Foreign Investment Act and Enforcement Ordinance

The "Foreign Investment Act" and its enforcement ordinance, which integrated the three Foreign Capital Companies Acts (Foreign Investment Corporation Act, Chinese Foreign Joint Venture Business Act, and Chinese Foreign Joint Venture Business Act), took full effect on January 1, 2020.

The Foreign Investment Act consists of a total of six chapters and 42 provisions
It established a "domestic treatment + negative list" management system while maintaining the basic national policy of "external opening." This approach is considered a characteristic of the Foreign Investment Act
In the past, the focus was on "examination permission + preferential policy," but the Foreign Investment Act emphasizes the "principle of equal treatment of domestic and foreign investors" and establishes the principle of enabling investment in all industries other than those on the "foreign investment negative lists."

The Act also emphasizes the protection of intellectual property rights, the prohibition of forced technology transfer, and legal responsibility in case of infringement of intellectual property rights, demonstrating its commitment to safeguarding the intellectual property rights of foreign companies
The terms of technical cooperation in the foreign investment process are determined through negotiations following fair principles, and administrative agencies or officials are prohibited from transferring forced technologies using administrative means.

Furthermore, the Act emphasizes the guarantee of legal rights for foreign-invested companies
This includes strengthening local government commitments, providing reasonable compensation when prohibiting and accepting acceptance, ensuring autonomy in financial transactions for foreign-invested companies, and establishing a civil complaint handling system for them.

For 40 years since the beginning of reform and opening, China applied the "Chinese Foreign Joint Venture Business Act," the "Chinese Foreign Joint Venture Business Act," and the "Foreign Investment Enterprise Act" based on the type of foreign-invested enterprise
With the abolition of the Foreign Capital 3 Act, a law related to foreign-invested companies, foreign-invested companies are now subject to the 'Company Act.'

The Enforcement Ordinance of the Foreign Investment Act (hereinafter referred to as the "Ordinance") is the most important detailed administrative law enacted by the "Foreign Investment Act" and went into effect on the same day as the parent law.

The ordinance consists of six chapters (Chapter 1 General Provisions, Chapter 2 Investment Promotion, Chapter 3 Investment Protection, Chapter 4 Investment Management, Chapter 5 Legal Responsibility, Chapter 6 Supplementary Provisions), and 49 articles
The foreign investment protection system was strengthened to enhance foreign investment attraction, and specific provisions were made to strengthen policy transparency and the participation of foreign-invested companies in the policy-making process, which were the major challenges faced by these companies.

In addition to the law, China has administrative regulations such as the "Foreign Investment Industry Map List (Foreign Investment Negative List)," "FTZ Negative List," and "Central and Western Foreign Investment Dominant Industries List," which regulate foreign investment in certain regions.

investment incentives

On October 28, 2022, China's National Development Commission and the Ministry of Commerce announced the 2022 edition of the Foreign Investment Industry Encouragement List (hereinafter referred to as the "Incentive List") and implemented it as of January 1, 2023. The incentive list is divided into two parts: the National List of Foreign Investment Encouragement Industries (hereinafter referred to as the "National Encouragement List") and the "List of Foreign Investment Preferred Industries in the Midwest" (hereinafter referred to as the "Central Western List")
The National Incentive List applies across the country, with Midwest offering investment incentives only in those areas.

2022 Incentive List

In the 2022 edition of the "Incentive List," a total of 13 industries and 519 items are specified as incentive items
Compared to the 2020 edition, the number of items increased by 39
Specifically, 22 items were deleted from the 2020 edition and 61 new items were added
The revision of the 2022 edition of the "Incentive List" focused on the qualitative development of manufacturing related to smart, green, and fourth industries, encouraging investment in the service sector, and establishing a self-reliant supply chain in China.

The “Midwest List”

The "List of Foreign Investment Dominant Industries in the Midwest" (hereinafter referred to as the "List of Middle and West") is a document designed to provide preferential policies aimed at attracting foreign capital to the central and western regions with low levels of economic development
If a business falls under the Midwest list, it can benefit from preferential policies equivalent to incentives outlined in the 'Foreign Investment Industry Map List'.

