May 2012, Issue 1
The clouded path to foreign-funded RMB funds in China
With the gradual improvement of China’s regulatory environment and the expanding group of the domestic limited partners (“LP”), the last few years have seen a rapid expansion of foreign-funded RMB funds. This has provided attractive investment opportunities for foreign investors to tap into China’s miraculous economic growth. Albeit the RMB funds model is more and more appealing to foreign investors, foreign currency conversion red-tape and investment industry restrictions have become predominant issues for foreign investors to participate in RMB funds. Also, foreign investors are facing uncertain and complicated China tax issues with regards to the RMB funds model.
Recently, an internal clarification issued by the Chinese National Development and Reform Commission (“NDRC”) in relation to the nature of foreign-invested equity investment enterprises (“EIE”) has received wide media coverage, which zoomed much attention to the prospect of private equity market in China for foreign investments. This Issue of China FS Tax News Flash highlights the salient points of the NDRC’s clarification on this issue and also shares our insights on the recent development of the upcoming Chinese-registered Partnership Taxation Rules.
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