Three Main Types of Foreign Investment Enterprises in China

Currently, there are three main types of foreign investment enterprises that are incorporated and operated under the law of China, namely, Equity Joint Ventures (EJV), Cooperative Joint Ventures (CJV) and Wholly-owned Foreign Enterprises (WOFE). As a whole, they are referred to as Foreign Invested Enterprises (FIEs).

Equity Joint Ventures

Equity Joint Ventures (EJVs) are enterprises that are co-established, co-invested in, or co-operated by foreign enterprises, other economic entities or foreign individuals within the territory of the PRC, and Chinese enterprises or other economic entities except individual person, in accordance with the foreign investment law and company law of China, and subject to approval by the Chinese government. As to the structure of EJV, it shall take the form of a limited liability company as defined in Company Law of China as amended in 2005.

Cooperative Joint Ventures

Cooperative Joint Ventures (CJVs) are otherwise known as contractual operative enterprises. When Chinese and foreign partners establish a cooperative enterprise, they shall prescribe in their cooperative jiont venture contract such matters as the investment or conditions for cooperation, the distribution of earnings or products, the sharing of risks and losses, the manners of operation and management and ownership of the property at the time of the termination of the CJVs.

Wholly-owned Foreign Enterprises

Wholly-owned Foreign Enterprises (WOFE) are those enterprises established in China by foreign investors, exclusively with their own capital, in accordance with relevant Chinese laws. However, WOFEs do not include any foreign enterprises in China or other economic entities. They are Chinese entities registered within the territory of China, and will be governed and protected by Chinese regulations.

In addition to these, other types of investments are also available to foreign investors, such as Foreign-Invested Holding Companies (FIHC), Foreign-Invested Joint Stock Companies (FIJSC), and Build-Operate-Transfer (BOT).

For further details concerning legal requirements and procedures of establishing a FIEs, investors may seek for professional advice from a specialized lawyer in China.