Ministry of Commerce Foreign Exchange Bureau Notice: Foreign-invested companies are prohibited from reinvesting domestic loans (VC332)

In order to regulate the approval and foreign exchange management of foreign-invested companies and promote their further development in China, the Ministry of Commerce and the Foreign Exchange Bureau jointly issued the "Notice on Further Improving the Relevant Management Measures of Foreign-invested Companies", pointing out that foreign-invested companies can Renminbi profits obtained in China, advance investment recovery, liquidation, equity transfer, and capital reduction are directly used for domestic investment after approval by the local foreign exchange bureau. Foreign investors can also transfer their legal income to investment companies After the registered capital contributes or increases its capital, it will carry out domestic investment, but its domestic loans shall not be used for domestic reinvestment.

The notice requires that the competent commercial departments at all levels should strengthen the review and management of the statistical information for the approval of foreign-invested companies. For foreign-invested companies approved to be established, "Investment companies" must be marked in the "Basic Information Form for Foreign-invested Enterprises" and entered into the approval management system for foreign-invested enterprises of the Ministry of Commerce. Similar names such as "investment company" or "investment holding" are not allowed for other types of enterprises. The above contents will be the key inspection items for the joint annual inspection of foreign-invested enterprises.

The notice clarifies that the foreign investment company applying for domestic investment approval procedures should provide materials to the foreign exchange management department including: written application, IC card for foreign exchange registration of foreign-invested enterprises, approval documents for foreign investment companies' domestic investment by the competent commercial authority, RMB Funding source certification materials and the latest capital verification report and financial audit report are attached with the corresponding foreign exchange income and expenditure situation table audit report.

According to Article 2 of the "Regulations on Foreign Investment in the Establishment of Investment Companies" issued by the Ministry of Commerce in 2004, an investment company refers to a foreign investor established in China as a sole proprietorship or a joint venture with a Chinese investor to engage in direct investment.