China is loosening restrictions on overseas investment in domestic foreign trade companies, a change that may result in more joint venture trading firms in more cities across the country.
According to a rule published yesterday on the Website of the Ministry of Foreign Trade and Economic Cooperation, overseas investors recording more than US$30 million in trade with China for three consecutive years may apply to set up foreign trade joint ventures anywhere in China, not just in Shenzhen and Shanghai's Pudong District, as was previously the case.
Those who set up such joint ventures registered in China's less-developed central and western regions need to have notched up only US$20 million in trade for three consecutive years.
Overseas investors are allowed to own between 25 and 49 percent of the joint ventures, according to the regulation, which goes into effect on March 2.
"The new rule could benefit many multinational corporations," said an official with the company management department of the Shanghai Foreign Economic Relations and Trade Commission.
"If they invest in a joint venture, they can directly access domestic distribution channels and save the commissions they have to pay to domestic trade agencies," the official said.
Without trading rights, overseas companies operating on China's mainland have to turn to domestic or overseas-based domestic trade agencies to handle shipping goods across the boarder. Such agencies usually charge up to 1 percent of the value of shipment in commission fees.
"Big companies in Japan and South Korea that own trade departments will be especially willing to set up trade joint ventures here," he added.
Nationwide, six Sino-foreign trade companies have been running on a trial basis since 1997 under strict government rules. Three are registered in Pudong, with the other three in Shenzhen.
China has promised to grant foreign trade rights to all overseas-invested companies starting 2005.
(eastday.com February 19, 2003)
