, structuring and compliance issues regarding real estate investing, lending, leasing and transfer activities in the People's Republic of China and relevant rules, including emphasis on tax, regulatory and due diligence issues presented by investments in PRC real property by non-PRC persons.
CLE: Rising Affluence and Post-WTO Reforms: Converging Trends Boost Franchising in China
In November of 2004, a two-day conference and exhibition on franchising in China was held in three major cities: Beijing, Guangzhou and Shanghai. Over 20,000 visitors attended. Seven categories of franchising businesses were represented, with the preferred industries for investment being food & beverage (34%) and laundry services (30%). More than 50% of the vi! sitors said they wanted to invest in a unit franchise store. Of those, 72% planed to invest US$60,000 or more in a franchise. At the same time that business trends were attracting increasing interest in the possibility of investing through franchising, China adopted key legal reforms aimed at integrating what had been a hodge-podge of various regimes relating to franchising activities. Some of the reforms are controversial, some predictable. This program intends to describe the new regulatory environment and its implications, as well as to glean first-hand experiences from companies engaged in franchising as a means to expand their business in China.
Committee Program: Managing the Crossfire of Multi-Dimensional Governmental Involvement in Foreign Investments in China
Foreign investment in China is subject to a multi-dimensional approval system . With the assortment of authorities involved, bureaucratic oversight and jurisdictional disputes are pervasive.
Establishment of a new company that involves investments above a certain “floor” is subject to the examination and approval of the central government. If the total investment were under this “floor”, the approval of the government at the provincial or municipal level would be sufficient. However, at all levels, a single project will usually involve the approval of more than one governmental agency. To begin a foreign investment project, the National Development and Reform Commission or its local counterparts are involved; with regard to the joint venture contract and articles of association of a ”Foreign Investor Enterprise”, the Ministry of Commerce or its local counterparts must approve. For foreign exchange issues, the approval of the State Administration of Foreign Exchange or its local counterpart is required. For land use, approval by the State Land Administration Bureau or its local counterpart is necessary. If a Chinese partner ! that will contribute its tangible assets into a joint venture is a State-owned enterprise, then the State-Owned Assets Administrative Commission will review the appraisal of those assets. The State Administration of Taxation along with the State Council will determine the tax treatment of the transaction. For approval of the scope of the business, parties must go to the State Administration for Industry and Commerce.
To complicate matters, local governments that want to attract foreign investment, may indicate that they can fully approve a project; when they cannot .
This program will address how to manage in the cross fire of all these regulatory agencies, from four perspectives:
- New regime for foreign investment approval by the NDRC and MOFCOM;
- Special issues involved when acquiring Chinese State-owned enterprises;
- Merger control rules for foreign investment;
- Other regulatory processes in asset and equity acquisitions.
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