弗朗西斯科·索勒专著的《在中国(投资指南)(英文版)》 will help minimize the difficulties described above，allowing foreign investors in China to reduce the uncertainties that are inherent in a country that is so different from their own，and at the same time facilitate trade and investment between Chinaand other countries．

Please note that the Chinese IegaI and tax frameworks are in constant development．弗朗西斯科·索勒专著的《在中国(投资指南)(英文版)》 contains up—to—date information at its date of pubIication but does not，therefore cover subsequent legjslative developments．

Anv Iists of documentation or reqUi rements contained in This guide should not be taken to be definitive or ex—haustive and confirmation should stiII be sought fromthe relevant authorities Since in our experience and to our best knowledge．there are no nationwide Uniform 《在中国(投资指南)(英文版)》 on such documentation and requirements． and locaI authorities positions and interdretations may vary．It is strongly recommended that specific confirma．tion be sought in each individual case．The information contained in this report shouId not be construed as legaI advice．as it contains generaI information whichmay vary depending on the specific conditions of each investment decision and the investor．If a decision is taken to invest in China or if further analysis or expla．nation on the subject matter is required specific IegaIadvice should be obtained．

Chapter I GENERAL ASPECTS

1．Geographic Location and Administrative Regions

2．People and Languages

3．Economy

4．Industry

5．Foreign Trade

6．Consumption

7．Political Matters

8．Culture

Note  

Chapter I I LEGAL SYSTEM

1．Legislation in China

 1．1 Sources of Law

 1．2 Civil and Commercial Legislation in China

2．Judicial System in China

 2．1 Organization ofthe Courts

3 Governmental Structure of the Administration

 3．1 Ministry of Commerce(MOFCOM)

 3．2 State Administration of Industry and Commerce(SAIC)

 3．3 State Administration of Taxation(SAT)

 3．4 State Administration of Foreign Exchange(SAFE)

