Now! China June 2025 - Recent Development in China’s Foreign Investment Policy

A Strong Legal Foundation for Foreign Investment

Over the past 70 years, particularly since the start of reform and opening-up over four decades ago, China has built a comprehensive socialist legal system with Chinese characteristics. The development of a law-based government has progressed steadily, and the judicial system has continuously improved. Public awareness of the rule of law has also significantly increased across society.

China actively participates in the reform and development of the global governance and continues to deepen multilateral, bilateral and regional cooperation. Key milestones include:

WTO Accession and Tariff Commitments:

China formally joined the World Trade Organisation (WTO) on December 11, 2001. By 2010, it had significantly reduced tariffs in line with its accession commitments. The average tariff rate dropped from 15.3% in 2001 to 9.8% in 2010, and further to 7.3% as of July 1, 2023. China also fulfilled its tariff concession commitments under the WTO Information Technology Agreement expansion and opened more than 100 sub-sectors in the services sector by 2007, now expanded to nearly 120.

Leadership in Investment Facilitation:

In February 2024, China led over 120 WTO members to reach the Investment Facilitation for Development Agreement.

Free Trade Area Strategy:

China has actively pursued the upgrading of free trade areas. The Regional Comprehensive Economic Partnership Agreement (RCEP), which came into effect on January 1, 2022, established the world's largest free trade area, encompassing 15 member countries and accounting for approximately 30% of global population, GDP and trade.

Free Trade Agreements (FTAs):

As of July 2024, China has signed 22 FTAs with 29 countries and regions, with trade with these partners accounting for about one-third of China's total foreign trade.

Applications to Join Major Trade Agreements:

• On September 16, 2021, China applied to join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).
• On November 1, 2021, China formally applied to join the Digital Economy Partnership Agreement (DEPA).

Double Taxation Agreements:

China has signed agreements on the prevention of double taxation with 114 countries and regions.

Legal Framework for Foreign Investment in China

On March 15, 2019, the Foreign Investment Law of the People's Republic of China (hereinafter referred to as the "Foreign Investment Law") was adopted at the second session of the 13th National People's Congress, replacing the previous "Three Laws on Foreign Investment". This new foundational law introduces a unified legal framework for China's new legal system for foreign investment, affirms the adoption of a "pre-establishment national treatment plus a negative list" approach, and strengthens investment promotion and protection.

Foreign-invested enterprises (FIEs) enjoy equal treatment with domestic enterprises in areas such as government funding, land supply, tax and fee reductions, licensing and permits, standard setting, project applications and human resources. FIEs are governed by the same laws as domestic and foreign-invested enterprises. Including the Company Law of the People's Republic of China and the Law of the People's Republic of China on Partnership.

China continues to guide and encourage foreign investment through various preferential policies, particularly for projects listed in the Catalogue of Industries for Encouraging Foreign Investment. Incentives include:

• Tariff Exemptions: A tariff-free policy applies to self-use equipment imported within the total investment of encouraged foreign investment projects, except for equipment listed in the Catalogue of Major Technological Equipment and Products Not Exempt from Import Duty and the Catalogue of Goods Not Exempt from Import Duty for Foreign Investment Projects;
• Preferential Tax Rates: Qualified foreign-invested enterprises in encouraged industries located in the western regions and Hainan Province are eligible for a reduced enterprise income tax rate of 15%;
• Priority Land Access: Industrial projects that efficiently utilise land are given priority in land allocation. The minimum price for such land transfer may be set at no less than 70% of the national minimum price standard for industrial land, based on corresponding local land grade. 

Further Optimising Foreign Investment Environment in China

On July 25, 2023, the State Council issued the Opinions on Further Optimising the Foreign Investment Environment and Intensifying Efforts to Attract Foreign Investment, outlining 24 specific measures across six areas; enhancing the quality of foreign capital utilisation, ensuring national treatment for foreign-invested enterprises, strengthening the protection of foreign investment, facilitating operations, expanding fiscal and tax support and refining promotional mechanisms. As of May 2024, more than 60% of these measures have been implemented.

