Rule to promote foreign-funded partnerships

Foreign companies and individuals will be allowed to set up limited partnership firms in China from March 2010, a move that could make it easier for some overseas investors to tap the domestic market.

China announced Wednesday on the government website the regulation issued by the State Council.

Under the new regulation effective March next year, foreign investors will be permitted to set up limited partnerships in China by themselves or with local partners.

The regulation is to encourage overseas investors with advanced technology and management experience to set up joint ventures in an effort to promote the development of industries such as the modern servicing sector.

It also applies to investors from the Hong Kong Special Administrative Region (SAR), Macao SAR and Taiwan.

Currently foreign-invested private equity funds can be structured as limited partnerships through complex offshore platforms, but are required to be structured as corporations or unincorporated entities if investing onshore through yuan-denominated funds.

Only Chinese investors in onshore yuan funds can opt for the limited partnership structure, which offers tax advantages and caps liability.

Registration of these limited partnerships will take place at the local level and will not need approval from the Ministry of Commerce, it added.

The amount of foreign direct investment into China rose for the third consecutive month in October, up 5.7 percent year on year to $7.1 billion, according to statistics from the Ministry of Commerce.

Source: Global Times/Agencies