The Ministry of Foreign Trade and Economic Cooperation (MOFTEC), the Ministry of Science and Technology and the State Administration for Industry and Commerce issued a notice announcing that foreign companies would be allowed to set up wholly owned or Sino-foreign cooperative venture capital firms in China.

Foreign-invested venture capital firms will be able to withdraw their capital through share transfers, buybacks or selling their shares in the company if and when it becomes listed on a domestic or overseas stock market, said the notice.

MOFTEC officials said the measure aims to encourage foreign investors to input capital into China's high-tech industries and to improve China's venture capital mechanisms.

"The policy has created very good conditions for foreign investors' entry into the Chinese market," said Zou Dating, a deputy director with the Ministry of Science and Technology.

But foreign-invested venture capital firms are forbidden to invest in securities, futures and other financial markets as well as real estate and other industries that the government does not allow foreign investors to enter.

They are also not allowed to make loans or underwrite or invest with borrowed money.

Before applying to set up wholly owned or Sino-foreign co-operative venture capital firms in China, one of the foreign investors must have managed assets of over US$100 million in total and invested over US$50 million of these assets in the past three years and own at least 3 percent of the new firm's capital.

On top of that, one foreign investor must have more than US$100 million in net assets and agree to put at least US$20 million in the new venture capital firm, said the notice.

(China Daily 09/20/2001)