Key outcomes include:

• The Cyberspace Administration of China released and implemented the Regulations on Promoting and Regulating Cross-Border Data Flow
• The Ministry of Finance and the State Taxation Administration extended the tax exemption policy for foreign individual allowances and subsidies, and the tax rebate policy for foreign-invested research institutions purchasing China-made equipment, until end-2027. The threshold for enjoying the tax rebate policy for purchasing China-made equipment was also lowered.
• The National Intellectual Property Administration and the Ministry of Justice introduced the Opinions on Strengthening Administrative Adjudication of Patent Infringement Disputes in the New Era, improving administrative adjudication system and mechanisms.
• The State Administration for Market Regulation issued the Opinions on Strengthening Intellectual Property Law Enforcement in the New Era.
• The National Immigration Administration (NIA) launched a new version of the Foreign Permanent Resident ID Card to help foreigners travel and live in China, and eased conditions for port visa applications. 

On February 28, 2024, the General Office of the State Council issued the Action Plan to Steadily Promote High-Level Opening Up and Make Greater Efforts to Attract and Utilise Foreign Investment (hereinafter referred to as the "Action Plan"), proposing 24 measures across five areas; expanding market access, increasing policy support, improving the competitive environment and services, facilitating innovation collaboration between Chinese and foreign-invested enterprises, and aligning domestic regulations with high-standard international economic and trade rules.

On January 11, 2023, the General Office of the State Council forwarded the Measures on Further Encouraging Foreign Investment in Establishing R&D Centers (hereinafter referred to as the "Measures") issued by the Ministry of Commerce and the Ministry of Science and Technology. The Measures recognise foreign-invested R&D centers as an integral part of China's scientific and technological innovation ecosystem and emphasize supporting their role in advancing international cooperation, innovation and high-quality development.

Example: Latest Development in Optimising Foreign Investment Environment in Shanghai

Located at the estuary of the Yangtze River and facing the Pacific Ocean, Shanghai is one of China’s most economically dynamic regions. It is known for its high degree of openness and strong innovation capabilities. For 13 consecutive years, Shanghai has been named one of the Most Attractive Chinese Cities for Expats. As of the first half of 2024, 985 regional headquarters and 575 foreign-invested R&D centers have been established in the city. With growing efforts to strengthen its role in global resource allocation, Shanghai continues to lead the Chinese mainland in the concentration of multinational company regional headquarters. Hence, its policies for optimising the foreign investment environment serve as a benchmark for the rest of China.

System Reforms: Supporting the National Key Project - "Efficiently Completing One Thing"

1.  One-stop Service for Enterprise information Changes 

In collaboration with relevant departments, the Shanghai Municipal Administration for Market Regulation (SMAMR) launched a one-stop service that enables automatic updates across various systems, including enterprise seal engraving and filing, tax, social insurance and housing provident fund, after enterprise registration details are modified. It also provides businesses to book appointments for basic deposit account updates.

2. One-stop Service for Business Cancellation Registration 

SMAMR integrated the cancellation processes of multiple departments, including taxation, human resources, social security and customs. To enable unified and online business license and tax deregistrations, the first such initiative in China. 

3. One-stop Service for Opening Restaurants

This service streamlines approvals for food business licenses, outdoor billboard settings and pre-operation fire safety inspections into a single application process. 

4.    One-stop Service for Enterprise Migration Registration

Businesses relocating within Shanghai can now complete migration-related formalities, spanning regulation, taxation, human resources and social security, and housing provident fund matters, through one-stop submission, parallel approvals, and efficient completion.

5.    One-stop Service for Enterprise Data Entry

This service integrates reporting requirements, such as annual reports, statistical and social security reports, customs filings and annual reports of foreign-invested enterprises (institutions), into a single intelligent reporting platform. 

Additional policies to enhance the foreign investment environment in Shanghai:

The SMAMR has actively introduced a series of measures to enhance the business environment, promote high-level opening-up, and strengthen support for domestic and foreign-invested enterprises.

One major initiative is the formulation of the "Measures for the Administration of Business Entity Address Registration in Shanghai", which clearly stipulates that when business entities use addresses listed in the Enterprise Domicile Standardized Registration Information Database as their registered domiciles, they shall be exempted from submitting property ownership certificates, lease contracts and other proof of address usage. By 2024, this database has covered over 110,000 apartments in 1,754 buildings across the city.

To maximise space utilisation, SMAMR supports qualified food R&D centers to directly engage in food production, allowing for a dual-use "research + production" model that consolidates activities within a single site.

