When investing and running a foreign business in China, the Chinese law needs to be followed. This chapter explains the Chinese domestic law relating to the Foreign Direct Investment (FDI) when China is the host country. To comprehensively understand the FDI law in China, section 2 guides the reader to understand the concept of Chinese FDI, journal relation relevant to FDI, and legal framework covering the Chinese FDI. Section 3 introduces the FDI law's historical development in China as well as international treaties relevant to FDI issues. Subsequently, section 4 introduces the legal forms to set up a FDI enterprise in China, and section 5 introduces the detailed rules on the market access stage and the business operation stage of the Chinese FDI. Notably, law in the title of this chapter refers to a set of regulations, and it may have a specific title in the different laws, administrative regulations or other forms of legal documents hereinafter. In addition, the chapter mainly aims to present Chinese inward FDI regulations and involves relevant international laws and principles that China follows. It provides a starting point for students studying Chinese FDI law and may also provide fundamental knowledge for foreign investors starting enterprises in China.
EXPLANATION ON SOME THEORIES REGARDING CHINESE FDI LAW
CONCEPT OF CHINESE FDI
A Chinese FDI usually is made by a foreign natural person, foreign legal entity or other forms of foreign economic entity. The aim of the investment is to operate an ongoing business rather than be a purely capital investment. Therefore to achieve the goal of establishing and operating the business, the foreign investor needs to hold or partially hold the right of control of the invested enterprise.
A definition, given by the Organization for Economic Co-operation and Development (OECD) in its Benchmark Definition of Foreign Direct Investment (FDI), states that FDI: is a category of cross-border investment made by a resident in one economy (the direct investor) with the objective of establishing a lasting interest in an enterprise (the direct investment enterprise) that is resident in an economy other than that of the direct invest.