Foreign ownership restrictions / limitation of foreign investments and equity in corporations in China

1) Are there any restrictions on foreign ownership in companies?

Yes, there are specific restrictions in China on foreign ownership in certain industries as outlined in the "Special Administrative Measures on Access to Foreign Investment (Negative List)" for foreign investment.

2) Is government approval required for foreign investment in local companies?

Yes, government approval is required for certain types of foreign investment in Chinese companies, depending on the industry, investment amount, and whether the target sector is on the “Negative List”.

3) Which sectors are subject to special rules or restrictions for foreign investors?

There are special rules and restrictions for foreign investors in several sectors, mainly outlined in the Negative List. 

Below are the key industries with special foreign ownership limits or approval requirements:

• Financial services;
• Telecommunications and internet;
• Automotive;
• Healthcare and education;
• Media and entertainment;
• Energy and mining;
• Transportation and logistics;
• Agriculture;
• Critical technologies and data security.

4) Can foreign persons own 100% of a limited liability company or joint-stock company?

Yes, foreign individuals or entities can own 100% of a limited liability company or joint-stock company in most industries in China unless the industry is prohibited or restricted according to the “Negative List”.

5) Are beneficial ownership rules applicable to foreign participants?

Yes, beneficial ownership rules apply to foreign investors in China. The State Administration for Market Regulation) requires disclosure of ultimate beneficial owners for all companies, including foreign-invested enterprises. Banks and financial institutions must verify beneficial ownership under the rules of People’s Bank of China. And the tax administrations in China require beneficial ownership disclosure for foreign-held accounts.

6) Are there any quotas or thresholds on foreign ownership in strategic companies?

Yes, China imposes quotas, thresholds, and special restrictions on foreign ownership in companies deemed strategic or sensitive, particularly in industries tied to national security, critical infrastructure, or key technologies.

7) Is disclosure of foreign shareholders/participants required when registering a company?

Yes, China requires disclosure of foreign shareholders/participants during company registration.

8) Are there any restrictions on the acquisition of real estate by foreign legal entities?

Yes, China imposes specific restrictions on foreign legal entities (including companies, organizations, and investors) acquiring real estate. The rules vary by property type, location, and intended use.

9) Are there any business or office localization requirements for foreign investors?

Yes, China imposes certain localization requirements on foreign investors. Foreign-invested enterprises must have a legal registered office address in China.

10) Are sanctions or other restrictions applied to investors from specific countries?

Yes, China applies sanctions, investment restrictions, and enhanced scrutiny on investors from certain countries, particularly in sectors tied to national security, critical infrastructure, or geopolitical sensitivities.

Author: Mingzhu Zhao