I OVERVIEW OF M&A ACTIVITY

The trade war between China and the US has flared even more dramatically compared to last year's events. From US$34 billion in tariffs and retaliatory tariffs in July 2018, it is expected to envelop all merchandise trade between China and the US by the end of 2019. As a response to the intensifying war, China is continuing to open up foreign investment. A new Foreign Investment Law (FIL) goes into effect on 1 January 2020, building on top of similar liberalisation moves in 2017 and 2018.

The effect on outbound investment to the US has not been noticeable so far in 2019 because there was already little deal activity by Chinese buyers of American target companies in 2018, leaving limited space for deal volume to dwindle any further. Overall Chinese outbound M&A across the world declined from US$122.5 billion in 2017 to US$94.1 billion in 2018. The slowdown in outbound M&A activity is even more apparent when compared to 2016, when deal volume reached the record-breaking level of US$210.4 billion.

II GENERAL INTRODUCTION TO THE LEGAL FRAMEWORK FOR M&A

There is no unified M&A law governing all M&A activities. Rather, specific M&A activities are subject to different sets of laws and regulations depending on the type of buyer, the target and specific legal issues implicated in the deal. Foreign investment in certain industries requires approval from the competent regulatory body (e.g., investment in banking is overseen by the China Banking and Insurance Regulatory Commission).

i Inbound M&A

In the context of inbound M&A, the laws and regulations applicable to foreign investment in China will generally apply.

Investment vehicles

China recognises a wide range of business vehicles. The three basic forms are the limited liability company, the company limited by shares and the partnership. A business establishment that is the result of foreign investment will generally be referred to as a foreign invested enterprise (FIE). The most common forms of FIEs are:

  1. joint ventures (JVs) between domestic and foreign partners, including equity JVs and cooperative JVs;
  2. wholly foreign-owned enterprises;
  3. foreign-invested holding companies;
  4. foreign-invested companies limited by shares (FICLS); and
  5. foreign-invested partnerships.

Joint ventures will be impacted when the FIL comes into effect on January 2020. The FIL replaces the existing joint venture law. After the end of a five-year grace period from January 2020, joint ventures must make amendments to their corporate structure in accordance with the Company Law. The eventual result will be consolidated corporate governance rules applicable to both FIEs and domestic companies.

Foreign investment regulation system

Under the foreign investment regulatory system, foreign investment in industries that are encouraged are grouped under an encouraged industries list (Encouraged Catalogue). While foreign investments in industries subject to restriction or that are prohibited are placed under a general nationwide negative list (Negative List) or a negative list (FTZ Negative List) for the free trade zones (FTZ). The Encouraged Catalogue contains an extensive list of industries that are sought after by policymakers. If a target sector industry is outside of the Negative List or FTZ Negative List (in the case of investment within an FTZ), then the investment does not require a case-by-case approval and can undergo recording through the record filing system.

Negative List

The Negative List is a mechanism that restricts or prohibits foreign investment into certain domestic industries. The latest Negative List (which entered into effect in July 2019) reduces the number of items listed from 48 to 40. For non-Negative List items, all market participants are legally entitled to invest in the respective sectors without bias, and foreign investors will only need to go through the record filing system, rather than the case-by-case approval needed under earlier versions of the foreign investment regulatory system.

Foreign investors are now allowed to hold controlling shares in domestic shipping agencies, urban infrastructure networks (e.g., gas, heat and water drainage systems) that cater to a population of 500,000 and above, and movie theatres and performance management agencies. Changes were also seen in the agricultural, mining and manufacturing industries. Foreign investors are no longer prohibited from investing in the development of wild animal and plant resources, the exploration and development of certain natural resources (tungsten, molybdenum, tin, antimony and fluorite), or the development of petroleum and natural gas (when the investment occurs in the form of an equity or cooperative joint venture).

Negative List for FTZs

For investments within FTZs, a separate negative list is implemented under the FTZ Negative List.2 Here, the Negative List concept is used with a more experimental purpose, as successful economic reforms are then subsequently extended nationwide.

In the latest revision of the FTZ Negative List (entering into effect in July 2019), the number of restricted or prohibited industries was reduced from 45 to 37 items. Compared to its 2018 predecessor, the 2019 FTZ Negative List completely removes restrictions on foreign investment in fishing aquatic products, the printing of publications, smelting and processing of radioactive minerals, and the production of nuclear fuel. Foreign investors may also now hold minority shares in cultural and artistic performance groups. While such investments are still prohibited within the nationwide Negative List, it is expected that a number of the 2019 FTZ Negative List exemptions listed above will be implemented broadly in future issues of the Negative List.