In terms of digital governance, SMAMR has launched the "Shanghai Enterprise Registration Online" mobile application, which enables applicants to handle enterprise registration, seal engraving, tax-related matters, employee social insurance, housing provident fund and make bank account opening appointments, all in a "one-stop" solution via mobile phone. The desktop version has further extended online services to include registration of foreign enterprises' permanent representative offices.

SMAMR continues to deepen the "One-Stop Online Service Reform", with 12 high-frequency government service items adopting the “Smart Easy Handling 3.0” model. This model has achieved a 70% intelligent pre-review rate, 90% intelligent pre-review rate and a 90% one-time acceptance success rate. It also introduced three self-service terminal scenarios: supplementary certificates for (1) accreditation of inspection and testing institutions (2) licenses of special equipment production units, and (3) accreditation of special equipment inspection and testing personnel. Additionally, two services, enterprise registration and registration file review have been added to the "Suishenban" app, and "Government Quality Award Payment" is now processed automatically without application.

New application scenarios for the use of electronic business licenses have been added, allowing businesses to open bank accounts or apply broadband access at institutions such as Commercial Bank of China, Shanghai Rural Commercial Bank and China Mobile, without the need to submit physical business licenses or physical seals.

An "Unsolved Matters" reporting window has been established both at the government service hall and online to support inquiries for the 12 high-frequency service items. Online interactive assistance, including text-based and written support, complements offline help channels.

To uphold market fairness, SMAMR has conducted a fair competition reviews and joint examination on 131 major policy measures in the city, including third-party reviews for key policy areas. In terms of market supervision, SMAMR has classified credit risks for 2.9 million enterprises in Shanghai:

• Class A: 15.68%
• Class B: 48.23%
• Class C: 34.37%
• Class D: 1.72%

Enterprises in Class A are exempt from active random inspections, while B, C, and D classes are subject to inspection ratios of approximately 1%, 1.5% and 5% respectively.

To protect innovation and foreign investment, SMAMR launched a special law enforcement campaign on Intellectual Property (IP) protection, cracking down on trademark and patent violations. In 2024, 365 IP cases related to foreign investment were handled, with total fines and confiscations amounting to approximately 7.12 million yuan.

To further support enterprises, SMAMR compiled the "Guidelines for Responding to the Protection of Overseas Trade Secrets", raising awareness and encouraging the adoption of enterprise trade secret insurance systems.

SMAMR also issued the "Several Measures of Shanghai Municipality on Further Supporting Foreign-Invested Enterprises to Participate in Standardisation Work", establishing China’s first standardisation collaboration platform for foreign-invested enterprises.

In global trade facilitation, SMAMR has guided inspection and testing institutions in Shanghai to cooperate with relevant organisations "Belt and Road" countries and other major trading nations, piloting the "one test, multiple certificates" system. Institutions such as SEARI, TICW, Intertek, and SGS have issued 2,597 test reports covering 449 enterprises under this initiative.

IN PRACTICE

With our extensive experience in corporate secretarial and advisory services, we have observed, alongside our clients, the steady improvements and increasing conveniences brought about by the development of China’s foreign investment policies.

In the early days, when clients needed to register their wholly foreign-owned enterprises (WFOEs) in China, whether for establishment, dissolution or changes to key corporate information, legal representatives were required to present their original passports in person at the relevant authorities. This posed significant inconvenience, particularly for foreign executives based outside of China.

Over time, this process was simplified. Chinese authorities began accepting scanned copies of passports, provided they were notarised in the representatives’ home countries and legalised by a Chinese embassy or consulate. Occasionally, online interviews were also required, during which the representatives would present their passports for verification。

More recently, following China’s accession to the Hague Convention, notarised (i.e. apostilled) copies of passports have become sufficient for most procedures. Legalisation by the Chinese embassy is no longer necessary, streamlining the process significantly. One client, for instance, successfully obtained an apostilled copy of their legal representative’s passport in Singapore in just two days.

This example reflects a common scenario. seen circumstances. For more complex or exceptional cases, we will continue to assess requirements on a case-by-case basis.

As you may be aware, SBA Stone Forest is a full-service professional firm with over 20 years of experience supporting clients with their compliance and corporate governance needs in China. Our Corporate Secretarial team in China is ready to assist with any queries related to your investment operational matters.

Conclusion

This article highlights, but does not exhaust, the comprehensive efforts of the Shanghai Municipal Administration for Market Regulation to to enhance openness and attract foreign investment. Through practical, targeted reforms and international collaboration, Shanghai continues to build a pro-business environment that inspires confidence among global investors and supports positive engagement with the world economy. 

