Holding Company in China can set up by foreign investors to hold their investments in FIEs and to provide services to their subsidies.
Specific Requirements (Holding Company in China)
To set up a holding company, foreign investors are subject to specific requirements:
- The investor shall prove a good financial standing and its financial ability to establish and fund a holding company;
- The capital contribution shall be affected by the establishment of new subsidiaries in China and/or the increase of registered capital of existing subsidiaries;
- A foreign investor must have a total asset value of no less than USD 400 million in the preceding year. It must also have previously established an FIE to which it has already paid up more than USD 10 million in registered capital. Or the foreign investor must have established at least 10 FIEs, representing a paid registered capital of more than USD 10 million;
- In the situation of a joint venture holding company, a Chinese investor must have a total asset value of RMB 100 million.
The holding company’s business scope is quite restricted. Indeed, as it is strictly an investment and services company, which may not engage in production operations for example.
The permitted operations of a holding company are the following:
- Investments operations: a holding company can invest in areas where foreign investment is encouraged or permitted, and in listed companies. A holding company may also invest in R&D centers for new products and high technology;
- Services operations: a holding company can provide services and consultancy services related to business operations to its subsidies in China;
- Establishment of R&D centers: a holding company can establish research and development centers or department in China. Then she can to engage in the research and development of new products and high and new technologies. it will Also be able to transfer of the research and development results, and provision of the corresponding technical services;
- Consulting operations: a holding company can provide consulting services to the investors and provide consulting services to its affiliated companies. For exemple, such as market information, investment policies, etc. that are related to its investment.
- Trading operations: a holding company may engage in trading activities with its subsidies.
-> This article may also be of interest to you : Foreign Invested Partnerships in China – Investment Options
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