It must be noted that in some sectors (e.g., finance, where there is a substantial similarity between the Negative List and the FTZ Negative List in terms of restrictions such as shareholding limits), companies operating in the FTZs can still enjoy more flexibility in their day-to-day operations. For example, FTZs have simplified procedures for controlling foreign capital. Foreign-invested companies in FTZs enjoy expedited processing in opening a foreign currency account and receiving payment in a foreign currency.

As for the number of FTZs, this stands now at 12 locations. During the G20 Summit of 2019, China announced that six new FTZs would be established in the near future. Besides newly established FTZs, the Ministry of Commerce (MOFCOM) is also focusing on improving the quality of the existing FTZs, and it has indicated it will deepen liberalisation in existing FTZs through concentrating on promoting openness in the areas of finance, education, culture, medicine and general manufacturing.

Record filing system

In parallel with adoption of the Negative List, a uniform record filing administration system was implemented to replace case-by-case approval under MOFCOM for investments in industries not on the Negative List. In general, the establishment of and most changes to existing non-Negative List FIEs, including the transformation of non-FIEs into FIEs through an acquisition, strategic investment by foreign investors in listed companies, mergers and other methods, is under the purview of record filing. However, exceptions include transactions on the radar of antitrust or national security review. Also not eligible for record filing are affiliated acquisitions, namely the acquisition of domestic entities through overseas entities that are established or controlled by affiliates of the target.

A strategic investment in a listed company not on the Negative List by a foreign investor is eligible for record filing. This is worthy of note since investments of this type are still subject to a number of legal requirements; however, it is commonly understood that the requirements – including qualification, lock-up period and shareholding ratio of foreign investors – may have been lifted (see 'Inbound M&A transactions involving A-shares listed companies').

All record filings are required to be carried out via a uniform online platform, largely eliminating the uncertainty of different interpretations by local officials.

Encouraged Catalogue

The Encouraged Catalogue sets out the range of encouraged industries for foreign investment. The latest Encouraged Catalogue (which entered into effect in July 2019) expands to include 415 items that are encouraged nationwide, and in the less-developed hinterlands of Central and Western China there are 693 encouraged items. Examples of encouraged industries are engineering consultancy, accounting, tax, cold chain logistics, artificial intelligence and carbon capture.

M&A regulations

Inbound M&A transactions by foreign investors are primarily governed by the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (M&A Regulations)3 developed by MOFCOM.

The M&A Regulations mainly concern:

  1. the acquisition of equity interest in and assets from Chinese domestic enterprises;
  2. the establishment of offshore vehicles for the purposes of listing Chinese assets through an offshore initial public offering;
  3. the establishment of FIEs by offshore entities set up or controlled by Chinese domestic enterprises and Chinese residents; and
  4. the swapping of shares between a foreign company or its shareholders and the shareholders of a Chinese domestic enterprise.

The M&A Regulations also provide detailed procedures and rules regarding the acquisition of domestic companies by foreign investors, including approval procedures, acquisition prices and terms of payment. However, they are not comprehensive and do not apply to the following inbound M&A transactions by a foreign investor:

  1. acquisitions of the equity or subscription of a capital increase of an existing FIE (covered by regulations on equity changes of the investors of FIEs);4
  2. mergers between or acquisitions of a domestic enterprise through an existing FIE (this is the ambit of regulations for mergers and divisions of FIEs and reinvestment by FIEs);5 and
  3. acquisitions of a domestic limited liability company and the transforming of the same into an FICLS (governed by regulations on the establishment of an FICLS).6

If a foreign investor's acquisition of a domestic enterprise has a bearing on national security, the acquisition may also be subject to a national security review by a ministry-level co-chaired committee, generally involving MOFCOM, the National Development and Reform Commission (NDRC) and, if necessary, other governmental regulators.

Acquisition of state-owned assets or equity

Inbound M&A transactions aimed at acquiring state-owned assets or equity are subject to a rather complex legal regime and strict supervision by the Chinese authorities, including the State-owned Assets Supervision and Administration Commission of the State Council (SASAC). In general, sales of state-owned assets or state-owned enterprises (SOEs) (with few exceptions) must be approved by SASAC (or its provincial and local counterparts) or by the relevant SOEs that are empowered with approval authority. Acquisitions of state-owned assets or SOEs are also subject to a mandatory appraisal conducted by a qualified appraiser and, as a general principle, the actual transfer price for the state-owned assets or equity shall not be less than 90 per cent of the value determined by the appraiser, except if a price lower than the 90 per cent threshold is approved by the competent authority.

