The Legal Analysis On New Methods Of Equity Investment By Foreign Investors In China

Since long-time investment practices by foreign investors in China, as well as thematuring foreign investment management legal system of China, the investmentmethods that foreign investors have in China, have a tendency of diversification. In2010, the State Council issued the “Several Opinions on Further Improving theUtilization of Foreign Investment” points out that utilization of private equityinvestment funds, and realization of listing of foreign-invested enterprises withinChina. However, whether foreign investor may use the form of equity investment,such as equity contribution, private equity investment, to invest in China, remainsunclear on laws and regulations. In practical, the form of equity investment has amagnificent advantage with respect to broadening the financing channels andpromoting the development of enterprises over traditional investment methods. It may,and will play an important role for the improvement of quality of absorbed foreigninvestment and the level of utilization of foreign investment. From this point, it willcertainly be a significant way for foreign investors to invest within China in the future.In2012, MOFTEC made it clear that foreign-invested enterprises may invest orbe invested in the form of equity contribution. In recent years, qualified foreignlimited partner (hereinafter referred to “QFLP”) in Beijing, Tianjin, Shanghai, etc.have been carrying out a pilot. And in2012, MOFTEC began to regulate the equitycontribution relating to foreign-invested enterprises, through the "Interim Provisionson Equity Contribution of foreign-invested enterprises”, Both of them convincinglypromote the diversification of the forms of foreign investment and the development of equity investment. Nonetheless, both of them are limited to develop further, to someextent, by their own specialties, relevant laws and regulations, and various problemsin practice.This essay commences with the laws and regulations in respect of equitycontribution relating to foreign-invested enterprises and QFLP, to discuss and analyzethe qualification of equity to contribution, the access restriction of foreign investment,the ambiguity of relevant laws and regulations, and the difficulty for foreigninvestment to quit, and etc. and their respectively influences, from the aspects oftheory, practice and legislation.This paper is divided into three parts to analysis of foreign investors’ equityinvestments, including equity contribution with respect to foreign-invested enterprisesand QFLP:The first part describes the status quo of China’s foreign investment anddiversification trend, and also introduced the concept of equity investments, itsclassification, characteristics, problems, and new development of equity investmentrelating to foreign investment;The second part is about equity contribution relating to foreign-investedenterprises, one of the new development of equity investment in foreign investment,analyzing the relevant laws and regulations on equity contribution with respect toforeign-invested enterprises and its possible impact, concluding the problems in thepractice of equity contribution with respect to foreign-invested enterprises will faceand to provide some advices;The third part is focused on another new development of equity investment offoreign investment, that is, QFLP. Combining the experiments of various cities, thispart is to analyze the problems in QFLP, to have some reflection and to raise advices.