Foreign Investment Bulletin May, 2016（II）

3、To Further Promote Trade Liberalization between the Mainland and Hong Kong, as well as the Mainland and Macau
In order to implement the Agreement on Trade in Services under the framework of the Mainland and Hong Kong Closer Economic Partnership Arrangement and the Agreement on Trade in Services under the framework of the Mainland and Macau Closer Economic Partnership Arrangement signed by the Mainland and Hong Kong, as well as the Mainland and Macau in November 2015 respectively (collectively referred to as “Agreements on Trade in Services” hereunder), the State Council issued the Decision of the State Council on Temporarily Adjusting the Administrative Approvals and the Special Administrative Measures on Market Access concerning Hong Kong and Macau Service Providers in Mainland China, and the Ministry of Commerce issued the Administrative Measures for the Filing of Investments by Hong Kong and Macau Service Providers in Mainland China (for Trial Implementation), both effective on June 1, 2016.
3.1 Background
In 2003, in order to strengthen trade and investment cooperation between the Mainland and Hong Kong, as well as the Mainland and Macau, the Mainland and Hong Kong Closer Economic Partnership Arrangement and the Mainland and Macau Closer Economic Partnership Arrangement were signed by the Mainland and Hong Kong, as well as the Mainland and Macau respectively (collectively referred to as “CEPA” hereunder). It is CEPA’s intention to promote development in product trade, service trade, and trade and investment facilitation between the Mainland and Hong Kong, as well as the Mainland and Macau.
To promote achievement of basic liberalization of trade in services between the Mainland and Hong Kong, as well as the Mainland and Macau, the Agreement between the Mainland and Hong Kong on Achieving Basic Liberalization of Trade in Services in Guangdong and the Agreement between the Mainland and Macau on Achieving Basic Liberalization of Trade in Services in Guangdong (collectively referred to as “Guangdong Agreements” hereunder) were signed between the Mainland and Hong Kong, as well as the Mainland and Macau in 2014. The Guangdong Agreements were effective on March 1, 2015. To implement Guangdong Agreements, the State Council drafted the Decision of the State Council on Temporarily Adjusting the Administrative Approvals and the Special Administrative Measures on Market Access concerning Hong Kong and Macau Service Providers in Mainland China, which provides that, other than the restricted measures, establishment of and change in telecommunication enterprises, companies engaging in cultural areas and financial institutions, and establishment of and change in commercial presence that are not in the form of companies as specified in the Guangdong Agreements, for Hong Kong and Macau service providers investing in service trade areas in Guangdong opened to Hong Kong and Macau as specified in Guangdong Agreements, the approval requirements on joint venture agreements and articles of association in relation to the establishment of and change in companies as specified in regulations related to foreign investment are temporarily suspended, and filing requirements on joint venture agreements and articles of association in relation to the establishment of and change in companies are implemented. The Ministry of Commerce also drafted the Administrative Measures for the Filing of Investments by Hong Kong and Macau Service Providers in Mainland China (for Trial Implementation), setting out provisions on filing management for Hong Kong and Macau service providers investing in service trade areas in Guangdong opened to Hong Kong and Macau under the Guangdong Agreements.
On the basis of the Guangdong Agreements, the Mainland and Hong Kong, as well as the Mainland and Macau signed the Agreements on Trade in Services in 2015 respectively, extending the geographical coverage to the whole Mainland for basic liberalization of trade in services. The Agreements on Trade in Services went into effective on June 1, 2016.
3.2 Legal Review
In order to implement the Agreements on Trade in Services, the State Council issued the Decision of the State Council on Temporarily Adjusting the Administrative Approvals and the Special Administrative Measures on Market Access concerning Hong Kong and Macau Service Providers in Mainland China, and the Ministry of Commerce issued the Administrative Measures for the Filing of Investments by Hong Kong and Macau Service Providers in Mainland China (for Trial Implementation), both effective on June 1, 2016. The Decision of the State Council on Temporarily Adjusting the Administrative Approval and Special Administrative Measures on Market Access for Hong Kong and Macau Service Providers in Guangdong Province and the Administrative Measures for the Record-filing of Investments Made by Hong Kong and Macau Service Providers in Guangdong Province (for Trial Implementation) have been abolished since June 1, 2016.
Other than the restricted measures, establishment of and change in telecommunication enterprises, companies engaging in cultural areas and financial institutions, and establishment of and change in commercial presence that are not in the form of companies as specified in the Agreements on Trade in Services, for Hong Kong and Macau service providers investing in service trade areas in the Mainland opened to Hong Kong and Macau service providers as specified in the Agreements on Trade in Services, approval requirements on joint venture agreements and articles of association in relation to the establishment of and change in their companies have been changed to filing requirements.
Administrative approvals and special administrative measures such as qualification requirements, restrictions on equity proportion, and restrictions on business scope are temporarily adjusted for Hong Kong and Macau service providers in the Mainland. Specifically, (i) Hong Kong and Macau service providers are allowed to engage in telecommunication service, shipping transportation service, non-diploma professional training service, convention and exhibition service, and air transportation support service; (ii) Hong Kong and Macau service providers are allowed to invest and establish joint venture cultural and artistic performance group controlled by local government in Mainland; (iii) Chinese citizens with permanent residency in Hong Kong or Macau are allowed to establish individual business to operate individual performance brokers without obtaining approval on foreign investments in the Mainland; (iv) Hong Kong and Macau service providers are allowed to set up wholly-owned entertainment places in Guangdong Province; and (v) detailed administrative rules are to be drafted by relevant departments and committees of the State Council and the People’s Government of Guangdong Province.
The filing of joint venture agreements and articles of association in relation to establishment of and change in enterprises invested by Hong Kong and Macau investors are handled by competent commerce authorities of all provinces, autonomous regions, municipalities directly under the central government, cities under separate planning, Xinjiang Production and Construction Corps, and central cities at vice provincial level. Hong Kong and Macau service providers or enterprises invested by Hong Kong and Macau investors should file online through the Foreign Investments (for Hong Kong, Macau and Taiwan investors) Filing Information System developed by the Ministry of Commerce. If the enterprises established by Hong Kong and Macau investors are within the scope of filing, all investors should complete filing procedures after obtaining the Notice of Pre-approval of the Name of Enterprise. Any changes in basic information of enterprise invested by Hong Kong and Macau investors, change in basic information of investors, change in or transfer of equity, pledge of equity, merges, spin-offs and terminations of enterprises should be filed with the competent authorities. If changes occurred before June 1, 2016, enterprises invested by Hong Kong and Macau service providers should complete filing procedures, and any Certificate of Approval for Establishment of Enterprises with Investment of Taiwan, Hong Kong, Macau and Overseas Chinese in the People’s Republic of China should be returned and destroyed.
3.3 Next Steps
The State Council requires that detailed administrative rules concerning temporary adjustments on implementation of the administrative approvals and the special administrative measures be drafted by relevant departments and committees of the State Council. The legislation progress and detailed content of relevant departmental rules is worth our continued attention.