China’s New Policy for Foreign Investment in E-Commerce

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Further to the early 2014 policy that relaxed the restrictions on the foreign equity ratio in value-added telecommunications business in the Shanghai Free Trade Zone (“Shanghai FTZ”),
on January 15, 2015, the Ministry of Industry and Information Technology (“MIIT”) promulgated a new policy, i.e., the Opinions on Lifting Restrictions on the Foreign Equity Ratio for Online Data Processing and Transaction Processing Business in the China (Shanghai) Free Trade Zone (the “New Policy”), according to which, any foreign equity ratio restriction on foreign investment in e-commerce operations (under the category of online data processing and transaction processing businesses) was removed in the Shanghai FTZ. As such, foreign investors are now allowed to establish a 100 percent wholly foreign owned enterprise (a  “WFOE”) in the territory of Shanghai FTZ to operate e-commerce business. In the New Policy,
MIIT authorized the Shanghai Municipal Telecommunication Administrative Bureau to implement the New Policy, review foreign investors’ applications and issue the relevant qualification/operation licenses to foreign-invested e-commerce companies.

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