 3．5 Customs

Note 

Chapter lII FOREIGN INVESTMENT POLlCY IN CHINA

1．Special Zones

 1．1 Special Economic Zones and Other Development Zones

 1．2 Export Processing Zones

 1．3 Bonded Zones，Bonded Logistics Parks and Bonded Port Areas

2．WT0 Commitments

3．Closer Economic Partnership Arrangements(CEPA)with Hong

 Kong and Macau_

4 Foreign Investment Industrial Guidance Catalogue．

 4 1 Encouraged Industries and Sectors

 4．2 Restricted Industries and Sectors

 4 3 Prohibited Industries and Sectors

 4．4 Permitted Industries and Sectors

5 Foreign Exchange Contr01

 5．1 Current Account Items

 5．2 Capital Account Items．

6．Debt Financing

 6．1 Borrowing Foreign Currency

 6．2 Borrowing RMB

ChapterIV DISTRIBUTION AND SUPPLYCONTRACTU

AL ARRANGEMENTS

1．Distribution Contracts

 1．1 Exclusivity．

 1．2 Distributor’S Obligations

 1．3 Ownership of Intellectual Property

 1．4 Confidentiality

 1．5 Term

 1．6 Termination

 1．7 Goveming Law

 1．8 Regulatory Approvals

2．Agency Contracts

 2．1 Duties of the Principal

 2．2 Restrictions and Duties of the Agent

 2．3 Commission

3．Franchise Contracts

 3．1 Franchisor Requirements and Content of a Franchise Contract

 3．2 Procedures and required documentation for registration

 3．3 TerlTIS and Conditions of the Franchise Contract

 3．4 Inventory Supply and Control

 3．5 Trademark Issues

 3．6 Term and Termination

4．Supply Contracts

 4．1 Obligations of the Suppliers

 4．2 Obligations of the Purchasers

5．Processing Contracts

 5．1 Grant Of License

 5．2 Intellectual Property

 5．3 Processing of Products

 5．4 Placing of Orders and Estimates

 5．5 Quality Control

 5．6 Pricing and Payment

 5．7Delivery and Quality Inspection

 5．8 Transfer of Risk and Insurance

 5．9 Restrictions on the Contractor

Note

Chapter v INVESTMENT VEHICLES

1 Representative Office and Branch Office

 1 1 Representative O伯ce

 1．2 Branch Office

2．Foreign Invested Enterprises

 2．1 Limited Liability Companies

 2．2 Qualification as a Shareholder

 2．3 Business Scope of Foreign Invested Enterprises

 2．4 Names of Foreign Invested Enterprises

 2．5 Total Investment and Registered Capital

 2．6 Registered Capital

 2．7 Registered Address

 2．8 Corporate Governance

 2．9 Directors’and Officers’Duties and Liabilities

 2．10 Foreign Exchange

 2．1l Audit Requirements

 2．12 Finance and Tax

 2．1 3 Allocation of Funds and Distribution of Profits

 2．14 Duration

 2．1 5 Procedures for the Incorporation of an FIE

 2．16 Annual Inspections

 2．17 Foreign Invested Commercial Enterprises

 2．18 Comparison of Difierent Investment Vehicles

3 Other ways of doing business in China Sourcing／Trading

 3．2 Processing or assembling

 3．3 Franchising

 3．4 Build—Operate—Transfer

Note

Chapter VI MERGERS AND ACQUISITIoNS

1．Mergers and Acquisitions in China

 1．1 Mergers．

 1．2 Acquisition

2．Due Diligence

 2．2Legal Due Diligence

 2．2 Tax Due Diligence

 2．3 Financial Due Diligence

 2．4 Reputational Due Diligence．

3．Anti—Monopoly Law

 3．1 Enforcement Authority

 3．2 Monopolistic Conduct

 3．3 Legal Liability

Note

Chapter VII INSOLVENCY AND BANKRUPTCY

1．Scope and Application

2．Commencement of Insolvency Action．

 2．1 Debtor

 2．2 Creditor

 2．3 Parties Responsible for Liquidating the Enterprise

3．Administrator

4．Property of the Debtor

5．Restructuring

6．Settlement

7．Distribution Priority

Chapter V I II INDUSTRIAL AND INTELLECTUAL PRoP

ERTY

1．Trademarks

 1．1 Legislative development

 1．2 Registrable Trademarks

 1．3 Registration ofTrademarks

 1．4 Rights ofTrademark Registrants

 1．5 Protection and Enforcement

 1．6 Special Provisions for Foreign Applicants for Trademark Registration

2．Patents

 2．1 Legislative Development

 2．2 Protected Patents

 2．3 Application for Patents

 2．4 Rights of Patent Holders

 2．5 Protection and Enforcement

 2．6 Special Provisions for Foreign Applicants for Patents

3．Copyright

 3．1 Legislative Development

 3．2 Protected Copyrights

 3．3 Rights of Copyright Owners

 3．4 Protection and Enforcement

 3．5 Special Provisions for Foreign Copyright Holders

4．Trade Secrets(Know—how)