China Updates

Accounting and Taxation

Pilot Reform for Optimising the "Two-step Declaration" Customs Clearance Mode

Announcement [2025] No.44 of the General Administration of Customs

To implement the deployment of the Central Committee of the Communist Party of China and the State Council on further deepening reform and promoting trade facilitation while safeguarding national security, the General Administration of Customs has announced the launch of a pilot reform to optimise the "two-step declaration" customs for imports. Key points of the announcement are as follows: 

Integration of Declaration Modes

The existing interfaces for "two-step declaration" and "one-off declaration and step-by-step disposal" in the "single window" for international trade shall be integrated into a unified declaration entry. Enterprise may complete all declaration items in two steps within 14 days from the declaration of entry of transportation vehicles. Goods that satisfy the requirements may be released after the summary declaration. Once all items are submitted and accepted by the Customs, the declaration is deemed complete. Late declarations beyond the prescribed period may result in penalties.

Optimisation of Summary Declaration Items

Removal of specific checkboxes:

Enterprises are not required to check whether the import goods are subject to restriction of control, inspection or quarantine, or tax payment obligations.

Improved mandatory items:

• In addition to the original mandatory fields, the following are added: "Specification and Model", "Currency" and "Transaction Method". The filling requirement for "HS Code" is revised from 6 digits to 10 digits.

Dynamic minimum declaration:

• For certain commodities, minimum declaration items will be defined and adjusted dynamically based on regulatory and safety requirements.

Upload of accompanying documents:

• At the summary declaration stage, enterprises may upload access documents such as inspection and quarantine certificates, contracts, invoices, and other relevant documents via the “single window.”

Implementation of guaranteed withholding for summary declaration:

• Enterprises importing taxable goods shall, prior to declaration of imports, must file a tax guarantee with their local Customs district under the General Administration of Customs before import declaration. During summary declaration, the Customs shall compute and deduct from the guarantee quota based on the summary declaration items and re-examine and deduct the guarantee quota based on the tax amount declared by the enterprise and adjust it again after final tax amounts are confirmed. upon completion of declaration. The tax guarantee quota shall be automatically restored upon tax payment.

Dynamic negative list for "two-step declaration":

• Goods subject to prohibition, restriction and control, tariff quotas, trade remedies, suspension of tariff concessions, retaliatory tariffs, imported special articles, imported animals and plants and their products, imported food from designated countries or regions, and imported hazardous chemicals shall be included in the adjusted negative list for "two-step declaration". These goods require full declaration at the initial stage. and enterprises shall fill in all the declaration items. Enterprises can access this list via the "single window" for international trade.

Notice from the Ministry of Finance, General Administration of Customs and State Taxation on Tax Policies for the 12th World Games in 2025

To support the successful hosting of the 12th World Games in Chengdu in 2025 (“World Games”), the Ministry of Finance, the General Administration of Customs and the State Taxation Administration have jointly issued Notice Caishui [2025] No.15. The key provisions are as follows:

The following incomes obtained by the Executive Committee shall be exempted from Value Added Tax (“VAT”):

• Income from the sale of TV broadcasting rights and sponsorships programs (goods and funds);
• Domestic and foreign sponsorship income, franchise income, promotional fee, ticket sales and card issuance fees;
• Commemorative stamp issuance (in collaboration with China Philatelic Co., Ltd.) and commemorative coin issuance (in collaboration with the People's Bank of China)
• Media broadcasts, including radio, Internet and television;
• Accommodation fees charged to athletes based on International World Games Association standards and income from related services.

VAT and Land VAT Exemptions:

• Income from the sales of assets post-Games.

Stamp Duty Exemptions:

• Business account books and various contracts used or signed by the Executive Committee;
• Property rights transfer vouchers related to property donated to the Executive Committee.

Other preferential policies:

• Consumables designated by the International World Games Association or international individual sports organisations that are imported for the World Games and cannot be produced domestically or do not meet required standards shall be exempt from tariffs, import VAT, and consumption tax;
• Other special materials including sports competition equipment, medical testing equipment, safety equipment, transportation and communication equipment, and technical equipment imported by the Executive Committee that are designated for use in the Games and cannot be sourced or substituted locally shall be handled in accordance with the provisions on temporary entry good.