The Midwest List actively supports tax-free benefits and licensing work for companies entering the region based on the industrial development status of the area
It applies to 22 provinces (including northeast, northwest, southwest, and central Hainan) in China
The 2022 version of the Midwest List significantly increased the number of items from 755 in 2020 to 955
The 2022 edition focused on facilitating industrial transfers to the Midwest and preserving region-specific industries
One of the most notable changes in the 2022 Midwest list is the emphasis on attracting foreign capital in labor-intensive industries and services
Several items related to labor-intensive industries, such as the "development and production of shoes, hats, clothes, toys, and bags," were added to the list in various regions
Additionally, new service sector items like tourism, nursing care, and education were introduced.

As the economy faces downward pressure and employment challenges intensify in the aftermath of COVID-19, policies for attracting foreign capital in the Midwest are being advanced to promote industries, boost domestic demand, and increase employment opportunities.

The Midwest list provides policy benefits by designating industries excluded from the incentive list of China's foreign investment guidelines, the "Foreign Investment Industry Map List." Preferential policies primarily include corporate income tax exemption/exemption benefits, import tariff exemption on imported facilities (for own use) within the total investment amount, a refund of value-added tax when purchasing Chinese facilities, and a land transfer price set at 70% of the "lowest standard for Chinese industrial land.”

Foreign Investment Negative List for 2021

Since 1995, China has published the "Foreign Investment Industry Map List" (hereinafter referred to as the "List") and provided a guide for the introduction of foreign capital
Since its first promulgation in 1995, it has been revised a total of 10 times (in 1997, 2002, 2004, 2007, 2011, 2015, 2017, 2018, 2019, and 2020).

On December 27, 2021, China's National Development and Reform Commission and the Commerce Department announced the "2021 Edition of Special Management Measures for Foreign Investment Entry (Negative List)," which took effect on January 1, 2022.

A "negative list" refers to a list of areas that prohibit or restrict foreign investment, and all areas that do not fall under the list are allowed for foreign investment and management
As part of China's measures to expand its openness to the outside world, China officially included the negative list in the foreign investment map list for the first time in June 2017 and the negative list of foreign investment in June 2018.

The 2021 negative list comprises 12 areas and 31 items, with 10 equity restrictions and 21 prohibitions
Sectors such as automobiles and financial industries, specified in the 2018 negative list, are gradually being opened through the application of transition periods.

Special Economic Zone

The Chinese government has established and operated special economic zones, offering substantial support for corporate development by relaxing regulations on foreign capital entry and providing tax benefits to encourage the expansion of foreign investment
These efforts aim to facilitate the acquisition of advanced technologies and management know-how, as well as nurture domestic companies
China boasts over 200 national-level economic and technology development zones, 17 border economic cooperation zones, 150 high-tech industrial development zones, 50 national-level bonded zones, 63 export facilities, 55 low-carbon industrial complexes, and 19 economic new districts.

Areas designated as national-level economic and technological development zones are comprehensively equipped with infrastructure, creating an investment environment that meets international standards
Among these, national-level zones are established following deliberation by the State Council, the highest administrative body, ensuring high-quality infrastructure and relatively extensive deregulation of foreign capital entry.

High-tech industrial development zones have been created to transform scientific and technological achievements into productive power by optimizing the industrial environment through preferential policies and reforms tailored for the high-tech industry
These zones aim to facilitate the transfer of advanced science and technology, funds, and management methods from domestic sources to abroad, leveraging concentrated knowledge and openness as the fundamental conditions.

Bonded zones, similar to free trade zones in other countries, are areas where international trade and bonded businesses, approved by China's State Council, take place
Within these zones, foreigners can engage in international trade, operate bonded warehouses, and conduct processing exports.

Export facilities were established to standardize the management of processing trade, promoting its development, and transitioning from decentralized to centralized management
These facilities provide a more liberal business environment for companies, encouraging external export expansion.

China's national-level new zones are specialized areas entrusted with strategic tasks for national development, reform, and opening
Designated and established by the State Council in regions with superior geographical advantages and favorable economic development conditions, these zones are pivotal in implementing major national strategies
Among the most renowned are Shenzhen (during Deng Xiaoping's leadership), Shanghai Pudong (under Zhang Zemin), and Xuan (during Xi Jinping's tenure), designated by national leaders at their respective times
Since 2015, in order to promote service trade and the development of the service industry, a service industry innovation demonstration zone (city) has been designated and implemented measures such as tax benefits and expansion of openness
In May 2015, Beijing was designated as the first "demonstration city to expand the opening of the service industry." In February 2016, the Chinese government designated 15 regions (10 cities and 5 national-level new districts) as pilot zones for two years and applied measures such as expansion of openness, increased convenience, tax incentives, and financial services
After the end of the demonstration time ('18.5), Beijing and one new national-level district were added to designate 17 "service trade innovation development demonstration areas."

