MOFCOM Further Encourages Foreign Investment in Commercial Sectors by Hong Kong and Macao Investors

On February 5, 2009, the Ministry of Commerce ("MOFCOM") released a fourth set of Supplementary Provisions for the Administrative Measures on Foreign Investments in the Commercial Sectors (the "Supplementary Provisions") in an effort to promote closer economic and trade cooperation between mainland China and Hong Kong and Macao, and encourage service providers from Hong Kong and Macao to establish commercial enterprises in mainland China. The Supplementary Provisions provide that a service provider from Hong Kong or Macao who has established more than 30 stores in the mainland that engage in the distribution and sale of products such as drugs, pesticides, agricultural film, fertilizers, vegetable oil, sugar or cotton is allowed to run the business as a sole proprietorship (i.e. without a mainland co-investor) if the products are provided by different providers with different brands. Prior to the Supplementary Provisions, service providers from Hong Kong or Macao who had established more than 50 stores in the mainland engaging in distribution and sale of the above-mentioned products, provided by different providers with different brands, were allowed to hold a maximum of a 65% equity interest in such business.

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