Deacons
  August 29, 2005 - Hong Kong

China: Foreign Investment in Leasing

The Ministry of Commerce ("MOFCOM") promulgated the Measures for the Administration of Foreign Investment in the Leasing Industry on 21 January 2005. The Measures superseded the 2001 Provisional Measures for the Administration of the Examination and Approval of Leasing Companies with Foreign Investment when they entered into effect on 5 March 2005. Form The Measures provide that foreign companies, enterprises and other economic organisations ("foreign investors") may establish enterprises with foreign investment in the form of a Chinese-foreign equity or cooperative joint venture or a wholly foreign-owned enterprise to engage in the leasing business ("leasing FIEs") and the financial leasing business ("financial leasing FIEs") in China. Both leasing FIEs and financial leasing FIEs may take the form of either limited liability companies or companies limited by shares. Leasing and financial leasing The Measures define leasing as the business whereby a lessor delivers the leased property for the use and benefit of a lessee in return for rental payments by the lessee. The Measures define financial leasing as the business whereby a lessor purchases the leased property from a seller as selected by the lessee, and grants the lessee use of the property in return for rental payments by the lessee. Leased property includes various types of movable property, means of transport and intangible assets. Establishment A foreign investor in a leasing FIE or a financial leasing FIE must have total assets worth at least US$5 million. A leasing FIE requires a registered capital of at least RMB 100,000. A financial leasing FIE requires a registered capital of at least US$10 million. Applications for the establishment of leasing FIEs in the form of a limited company are to be approved by the provincial-level commerce department, whereas applications for the establishment of financial leasing FIEs require central-level approval by MOFCOM. Permitted business A leasing FIE may engage in the following business: • leasing business; • purchasing leased property in China and abroad; • disposal of the salvage value, and repair and maintenance, of leased property; • other business approved by the examination and approval authority. A financial leasing FIE may, in addition to the foregoing, also engage in the financial leasing business, provide leasing consulting services and issue guarantees.