Free Trade Area

Since China's first free trade zone appeared in Shanghai in September 2013, China has established 21 free trade zones on five different occasions until September 2020
A Free Trade Zone (FTZ) refers to a special economic zone designated by the Chinese government to enhance the business, investment, and trade environment to international standards.

China provides tax preferential treatment, simplifies customs clearance and quarantine procedures, and offers administrative convenience to foreign investment companies operating within the 21 free trade zones
It applies to the "FTZ Special Management Measures for Foreign Investment Entry" (negative list)*, hereinafter referred to as the "negative list"
The current FTZ negative list, effective since January 1, 2022, is a revised edition from 2021 and has been implemented across all 21 free trade zones.

Free Trade Port

Hainan Province, officially designated as an FTZ in 2018, is being developed as a free trade port
On June 1, 2020, the Chinese government announced the "General Plan for the Construction of the Hainan Free Trade Port" and expressed its intention to transform Hainan into an area with even greater openness than special economic zones like Shenzhen.

The Chinese government has proposed establishing a free trade port system based on trade and investment liberalization by 2025
The Hainan Free Trade Port plans to eliminate tariffs on imported goods by 2025, with initial "zero tariffs" applied to certain products
The mid- to long-term goals include further enhancing the operational efficiency of the free trade port by 2035, achieving ease of access for both domestic and foreign funds, entry, and logistics sectors.

Companies eligible for development will be subject to a 15% corporate income tax rate, with foreign investors in key industries such as tourism, services, and high-tech sectors being exempted by 2025
Additionally, the annual duty-free limit for visitors to Hainan has been increased from 30,000 yuan to 100,000 yuan, along with an expansion of the items available for duty-free purchases.

Jingjinji Temple (津冀津)

Jingjinji is a common name for Beijing, Tianjin, and Hebei, and refers to the Chinese metropolitan area centered on the capital Beijing and Tianjin, a shipping hub in northern China.

High-tech industries such as automobiles, IT, electronics, medicine, and machinery, as well as service business and consumer markets, have developed around Beijing
In addition, road-rail networks have been established nationwide with radiation centered on Beijing, and the Jingjinji Project, President Xi Jinping's plan to integrate the metropolitan area, has recently been implementing a national strategy to build transportation infrastructure in the metropolitan area.

East China

Jiangsu, Zhejiang, and Anhui provinces are referred to as an economic zone, centering on the delta region at the mouth of Changjiang, which has a population of 80 million and accounts for 21% of China's GDP
This region is China's largest foreign trade center, the largest domestic market with consumption exceeding 20% of the country, and the most developed economy in China.

The economic zone is centered on the Changjiang Delta, and the Changjiang Delta is centered on the city of Shanghai
Meanwhile, Jiangsu Province and Zhejiang Province are both representative economic development areas along China's eastern China.

South China

South of the Huaibei River, it is generally called the Hwanam Economic Area, including Guangdong Province, Hainan Province (Haenam Province), Guangxi Zhuang Autonomous Region, and Fujian Province
The economic zone of South China is centered on Guangdong Province around the Pearl River Delta at the mouth of the Pearl River. Guangdong Province, along with the Yangtze River Delta (Shanghai) and the Transboundary Sea Bay Economic Zone (Beijing and Tianjin), is one of the three pillars driving the Chinese economy, boasting the largest economy in the country
It is the leading region for reform and opening up, and the size of foreign trade accounts for more than a quarter of China's total foreign trade, making it China's largest foreign trade province for 31 consecutive years
Guangdong Province is a global factory with a complete industrial system and has the world's best production processing and assembly capacity of more than 100 industries
As IT industry manufacturing bases, electronic information industry bases are formed around Shenzhen, Guangzhou, Dongguan, Huizhou, Fosan, and Jungsan, and high-tech technologies such as new materials and optical electricity are rapidly developing
According to China's domestic demand expansion policy, Guangdong Province is expected to serve as an important forward base for pioneering the Chinese domestic market as a manufacturing base for global companies.