Inbound M&A transactions involving A-shares listed companies

PRC domestic stock exchange-listed companies currently issue two classes of shares, namely:

  1. A-shares, which are yuan-denominated shares reserved for Chinese investors, qualified foreign institutional investors (QFIIs), yuan-qualified foreign institutional investors (YQFIIs) and qualified foreign strategic investors; and
  2. B-shares, which are yuan-denominated shares traded in foreign currency (in US dollars on the Shanghai Stock Exchange and in Hong Kong dollars on the Shenzhen Stock Exchange) and available for purchase by both Chinese and foreign investors.

To qualify as a foreign strategic investment in a domestic-listed company, a foreign investor needs to purchase at least 10 per cent of the A-shares of a listed company, by way either of a private placement or a share transfer, and generally be subject to a three-year tie-in period and other prescribed conditions.

In addition, to purchase through QFIIs or YQFIIs, or through qualification as a strategic investment, a foreign investor may acquire A-shares indirectly through an existing FIE that holds or is eligible to hold A-shares of a listed company.

ii Outbound cross-border investments

A new regulatory regime for outbound investments, the Administrative Measures for Outbound Investments by Enterprises (the Outbound Investment Circular), came into effect on 1 March 2018, specifying filing or approval requirements for outbound investments. The Outbound Investment Circular is a framework of filing and approval requirements on both direct and indirect outbound investments based on the sensitivity of an investment. The Outbound Investment Circular, issued by the NDRC, cements the build-up of regulatory policy changes since late 2016 when authorities adopted practices to curb outbound investment in sensitive sectors. It also builds on the Guidelines on Further Guiding and Regulating the Directions of Outbound Investments issued in August 2017 (the Outbound Investment Guidelines), which divided types of outbound investments into the categories of encouraged, restricted and prohibited.

The Outbound Investment Circular also has the important consequence of bringing under regulatory coverage the sponsorship of, or investment in, offshore investment funds with outbound investments by Chinese entities, including offshore entities controlled by Chinese companies or individuals. This puts indirect investments under the purview of outbound approval regulation by the NDRC. Previously, if funds were transferred offshore for an indirect investment, the transaction, although subject to domestic foreign exchange regulations, was outside the regulatory approval of the NDRC.

Under the previous regulatory framework, it was necessary to file a project information report for projects exceeding US$300 million before 'carrying out any substantive work'. This 'small pass' requirement at the early stage of a project has been eliminated. Approval, filing or reporting requirements under the NDRC under the new framework are timed at completion (financial closing).

NDRC

The approvals and registrations for outbound investment must be obtained or conducted through the NDRC, MOFCOM and the State Administration of Foreign Exchange (SAFE). For SOEs, there are additional reporting obligations and a required approval from SASAC (not covered in detail here).

Approval of a project before financial closing by the national level NDRC is required for sensitive projects. However, for a non-sensitive project undertaken by a non-central state-owned enterprise worth over US$300 million, a filing with, rather than approval from, the national level NDRC is necessary. For non-sensitive projects under US$300 million, conducting a filing is necessary with the provincial level NDRC. For indirect, non-sensitive investments made through an offshore investment fund that exceeds US$300 million in value, a report to the NDRC must be submitted before the financial closing; for such projects below US$300 million, there is no reporting requirement. The applications for filing, approval and reporting are done through the NDRC's online platform.

Sensitive projects are outbound investments to sensitive countries or in sensitive sectors. The 2018 Catalogue of Sensitive Industries for Overseas Investment defines sensitive sectors as industries listed as restricted under the Outbound Investment Guidelines (i.e., real estate, hotels, cinemas, entertainment, sports clubs) and news media, among others. Sensitive countries are those that do not have diplomatic relations with China,7 are at war, or are barred by international treaties agreements or treaties to which China is a party.

MOFCOM

Following the execution of the definitive transaction agreements, an 'application form of outbound direct investment' should be submitted online to MOFCOM. The application package includes the application form, transaction agreements, the business licence of the buyer, an export permit for products or technologies (if applicable) and a statement from officers of the companies warranting the veracity of the proposed outbound investment. MOFCOM approval is typically received within 10 to 15 business days of the date on which the application satisfies the filing requirements, and culminates in the issuance of an enterprise overseas investment certificate.

