New Law Could Upset Company Ownership Structures

New legislation will lower the regulatory hurdles for foreign companies entering the Chinese market, but it is restricted to particular industries. China's Ministry of Commerce posted a draft version of its Foreign Investment Law on its Web site in January. Currently, China has multiple laws go...

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Bibliographic Details
Published in:Global Finance 2015-03, Vol.29 (3), p.8
Main Author: Clouse, Thomas
Format: Article
Language:English
Subjects:
Business ownership
Foreign business
Foreign investment
Holding companies
Online Access:Get full text
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Summary:New legislation will lower the regulatory hurdles for foreign companies entering the Chinese market, but it is restricted to particular industries. China's Ministry of Commerce posted a draft version of its Foreign Investment Law on its Web site in January. Currently, China has multiple laws governing foreign investment, and all foreign companies must receive approval before operating in China. The new policy, if passed, will simplify the market entrance process for most foreign companies. But the proposed law has prompted concern about investment structures known as variable interest entities. In such arrangements, domestic companies transfer control -- but not ownership -- to an overseas holding company.
ISSN:0896-4181