 4．1 Legislative Development

 4．2 Definition of Know—how

 4．3 Protection and Enforcement

Note

Chapter 1X TAX

1．Taxes Levied on FIEs

 1．1 Value Added Tax

 1．2 Business Tax

 1．3 Consumption Tax

 1．4 Enterprise Income Tax

 1．5 Individual Income Tax

 1．6 City Maintenance and Construction Tax

 1．7 Deed Tax

 1．8 Stamp Duty

 1．9 Customs Duty

2．Taxes levied on Foreign Enterprises

 2．1 Enterprise Income Tax

 2．2 Business Tax

3．Administration of Taxation

 3．1 Local Taxation Organizations．

 3．2 Taxation Control

Note

Chapter x EMPLOYMENT

1．LabOr contract

 1．1 written Contract

 1．2 Form and Contents

 1．3 Tvpes of Labor Contracts

2 Salary and Individual Income Tax

3．Working Hours，Holidays and Vacations

4．Termination of Labor Contracts

 4．1 Termination Grounds

 4．2 Severance Compensation

5．Social Insurance and Housing Fund

6．Labor Unions

7．Employment Policies for Foreigners

 7．1 Work Permit Certificate and Visa Notice Letter

 7．2 WOrk Visa

 7．3 WOrk Permit

 7．4 Residence Permit

8．Child Labor

9．Labor Authorities

 9．1 Administrative Authorities

 9．2 Semijudicial Authority

Note

Chapter XI REAL ESTATE

1．Real Estate

1．1 Land and Land Use Right

1．2 Land Ownership

 1．3 Right to Use State—owned Land．

 1．4 Purposes for the Exercise of Land Use Rights and Term

 1．5 Termination of a Land Use Right

 1．6 Acquisition of a Land Use Right

 1．7 Granting of a Land Use Right

 1．8 Transfer of a Land Use Right

 1．9 Lease

 1．10 Mortgage

 1．1 1 Building Ownership

 1．12 Title Documents

2．Foreign Investment in the Real Estate Sector．

 2．1 Definition

 2．2 Incorporation of a Foreign Invested Real Estate Enterprise

 2．3 Incorporation Procedures

 2．4 Acquisition of a Land Use Right

 2．5 Registered Capital

 2．6 Special Requirements for FIREEs

 2．7 Registration Procedure and Total investment

 2．8 Fixed Return and Financing

 2．9 Development／Exploitation

 2．10 Acquisition of Property by Foreign Individuals／Entities

(other than FIREEs)

 2．11 Relevant Governmental Authorities for Foreign Investment in Real Estate

Chapter XI 1 DISPUTE RESOLUTION AND PREVENTION

1．Negotiation

2．Mediation．

3．Arbitration

 3．1 Arbitration in China

 3．2 International Arbitration

4．Litigation

5．Dispute Prevention

Appendix：CATALOGUE FOR THE GUIDANCE OF FOR

EIGN INVESTMENT INDUSTRIES

Catalogue of Encouraged Foreign Investment Industries

Catalogue of Restricted Foreign Investment Industries

Catalogue of Prohibited Foreign Investment Industries

1．2．3 Procedure

The acquisition must be approved by the MOFCOM or its local offices at provincial level．

Pursuant to the 2006 M&A Regulation，an application for approval of an Equity Acquisition must include the following documents：

一Unanimous consent from the target company’S shareholders(in the case of limited liability companies)or a resolution from the target company’S general shareholders’meeting approving the proposed acquisition(in the case of companies limited by shares)．

 ——Application from the target company for its conversion into an FIE．

 一Articles of association and／or joint venture contract for the FIE after the acquisition．

 一Share transfer agreement or agreement for increased share capital sub—scription．

 一Target company’S audited financial report for the previous financial year．

——Certified true copy of the certificate of incorporation of the investor，dulV notarized and legalized at the Chinese consulate or,if the investor is an individual，a copy of his passport．

一Bank reference 1etter．

一Target company’S employee relocation plan．

一Other documents as may be required by the approval authority relat—ing to the company’S worth，debts and affiliated disposal transactions·

In the case of an Asset Acquisition，the necessary application documents for approval from MOFCOM or its local offices include：

——Resolution of the governing body of the target company agreemg to the sale of assets．

一Application from the foreign investor to set up an FIE．

一Articles of association and／or joint venture contract for the FIE after the acquisition．

——Asset purchase agreement．

——Proof of publication of the public notice by the target company to its creditors．

—Certified true copy of the certificate of incorporation of the investor,I duly notarized and legalized at the Chinese consulate or，if the investor is an individual，a copy of his passport．  

—Target company’employee relocation plan．  

一Other documents as may be required by the approval authority relat- lng to the company’S worth，debts and affiliated disposal transactions．  

Under Chinese law，the relevant approval authority must issue its deci- slon on the acquisition within 30 days of receiving all the necessary docu-mentation．

Once the approval authority has approved the acquisition，in the case of an Asset Acquisition，the foreign investor must，within 30 days of receipt 0fthe approval certificate，apply for commercial registration with the competent AIC·In the case of an Equity Acquisition．the target company must applyfor registration modification at its governing AIC branch or other competent AIC(if the original AIC branch is not competent to process registration 0f the FIE)．

Furthermore．the MOFCOM at State level is responsible for approving acquisitions involving key industries，national economic stability or the trans．fer of effective control of well—known trademarks or trade names．MOFCOM approval at State level must also be obtained fbr the acquisition of a domestic company by a Chinese company using an offshore vehicle．