SAFE

After obtaining an enterprise overseas investment certificate from MOFCOM, an application for foreign exchange registration on an outbound direct investment is made to a commercial bank under the supervision of SAFE, which will include the business licence of the buyer and the enterprise overseas investment certificate, with a statement of foreign exchange funding sources. Following submission, an overseas investment foreign exchange registration certificate will be issued to the buyer.

III DEVELOPMENTS IN CORPORATE AND TAKEOVER LAW AND
THEIR IMPACT

i Greater global participation in the financial sector gains traction

In 2018, a number of laws and measures eased or committed in the future to easing restrictions on foreign investment in the financial sector. Major steps that have been taken or are planned include the following:

a the removal of restrictions regarding the business scope of jointly funded securities companies in 2018;

  • the cap on foreign ownership in companies in the securities, funds, futures and life insurance sectors was increased to 51 per cent, and all limits on ownership by foreign investors are due to be removed in 2020 (an acceleration was announced in 2019, moving up the initial 2018 timetable); and
  • the removal of restrictions on the business scope of foreign-invested insurance brokerage companies.

Global investment banks have seized the opportunity to raise their shareholding to 51 per cent in their Chinese business ventures. UBS increased its shareholding in its securities joint venture to 51 per cent in December 2018. JP Morgan raised its shareholding in a local mutual fund business to 51 per cent in July 2019. Many more foreign investments in the local financial services industry are expected. Nomura and JP Morgan are expected by the end of 2019 to open Nomura Orient International Securities and JPMorgan Chase Securities (China) Co Ltd respectively, both 51 per cent held securities joint ventures with local investment firms.

ii New Foreign Investment Law

Coming into effect on 1 January 2020, the Foreign Investment Law (FIL) seeks to be a comprehensive overhaul of foreign investment law. The Law was passed against the backdrop of intensifying trade tensions with the US. The aim of the Law is to boost foreign investor confidence and remedy issues that may have previously deterred investors. While the FIL attempts to provide greater legislative and commercial certainty for foreign investors, the FIL is an overarching framework until more specific regulations and directives are issued.

The FIL replaced existing rules in relation to FIEs (i.e., the Sino-Foreign Joint Venture Law, the Sino-Foreign Cooperative Joint Venture Law and the Wholly Foreign-Owned Enterprise Law). The Law brings together in consolidated form rules many areas of foreign investment, including the administration system for market access, the Negative List, corporate governance and operations.

Chinese legislation has a reputation for vagueness of language and wording, and there are provisions in the FIL that set unclear legislative expectations for the behaviour of investors. Premier Li Keqiang has announced greater clarification on the law with a 'series of matching regulations and directives'. The ensuing regulations are each predicted to delve deeper into a specific segment of the FIL.

A salient feature of the FIL are IP protections responding to foreign investor complaints about Chinese industrial policies that compel the transfer of IP from foreign investors. The FIL prohibits theft of IP by Chinese joint-venture partners and commercial secrets from foreign partners through protections listed in Article 22. The protections include criminal liability for government officials for use of administrative means to pursue forced technology transfers.

IV SIGNIFICANT TRANSACTIONS, KEY TRENDS AND HOT INDUSTRIES

i German investment screening and European sharing mechanism

Outbound Chinese investors also face difficulties and restraints by the countries of target companies. Most notably, the Foreign Investment Risk Review Modernization Act of 2018 (FIRRMA), an amendment to the CFIUS, was signed into law in August 2018, creating a more severe regime in the United States for the review and approval of foreign investment based on perceived national security threats. Based on FIRRMA and later regulations promulgated by CFIUS in October 2018, transactions in certain emerging technological industries are subject to a mandatory filing for review. The potential effect of a transaction on eroding the US' technological leadership is an explicit factor adopted by CFIUS in determining whether a transaction would result in a threat to US national security.

European policymakers have shown similar national security-related concerns and protectionist sentiment towards China as a rising industrial competitor. The cumulative acquisitions of European high tech companies by Chinese enterprises has prompted a response in Germany. In December 2018, Europe's largest economy amended its foreign investment regulations, expanding the ability of the German Ministry for Economic Affairs and Energy to prohibit those acquisitions of German enterprises that are perceived to threaten Germany's national security. The screening threshold for the acquisition of companies deemed relevant to Germany's security was lowered from 25 to 10 per cent, and certain media enterprises are also included as companies subject to screening.

