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Foreign Investment Restrictions in China

Foreign Investment Restrictions in China

The 6th amendment of China’s Company Law was approved at the end of 2023 and refers to how foreign investments are controlled in China. Certain restrictions were already present and explained in the existing applicable legislation, but some provisions needed changes or additions. In the following lines, you can find information about Chinese foreign investment restrictions, specifying that our local agents can help you in the process of company formation in China.

What you need to know about Chinese foreign investment restrictions

The legislation regarding foreign investments was recently modified in China for foreigners who want to set up a company in China. The following changes can be found in the lines below:

  • There are certain industries in China where restrictions are applied regarding foreign investments.
  • Specific restrictions have been lifted in the car sector in China. Thus, overseas companies are no longer obliged to a 50% investment capital on the production of all complete passenger cars, including internal combustion engine vehicles.
  • Investments in the Satellite Television Broadcast Ground Receiving Facilities sector remain on the Negative Investment List. Foreign entrepreneurs are obliged to apply for specific approvals.
  • Investments in sole proprietorship enterprises in China are not accepted.
  • International investors cannot participate in the management and operation of companies in China and must take into account the management rules of domestic securities investments imposed on foreigners.
  • Local companies involved in business sectors for which foreign investments are prohibited, according to the Negative List, must obey the legislation and be examined by the relevant authorities in China. However, they can receive approval for going public for trading and issuing shares overseas.

If you want to open a company in China, it is good to check everything related to the legislation for foreign investors in this country. WOFE in China is the optimal business structure for foreign entrepreneurs, however, certain sectors may impose restrictions on what receives investments. You can learn more about this topic from our company formation agents in China.

Restrictions on capital contribution in China

According to the provisions of the new Company Law in China, a 5-year maximum period for capital contributions in limited liability companies was introduced. This helps to enforce actual contributions and protect the interests of creditors. Already registered companies must make the necessary changes in this regard.

We invite you to talk to our specialists about Chinese foreign ownership restrictions. Those who want to start a company in China must ask for support and advice to understand the legislation from the start.

What should foreign entrepreneurs in China pay attention to, depending on the business sector

As mentioned at the beginning of this article, the legislation for Chinese foreign investment restrictions has been updated. Investments in mining, exploration, and fishing of aquatic products in marine zones of China, and tobacco retail, among others, are not accepted. We invite you to discuss with our team about Chinese foreign investment restrictions.

Those who want to start a business in China can discover the following statistical data about the country’s economy, to get an idea of the business climate:

  • China’s economy registered an increase of approximately 5.2% in 2023.
  • Gross domestic product increased in each quarter by approximately 1% in the same year.

In addition to support in opening a business, you can also opt for the services of our accountants in China. We invite you to contact us to find out more details about Chinese foreign investment restrictions. We are here to guide you in the process of company incorporation in China.