Moreover，if the proposed acquisition leads to any of the following scenarios，the foreign investor is obliged to report to the MOFCOM and the SAIC for an antitrust review。：

一Any of the parties to the acquisition has a turnover in the Chinese mar．ket during the year of the acquisition exceeding RMB 1．5 billion．

一The foreign investor has acquired more than ten enterprises in relatedindustries in China in one year．

一Any of the parties to the acquisition has a market share of no less than20％in the Chinese market；or

—The acquisition will result in a party to the acquisition having a marketshare of 25％in China．

Following a request by a competing domestic enterprise or a relevant……

P143-144

In recent years，China has become one of the world’S leading economic powers(in 20 1 0，it overtook Japan to become the second largest economy on the planet in GDP terms，behind the us)．This economic development took place in the space of over 3 0 years as it has to be remembered that until the end of the 70s，China was closed to the outside world and during that period(first the Imperial reign，then its short experience as a republic，followed by the establishment of the People’S Republic，with The Great Proletarian Cultural Revolution)，commercial relations between China andthe outside world were virtually non—existent．

 It should also be noted that following the breakupof the USSR，China repealed a number of the Soviet—inspired laws it had passed and after the CulturalRevolution，China had no legal system for almost 2 0years，which obviously greatly hindered the developmentof the country and its economy．

All of this changed with the reform and opening up of the country instigated by Deng Xiao Ping who，withhis“open door”policy,began，from 1 9 79 onwards，to open China up to the world．This resulted in one of the greatest economic transformations the world has seen in recent times and which radically changed the position of China and the rest of the world．Subsequently,a growing and continuous flow of foreign investment began to enter China，and today it is the second largest recipient of foreign investment in the world．

Growing foreign investment in China has also givenrise to massive legislative developments in the countrywhich has enacted thousands of important laws and rules in recent years，providing commercial transactionswith increased legal certainty．To give you an idea of thescale of the legislative change that has taken place in China in recent times，in the last five years alone Chinahas amended，inter alia，the following fundamental laws：

catalog of foreign investments．

Company law．

Antitrust law．

Bankruptcy law．

Property law．

Real estate legislation．

It could almost be said that in recent years，Chinahas completely overhauled its entire legal system．

Furthermore，China’S entry into the World TradeOrganization(WTO)in 200 1 obliged it to open up itseconomy to foreign investment to an even greaterdegree and left it with no choice but to amend and adapt a significant portion of its laws in order to comply withthe commitments it assumed in the context of the WTO．

Lastly,it must be taken into account that despite all of the abovementioned progress，the Chinese economyis still not fully open to the outside world and，as a result，foreign investors still sometimes find themselves subject to a legislative framework that differs from that applicable to national investors．This，together with the obstacles inherent in a culture and language that are SO different，makes it even more difficult for foreigninvestors to do business in China．

This ad hoc system of rules takes the form of laws and provisions that subj ect foreign investment to administrative authorizations and approvals，registrations，additional requirements and，in some cases，restrictions that allow the Chinese government to control and select the type of investment it wishes to attract．This difference in treatment used to have a positive aspect in terms of the policy on tax incentives for foreign Investment，which the Chinese government applied paradoxically with the aim of standardizing the tax treatment of national and foreign investors until its almost total abolition in January 2008．

In addition to the above，it must be noted that the Chinese legal system，although to a lesser extent than one might think，is influenced by the peculiarities 0I its recent history and current political situation．For example，the ownership of land located in urban areas continues to belong to the Chinese state while land located in rural areas or on city outskirts belongs，in general，to collective economic organizations．Nevertheless，individuals and legal entities can hold a right to use land，(known as a land use right)for a period of time depending on each concession and on the use of the land in question(e．g．residential，industrial or educational)．Moreover,and to greater extent following the reforms of recent years，labor legislation stands out for the protection it affords workers which，in certain areas，even rises above the levels to which we are accustomed in European countries with higher levels of protection．We hope this book will help minimize the difficulties described above，allowing foreign investors in China to reduce the uncertainties that are inherent in a country that is SO different from their own，and at thesame time facilitate trade and investment between Chinaand other countries．