Earlier instances of German governmental intervention in 2018 included preventing State Grid Corporation of China from obtaining a 20 per cent stake in 50 Hertz Gmbh, one of Germany's four transmission grid operators, in the summer of 2018 (through KfW, the German development bank, the German government instead acquired the stake in 50 Hertz Gmbh), and again in the summer of 2018, the German government prohibited the acquisition by China Yantai Taihai Corporation of Leifield Metal Spinning AG, a German machine tool manufacturer.

The European Parliament, Council of European Union and European Commission reached an agreement in 2018 on the introduction of a Europe-wide investment screening and sharing mechanism. The framework requires European Union Member States to inform the European Commission and other Member States of any transactions that are currently being screened by it. The European Commission will also have the power to issue opinions as to whether an acquisition will pose security risks to European nations, albeit these opinions are non-binding. For investors being screened, this means that the review procedure is likely to become even more lengthy and prolonged.

V FINANCING OF M&A: MAIN SOURCES AND DEVELOPMENTS

Policymakers have sought to reduce the outflow of capital from China through stricter screening enacted in measures first announced and then formalised between 2016 and 2018. In response to the effect of these policies on curtailing financing for outbound M&A by NRDC, MOFCOM and SAFE, Chinese investors developed alternative modes of fundraising to minimise domestic regulatory scrutiny, including the use of:

  1. a guarantee or security structure in which a Chinese onshore entity or individual grants a guarantee or security for a debt owed to an offshore creditor by an offshore debtor – usually a subsidiary or controlled entity of the guarantee or security provided;8
  2. cash deposited with an onshore financial institution by a Chinese onshore investor and a loan granted by an offshore branch of the onshore financial institution to an offshore debtor – usually a subsidiary or controlled entity of the Chinese onshore investor;
  3. loans advanced by foreign lenders to overseas Chinese investors' subsidiaries secured by assets located outside China; and
  4. equity and debt issuance in overseas markets.

For option (a) registration with SAFE is required for the guarantee or security, and NDRC and MOFCOM filings are necessary for such registration. Absence of such registration affects the enforceability of the guarantee and security.

VI EMPLOYMENT LAW

M&A transactions have triggered labour disputes or strikes leading to collective labour arbitration, hindering the completion of deals. Labour relations are established in the form of employment contracts and, barring any change to the subject qualification of an employment contract,9 labour relations are usually not affected. According to Article 40 of the Labour Contract Law and Article 26 of the Labour Law, a target has the right to terminate an employment contract if a material change in the objective circumstances relied upon at the time of conclusion of the contract renders it impossible for the seller to perform and, after consultation, the employer and the employee are unable to reach an agreement on amending the employment contract. As such, unless the M&A transaction leads to a 'material change of the objective circumstances' or the 'subject qualification' of the seller being eliminated, the seller does not hold a unilateral right to terminate the employment contract.

Whether an M&A transaction has caused a change in either condition depends to a large extent on the type of transaction. In general, a share acquisition does not affect the change of the legal subjects of the parties. Nor is it a 'material change of the objective circumstances' to the employment contract, so this type of transaction has no basis in providing the seller with the unilateral right to terminate the employment contract. In the case of an asset acquisition or business reorganisation, if it involves a transfer of assets, then this may constitute a material change of the objective circumstances, and the seller may unilaterally terminate employment contracts with employees.

Even though there is a right to unilaterally terminate an employment contract, the seller must still hold good faith negotiations with the employee to work out a comparable position before exercising termination. If the employment contract is terminated, the seller must provide severance based on the number of years of employment. In the case of large-scale layoffs of employees, sellers must carry out negotiations with the employees' labour union and the local government to formulate a plan that includes providing advance notice to the employees.

VII TAX LAW

The State Administration of Taxation (SAT) levies enterprise income tax (withholding tax) at a rate of 10 per cent on the taxable income obtained by non-resident enterprise (NRE) transferors through cross-border M&A.

In the past year, no further tax rules regarding NREs in M&A transactions were published. SAT Announcement (2017) No. 37 and Circular (2009) No. 59 together remain the overall framework regarding the treatment of taxable income for NREs in M&A transactions. The issuance of Announcement (2017) No. 37 has not completely resolved disputes in tax collection and enforcement on NREs in cross-border M&A transactions, requiring the SAT to publish guidance announcements to further amend and explain Circular (2009) No. 59 and Announcement (2017) No. 37.