The Southwest

China's southwestern economic zone, centered on Sichuan Province, is rapidly emerging in accordance with regional development strategies such as western development, one-on-one road, and the Sichuan-Chongqing economic zone. With a population of 80 million, Sichuan Province still serves as the largest economic bloc in western China and the centerpiece of economic growth
The Chinese government plans to foster the Qingyuan Economic Zone (Sichuan-Chongqing) as the fourth largest economic zone after Shanghai (Janggang Delta), Beijing (Hwanbalhae) and Guangzhou (Zhugang Delta). Chengdu, a holy city in Sichuan Province, has been fostered as a central hub for finance, transportation and emerging industries in western China's inland region
Starting from Chengdu, Chengdu, Sichuan Province, has rapidly emerged as a railway hub on the Eurasian continent, with the operation of the 9,826-kilometer high-speed long-haul railway, which runs through Xinjiang Arasan, Kazakhstan, Russia, and Belarus. Chongqing City, which has the largest population (30 million people) among China's four major direct cities and is the only one located in the western inland, is used as a base for pioneering the western market
It is an important transportation hub in the western inland area as it is located upstream of Changjang and the construction of transportation infrastructure such as roads, railroads, and routes is also promoted extensively
China's Wixin-Ou railway, which first ran to Duisburg, Germany in 2014, passed through a total of six countries, including Kazakhstan, Russia, Belarus, and Poland, to Germany, which is called the New Silk Road.

Northwest

As the "one-on-one road" initiative has been upgraded to a national strategy, China's northwest region, which is a border area of the "new silk road," is in the spotlight
The northwestern region, which used to be home to nomadic people consisting of deserts, highlands, and grasslands, has recently emerged as China's economic growth axis, led by Shaanxi Province. Shanxi Province is striving to build strategic emerging industries such as semiconductors and automobiles by building three major bases, four major districts in the electronics and information sectors, three major bases in the new energy, new materials and biopharmaceutical sectors
Large domestic companies such as Samsung SDI, SK, and LG are also making inroads. Xi'an, a holy city in Shanxi Province called Jangan during the Tang dynasty, developed tourism based on support from history, culture, and natural environment
The tourism industry in the northwest region is also showing an expansion trend due to history, culture, and natural scenery.

There are generally forms in which foreign companies enter China, such as the establishment of a company and the establishment of a liaison office
Among them, the company can carry out commercial activities within the scope indicated in the business license issued by the China Market Management and Supervision Bureau, file a lawsuit independently, and take responsibility independently in China.

The branch office is a subordinate agency of the headquarters and cannot be held legally responsible independently
It is possible to carry out management activities within the management scope of the headquarters, take charge of communication and consulting within the management scope of the headquarters, and the headquarters is jointly responsible
It should be noted that some local governments, sensitive to tax collection, may not welcome the establishment of branches without commercial work
If branches that do not engage in commercial activities are established outside the headquarters, this might pose challenges with certain local authorities.

By establishing a liaison office, foreign companies can conduct market research, exhibitions, and promotional activities related to their products or services, sell products, provide services, and make purchases in China
They can also engage in activities related to investment in China
Since the liaison office cannot have corporate status, external responsibilities must be borne by the foreign corporation
Additionally, if the liaison office engages in for-profit activities, it may face administrative penalties such as confiscation of property used for these activities, fines, and revocation of registration certificates.

As the most basic step in establishing a presence in the region for promoting Chinese business, establishing a liaison office can be considered
The liaison office set up by foreign investors before establishing a local subsidiary in China is referred to as a representative office in China.

In principle, for-profit activities are prohibited, but it is possible to conduct market research, establish contacts with Chinese trading partners, enhance company awareness and image, exercise local control over various businesses in different regions of China, and support other important headquarters
Overseas companies intending to conduct business activities must establish a local subsidiary in China and can establish branches in other regions of China after setting up a local subsidiary.

To establish a liaison office, our company must meet the following criteria:

• The headquarters must have been established for at least two years.

• Up to four delegates are allowed.

• If the headquarters operate in special industries (financial, insurance, film, etc.), prior permission from Chinese regulatory agencies must be obtained
  Some industries are prohibited.

• If a representative provides a certificate of employment, they must be a four-year college graduate.

Foreign investment corporations are classified into three categories in China: joint ventures, joint ventures, and independent companies.

