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The General Office of the State Council released Administrative Measures for Partnership Enterprises Established by Foreign Enterprises or Individuals in the Territory of China (Measures) on December 2, 2009 and will take effect as of March 1, 2010.

According to these new Measures, foreign enterprises or individuals with advanced technology and management experiences are encouraged to found partnership enterprises in the territory of China, so as to accelerate development of such industries as modern service industry.

Under the Measures, foreign partners can set up the foreign partnership in China in three models: (i) with the other foreign partners; (ii) with the Chinese individuals, legal persons and the other organizations registered and located in Mainland China; (iii) through participating the existing domestic partnership.

In the models above, the foreign partners have the option to take the form of general partnership, limited liability partnership or limited partnership stipulated by the Partnership Law, among which the limited liability partnership is only for the professional institutions such as law firms and accounting firms.

Some thresholds, such as the approval by the MOC, imposed on the FIEs are lifted for foreign partnership. This means that the foreign partnership and the domestic partnership will be treated with unified threshold in the aspect of approval, which will definitely reduce the criticism from the international community, but may cause more from the domestic public (including those FIEs). But it does not mean that there will be no thresholds review on foreign partnership.

Article 3 of the Foreign Partnership Measures lists the general thresholds for the foreign partnerships. The establishment of foreign partnership shall abide by the Partnership Law and the other relevant laws, regulations and rules, and comply with the industrial policies for foreign investment.

For those foreign partners not interested in establishing professional foreign partnerships such as law firms in China, they are now can access the Chinese market with a presence in the option of partnership.

The approval procedures involved with the MOC or its local branches as set up for FIEs has been removed. The minimum investment (registered capital) requirement for FIEs has been reduced to RMB30,000 (RMB100,000 for one-person limited liability company) by the Company Law of the People's Republic of China (revised in 2005), the Foreign Partnership Measures leave the minimum investment open to the partners.

The foreign partners can contribute with the currency (freely exchanged foreign currency or legally earned RMB), in kind, IPR, land use right, the other properties or labor service (limited to general partners) to the foreign partnerships.

These measures will minimize the cost for foreign partners to achieve their goal of profit maximization in China. But those enterprises focusing on the investment business, such as the foreign-funded venture capital investment enterprises and foreign-funded investment companies, are excluded from the Foreign Partnership Measures due to lack of experience in administrating this kind of enterprises by the government.