VIII COMPETITION LAW

Sweeping changes that had been enacted in March 2018 saw the anti-monopoly enforcement functions of three agencies (the Anti-Monopoly Bureau of the Ministry of Commerce, the Price Supervision/Inspection and Anti-Monopoly Bureau of the National Development and Reform Commission, and the Anti-Monopoly and Anti-Unfair Competition Bureau of the State Administration of Industry and Commerce) being consolidated under the control of the State Administration for Market Regulation (SAMR), including the role of merger control review.

M&A transactions meeting statutory thresholds and circumstances constituting a concentration of undertakings (i.e., an acquisition of control over a target) are subject to the merger control provisions of the Anti-Monopoly Law. If in the preceding financial year (1) the combined global turnover of the undertakings (i.e., the buyer or the target) exceeds 10 billion yuan, and the turnover from the PRC of each of at least two of the undertakings exceeds 400 million yuan, or (2) the combined turnover from the PRC exceeds 2 billion yuan, and the turnover from the PRC of each of at least two of the undertakings exceeds 400 million yuan, then the transaction must obtain clearance from the enforcement authority.

The enforcement authority has strengthened enforcement to ensure compliance with the filing requirements. In 2018, 13 deals were punished for failure to file and obtain clearance before closing. Punishment amounts to fines of no more than 500,000 yuan, though MOFCOM has the authority to go further and order the unwinding of a transaction or divestiture of certain businesses or assets.

Over 81 per cent of cases in 2018 fell under the simple application procedure, a process designed to abbreviate the duration of the review time for merger control reviews. The following types of transactions are generally eligible for the simple application procedure: (1) horizontal mergers in which the combined market share of the parties is less than 15 per cent; (2) vertical mergers and conglomerate mergers in which each party's market share is less than 25 per cent; (3)acquisitions of shares or assets of a non-Chinese company that does not conduct economic activities in China; (4) the establishment of a non-Chinese joint venture that does not conduct economic activities in China; and (5) changes in control of a joint venture whereby the joint venture becomes controlled by one or more of the previously jointly controlling parents.

Lastly, some statistical figures shed light on enforcement activity in 2018: 444 applications were approved without any condition, increasing significant compared to 325 applications in 2017. Four applications were approved with conditions in 2018 under the Anti-Monopoly Law. The average time for acceptance and clearance shortened to 16 days from 24 days in 2017. In addition, 99.4 per cent of simple cases were cleared at the first stage (within 30 calendar days following the acceptance of an application), demonstrating that the simple case procedure plays an active role in improving the efficiency of merger control review.


Footnotes

1 Wei (David) Chen is a managing partner and Kai Xue is a counsel at DeHeng Law Offices. The authors would like to thank DeHeng colleagues Tong Yongnan, Wang Yuwei, Hu Tie and Zhang Xu for their assistance in preparing this chapter and summer 2019 interns Weize Tong and Lui Ka Yee for their contributions.

2 Special Administrative Measures for Foreign Investment Access to Pilot Free Trade Zones.

3 As last amended on 22 June 2009.

4 Mainly, Certain Regulations on the Change of Investors' Equities in Foreign Investment Enterprises promulgated by the former Ministry of Foreign Trade and Economic Cooperation (predecessor of MOFCOM) and the State Administration for Industry and Commerce on 28 May 1997.

5 Mainly, Regulations on the Merger and Division of Foreign Invested Enterprises promulgated by the former Ministry of Foreign Trade and Economic Cooperation and the State Administration for Industry and Commerce on 22 November 2001, and Provisional Regulations on the Reinvestment of Foreign Invested Enterprises in China promulgated by the former Ministry of Foreign Trade and Economic Cooperation and the State Administration for Industry and Commerce on 25 July 2000.

6 Mainly, Provisional Regulations on the Establishment of Foreign Invested Companies Limited by Shares as last amended on 28 October 2015.

7 Guatemala, Honduras, Nicaragua, Paraguay, Belize, Eswatini, and several Caribbean and Pacific Island countries.

8 Known as neibaowaidai.

9 According to the relevant provisions of the Labour Contract Law, an enterprise with the subject qualification of labour and employment means it is established in the territory of the PRC, has not been declared bankrupt according to law, and no business licence has been revoked, been ordered to close, been revoked or been decided to be dissolved ahead of schedule.