A joint venture refers to a corporation in which a foreign company, other economic organization, or individual jointly invests with a Chinese company, company, or other economic organization in China, jointly manages the company, and jointly bears profits and losses according to the equity ratio invested
Chinese partners must be corporations, but individuals can also invest in certain regions under the special law
For example, areas such as Beijing's Zhongguancun Technology Development Zone are not subject to applicable regulations.

Joint ventures have characteristics such as joint investment, joint management, joint profit and loss burden, and limited liability.

• Joint investment: In a joint venture, both investors invest cash, in kind, intellectual property, technology, and land use rights, respectively, and allocate shares according to the amount of investment.

• Joint management: A joint venture company stipulates and registers management institutions such as the company (director), the board of directors, legal representatives, and general management in the articles of association.

• Joint Profit and Loss Burden: Foreign and Chinese investors share gains and losses and risks, respectively, according to their respective equity ratios.

• Limited liability: The liability for the burden of corporate debt shall be within the total amount of corporate assets, and the liability of investors for corporate debt shall be within the amount of investment, and there is no obligation of joint liability between investors.

When establishing a joint venture, there are concerns about leakage/implication of core technologies, profit recovery, and difficulties in withdrawing businesses, so be careful
You should visit China to conduct due diligence in person and conduct a thorough credit investigation of your partner before making an investment
It should be noted that overconfidence and investment in the distribution capacity of Chinese partners can lead to failure.

Even if the foreign counterpart has a large stake, it may face difficulties in management activities if the Chinese partner holds a company with a stake or higher or has secured a president
Therefore, it is necessary to secure the number of companies with a stake or more, and if possible, it is necessary to take control of management leadership, such as securing the president's position and stipulating in the articles of association except for unanimous decisions under the Joint Venture Act.

China often demands reinvestment when profits are made
Since the decision is a unanimous system under the Joint Venture Act, it is impossible if even one person opposes it, so the contract should specify solutions for various problems such as recovery of investment profits and withdrawal of business.

A contractual joint venture is a form of joint venture established by a foreign company, other economic organizations, or individuals with Chinese companies or other economic organizations, and the rights and obligations of both sides are determined by contract regulations. It should be noted that the scope of the rights and responsibilities of the joint venture partner is not automatically determined by the investment ratio
It has the advantage of being able to flexibly adjust investors' rights and obligations according to the nature of the business and investors' circumstances, but foreign investors who lack understanding of China's local circumstances are likely to sign unfavorable investment contracts.

A joint venture has the following characteristics:

• Contract Note: Both the terms of the joint venture of each investor and the rights and responsibilities accordingly are determined by the legal and valid contracts of both parties.

• Flexibility of corporate form: A joint venture may choose a corporate form or a federated management form, establish a board of directors or a federated management committee according to the above form, and delegate management to a third party.

• Profit allocation flexibility: It is possible to distribute profits according to the investment ratio of each investor and by a separate contractual arrangement
  In other words, it is possible to distribute profits or produce products.

• Investment turnover: Foreign investors of a joint venture are allowed to recover their investment capital early within the investment period under the joint venture contract
  Once a foreign investor recovers its capital early, all fixed assets of the joint venture will be attributed to Chinese investors free of charge at the end of the investment period.

Since the rights and obligations of both sides are determined by the contract, the legal interpretation is ambiguous, and disputes between the two sides are likely to occur
Like the joint venture, Chinese partners should thoroughly conduct credit investigations to prepare for future problems, and all investment risk sharing and profit sharing conditions should be stipulated in the contract, and special care should be taken when preparing the contract to prevent losses in the event of a dispute in the future.

Depending on the situation, a Chinese joint venture may use the following financing methods.

• External borrowing: borrowing from third parties, such as external financial institutions

• Internal borrowing: borrowing from each investor (which may be accompanied by a mortgage or guarantee act)

• Proportional capital increase in equity ratio: additional investment on equal terms by each investor according to the existing equity ratio

• Equity ratio non-proportional capital increase: Differential capital increase regardless of existing equity ratio (includes changes in equity ratio)

• Third-party equity participation: Increase capital by recruiting new third-party investors other than existing investors

Among the above measures, '1st' and '5th' are sufficient only as specified in the standard contract and standard articles of association, but '2nd' to '4th' are likely to be disrupted if agreement is not reached between existing investors It is recommended to agree on each countermeasure according to the situation in advance in writing
Considering borrowing or capital increase and third-party equity participation increase, the standard is whether the joint venture's financial situation can improve in a short period of time
If a short-term improvement is expected, it is recommended to choose a "borrow" method and a "capital increase" method if it is feared to be prolonged.