This announcement shall take effect on January 1, 2025.

Human Resources

Work Plan on Building World-Class 'Beijing Services' and Optimising the Business Environment in the Human Resources and Social Security Sector

On May 7, 2025, the Beijing Municipal Human Resources and Social Security Bureau released the "Work Plan” aimed at building World-Class 'Beijing Services' and improving the business environment within the human resources and social security domain. The initiative is part of the "Year of Work Style Improvement" campaign for human resources and social security window units and outlines 44 reform measures across six key areas, including employment and entrepreneurship, social security, personnel and talent, labor relations, human resources and social security services, and the coordinated development of the Beijing-Tianjin-Hebei region, to support the creation of internationally first-class "Beijing Service".

In terms of employment and entrepreneurship, the "Work Plan" proposes 12 reform measures, including strengthening policy support for enterprises to absorb employment, improving the entrepreneurship service system, promoting the quality and efficiency improvement of public employment services, and enhancing the employment service guarantee for key enterprises.

In terms of social security, the "Work Plan" proposes three reform measures, including promoting the expansion of enterprise annuity coverage, reducing the labour costs of enterprises, and enhancing the convenience of social security handling services.

In terms of personnel and talent, the "Work Plan" proposes 12 reform measures, including promoting the high-quality development of the human resources service industry, creating a "full-chain" human resources service model, iteratively upgrading the "three talent service directories", advancing the reform of professional title evaluation, implementing the "Skill Service package" initiative, and strengthening the development of professional and technical talent teams.

In terms of labour relations, the "Work Plan" proposes eight reform measures, including improving the consultation and coordination mechanism for labour relations, enhancing diversified mediation mechanism systems for labour and personnel disputes, and further standardising administrative inspections involving enterprises.

In terms of human resources and social security services, the "Work Plan" proposes six reform measures. These include implementing the "Year of Work Style Improvement" campaign for human resources and social security window units, promoting the initiative of "Bureau, Department (Section) Heads walking through Processes", and systematically reviewing all government service items and standards in the HR and social security domain. It also calls for advancing intelligent policy consultation services, exploring multi-channel service models, and building a unified "general customer service" platform. The Plan further encourages the expansion of "online processing" and "mobile processing" services, and the creation of "One Thing for Personal Entrepreneurship", "One Thing for Foreigners" and other streamlined service experiences under the "Efficiently Complete One Thing". By reinforcing coordination between the government and enterprises, and urban and district levels, the Plan aims to deliver policy service packages more precisely, enhance frontline outreach and training, improve policy awareness and compliance, and ensure effective implementation and pro-people policies.

In terms of the coordinated development of human resources and social security in the Beijing-Tianjin-Hebei region, the "Work Plan" proposes three reform measures, including enhancing regional cooperation on social security agency services, building an integrated and interconnected talent development ecosystem, and deepening pilot reforms to foster high-quality development and harmonious labour relations within the region.

Corporate Governance

"Trust Shanghai" Credit Insurance Policy Service Package 

To promote trade facilitation and ensure that foreign trade preferential policies are effectively implemented, Shanghai has launched the "Trust Shanghai" Credit Insurance Policy Service Package. The policy targets enterprises with an export performance of less than 5 million US dollars in 2024 and that meets specific eligibility qualifications. The first batch includes over 35,000 qualified enterprises. The Service Package includes the following benefits:

Export credit insurance support: Eligible enterprises can receive an export credit insurance policy (with a maximum compensation limit of USD 120,000 US and a maximum compensation ratio of up to 80%). The policy is automatically renewable through 2028 if conditions are met annually.

Tax rebate facilitation: For export businesses where enterprises are unable to receive payment and instead claim compensation under the export credit insurance policy, the compensation will be treated as having received payment, thereby allowing the enterprises to proceed with tax rebates applications.

Policy financing access: Enterprises may apply for policy financing without the need for collateral or guarantees, and may also qualify for interest subsidies.

Logistics and custom insights: Enterprises can check the logistics information of goods shipped from Shanghai Port and view optimal tax rates in destination countries.

Trade risk management tools: Enterprises can make use of a “red-green light” credit assessment system, a risk navigation tool, and an early-warning system to explore new markets and manage trade risks.

The Service Package has been delivered directly to legal representatives through the " Suishenban" app. You may also engage us to assist with the application process. Please feel free to contact us if you require support.