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Foreign investment in China is made in two ways: direct investment with juristic entity incorporated by the investment activities and indirect investment without juristic entity. China allows both direct and indirect investment by foreign companies.

Companies to be established by foreign direct investment are formed as follows: three types of invested companies, such as Chinese-foreign equity joint ventures, Chinese-foreign cooperative joint ventures, wholly foreign-owned enterprises: foreign-invested company limited by shares holding companies build, operate, transfer(BOT). Indirect foreign investment takes the form of permanent representative, OEM, technical cooperation (licensed plantation), merger & acquisition, establishment of branch offices, etc.

Foreign-invested companies limited by shares are mainly established for investment by listing on the Chinese stock exchange market by foreign investors. All assets are comprised of shares with equal value and shares of a company are jointly owned by both Chinese and foreigners with at least 25% of registered capital purchased and held by foreign shareholders. The company is responsible for liabilities of the company with all assets the company has.

Foreign-invested companies limited by shares are established by going through the same procedures for application, ratification and registration as other companies do. Foreign-invested companies limited by shares may be established by conversion of foreign invested companies, state-owned enterprises, collective companies, or company limited by shares, while they are newly established by means of promotion orshare offer.

In terms of structure of foreign-invested companies limited by shares, there are no clear provisions specifying it under the Provisional Regulations on Certain Issues concerning Establishment of Foreign-Invested Companies Limited by Shares. However, the company is composed of general meeting, board of directors, audit board and accounting by the application of the Corporate Act according to Article 25 of the Provisional Regulations.