Foreign investors of joint venture companies can recover their investment capital early within the investment period under a contract agreed with Chinese investors
Once a foreign investor recovers its capital early, all assets of a joint venture company will belong to Chinese investors free of charge at the expiration of the investment period and will not go through a separate liquidation process
Early recovery of foreign investment capital includes repaying a certain amount to foreign investors and treating it as a fixed asset depreciation, setting a large ratio of foreign investors' profit distribution, agreeing a certain amount of investment capital repayment to foreign investors. When establishing a joint venture, all investment risk sharing and profit sharing conditions should be stipulated in the contract, and special attention should be paid to prepare the contract to prevent losses in the event of a dispute in the future
In addition, it is necessary to thoroughly conduct credit investigations of Chinese partners to prepare for future problems.

An independent company (foreign capital company) is a company in which all of its capital has been invested by foreign investors, established in Chinese territory in accordance with Chinese law
In China, it is also called a foreign-invested enterprise or an independent enterprise.

Foreign investment-based foreign-invested companies exercise their own management rights, and the corporate management method is not much different from internationally used single-invested companies
However, as the Chinese government imposes stricter restrictions on the investment sector of foreign-invested companies compared to joint ventures and joint ventures, foreign investors should pay special attention.

An independent company has the following characteristics:

• Capital ownership: The capital of a foreign-invested company must be appropriated by foreigners as foreign capital.

• Legal status of enterprises: the legal status of foreign capital enterprises still holds the status of a Chinese corporation established under Chinese law in China.

• Independent management: Since foreign-invested companies are foreign-only investments, they can establish their own management organization to determine management policies and independently determine employee treatment
  Investors take the investment risk alone.

• Limited Liability Company: A foreign-funded enterprise must take the form of a limited liability company.

Independent companies are burdened with initial investment funds such as land, factories, and operating costs
If a company that does not have sufficient know-how in local business enters the form of an independent company, the initial capital burden is large
In addition, it costs a lot of money to pioneer and build a sales network on its own, and it may also be difficult to recover payments due to lack of experience
In addition, labor management may be difficult in the early stages of investment due to a lack of understanding of local society and culture
In order to increase the investment success rate, it is desirable to enter China through a similar reader format, such as establishing a liaison office for pre-market research, and then attempt to invest independently after gaining sufficient experience.

Limited liability companies (limited companies) are the most representative form of organization in China's corporate system, and investors of limited companies have limited liability externally, and in principle, the company's control is realized through the investor association based on the principle of majority stake
Since the total number of investors in a limited company is limited to less than 50, limited companies are generally small unless each investor's investment is quite large
In limited companies, the securitization of shares is prohibited and the transfer is limited, so the personnel composition is closed.

Limited companies have no limitations on the amount of investment and the deadline for investment
All investments can be made in cash, in kind, intellectual property rights, and land use rights.

The institutions of a limited company shall have a shareholders' meeting (general meeting of members: decision-making agency), a board of directors (the board of directors), an executive director, an auditor or an auditor (arbitrary agency)
If the company is small, the company shall not establish an association and shall have an executive director (legal representative, director, general manager: three roles per person).

The registration process of a limited company mainly goes through the following five processes.

• Submit an application for pre-authorization of the name of the company to the company registration agency (the Industrial and Commercial Administration Bureau) and receive a "notification of pre-authorization of the name of the company".

• Submit an application for establishment of a corporation to the examination agency (commercial committee) and receive a certificate of ratification and a certificate of ratification.

• An application for registration of incorporation is filed with the company registration agency and a business arrangement is received
  The date of issuance of the business group will soon be the date of establishment of the corporation.

• Raise the application for necessary licenses according to the handling industry
  For example, companies engaged in the restaurant industry are required to obtain a "food and beverage service license," and food distribution companies are required to obtain a "food management license."

• A "certificate of investment" is issued to the investor after tax registration, bankbook opening, customs registration, etc. a private business operator

In China, foreigners cannot run private businesses.