Investing in China? What Changes Do You Need to Be Aware About?

With China progressing in every corner, the country has long been the place to keep an eye on, in terms of business and investment. Lisa Li, from Taylor Wessing, speaks on changes in her jurisdiction, what makes a 5star Lawyer and which industry often causes the most challenges in her line of work.

You advise on transactions in a variety of industries. What industry poses the most challenges, when foreign investors undergo acquisitions in China, and why?

The highly-regulated TMT sector.

First of all, a dozen areas are restricted or prohibited for foreign investment, e.g. telecom, online publishing, Internet audio & video programs, online grams, etc. In the next place, industrial specific licenses are required in most cases, which may prove difficult or even impossible to obtain because of high regulatory requirements and/or practical hurdles.

Due to the abovementioned market access restrictions, a number of foreign investors choose to conduct related business in China by entering into cooperation or licensing agreements with, or control through a series of contractual arrangements of, domestic Chinese enterprises holding the requisite regulatory licenses and approvals. However, such structures pose considerable legal and potential risks. Plus, project cooperation between domestic Chinese entities and foreign-invested enterprises in China, or foreign entities and individuals in certain fields (e.g. online publishing, Internet news information services), require prior approval or security review of the Chinese government.

In addition, if a foreign investor’s contemplated acquisition of the actual control of a Chinese enterprise touches upon key technology, the transaction will also be subject to national security review by the Ministry of Commerce, the National Development and Reform Commission together with other authorities. And foreign investors shall not evade the M&A security review through such manoeuvres as nominee shareholding, trust, multi-layer reinvestment, lease, loan, control by agreement, offshore structure, etc.


What three things do you consider before working with a team from various jurisdictions and backgrounds?

In today’s business world, there are an increasing number of cross-border transactions that involve multiple jurisdictions, and we have to often work with teams from various jurisdictions and backgrounds.

Firstly, effective “project management” is essential, which involves many aspects: engagement letter, fee estimation, step plan, timetable, proper allocation of tasks and liabilities, billing and cost control, etc.

Secondly, communication is key to accomplishing successful management of any matter. Communication means listening to understand, as well as passing on information, instructions and thoughts clearly. Regular meetings/conference calls are necessary.

Thirdly, people from different jurisdictions and backgrounds think and approach problems differently, and the laws and business practices vary from jurisdiction to jurisdiction. Respect, being courteous and understanding local ways of doing things are vital. Do not impose ideas, working methods and templates to other jurisdictions. Instead, it would be better to communicate in such a manner: “We propose to do like this, does it work in your jurisdiction?”


You have done a lot of work in the healthcare industry: how have you seen it change in China over the years?

As the Chinese government promotes the “Healthy China” strategic plan, the healthcare industry has developed rapidly, and numerous laws, regulations and policies have come out in recent years. Here are a few highlights:


  • In terms of the regulator for drugs and medical devices, the former CFDA (China Food and Drug Administration) has been dismantled, and reformed as a new State Drug Administration (SDA) which is under the administration of the State Market Regulatory Administration (SMRA).
  • China has launched the “two-invoice” system in drug distribution, which means that generally only one distributor is permitted to distribute drugs between the manufacturer and the medical institution; however, a wholly-owned or controlled commercial company that is established by a drug manufacturer or group enterprise integrating scientific research, manufacture and trade and only sells the drugs of the enterprise (group). There shall be only one commercial company in China and only one domestic general agent of overseas drugs that may be regarded as a manufacturer. Some local rules extend the “two-invoice” system to medical consumables.
  • China continues to reform the review and approval system for drugs and medical devices and encourage innovation of drugs and medical devices, in particular:
  • A three year pilot plan was initiated on 5 November 2015 allowing drug R&D institutions and personnel in 10 selected provinces and municipalities to apply for and hold drug approval numbers. The market authorisation holder (MAH) system will be rolled out nationwide for both drugs and medical devices.
  • Clinical trial data obtained from multi-centres overseas can be used to support registrations of drugs and medical devices in China, as long as they comply with relevant Chinese requirements.
  • Given the “Internet Plus healthcare” movement, telemedicine services, as well as online trading of drugs and medical devices, flourish.
  • Since the State Council approved the Hainan Boao Lecheng International Medical Tourism Pilot Zone in 2013, medical tourism is also growing.

Currently, overseas investments are classified into three categories, namely “encouraged”, “restricted” and “prohibited”.

What are the latest trends of China Overseas Direct Investment (ODI) regulations?

From the 1990-ties onwards, the regulatory requirements on China ODI had been gradually relaxed. However, in the last two years, we have seen a tightening of the regulatory regime and review practice for China ODI.

Currently, overseas investments are classified into three categories, namely “encouraged”, “restricted” and “prohibited”.

  • Overseas investments that further the “One Belt One Road” initiative and help China develop its advantages are encouraged, e.g. high-tech, advanced manufacturing, agribusiness, resources and service sectors.
  • Restricted overseas investments include, among others, outbound investments in such sectors as real estate, hotels, cinemas, entertainment industry, sports clubs etc. In some cases, restricted overseas investments require approvals, rather than filings with relevant Chinese authorities.
  • Chinese enterprises are prohibited from overseas investments that endanger or are likely to endanger national interests and national security.

Additionally, National Development and Reform Commission (NDRC), Ministry of Commerce (MOFCOM), People’s Bank of China and State Administration of Foreign Exchange (SAFE) stated in December 2016 that they are closely monitoring the following four phenomena:

  • mega-investments in non-core business;
  • outbound investments by limited partnerships;
  • “quick setting up and quick investment” (i.e. outbound investments by enterprises that have established for only a few months with no substantial business operation); and
  • “small parent company with a big subsidiary” (i.e. the scale of an outbound investment far outweighs the registered capital or financial strength of the parent company).

The Chinese ODI regulators (i.e. NDRC or its provincial counterpart, MOFCOM or its provincial branch, SAFE and banks) strengthen authenticity and compliance review of ODI deals, and require Chinese investors to provide substantially more documents and information.

Here are my recent newsletter articles on China ODI related topics on the Taylor Wessing website.

What do you think is key to becoming a 5Star Lawyer in Corporate Law?

Above all, to stand out the crowd, one should never stop learning and improving. A corporate lawyer should have a broad spectrum of knowledge: not only corporate law, but also other areas of law; not only legal provisions, but also practices; not only legal, but also other fields, in particular business. On top of acquiring solid technical skills including legal research, legal analysis and legal drafting, an excellent lawyer should also develop strong interpersonal and leadership skills.

Quality legal services should always be client-oriented. And thus, a lawyer should understand the clients, their positions, the business drivers behind a deal, and the clients’ expectations. Identifying legal issues or risks is far from enough. More importantly, an excellent lawyer should be capable of finding legally feasible solutions that can fit into the clients’ business objectives.

Furthermore, committed, dedicated, well-organised, detail-oriented and efficient are all the indispensable qualities to succeed as a lawyer.

Is there anything you would like to add?

Nothing worth having comes easy, strive for it, and efforts will be paid off.

Xiang (Lisa) Li


Direct +86 10 8593 0228


Taylor Wessing Beijing Representative Office

B-12 Jianguomenwai Avenue, Twin Towers, West Tower Unit 2307

100022 Beijing


I am Ms. LI Xiang, a corporate/M&A associate based in the Beijing office of Taylor Wessing.

I focus on advising multi-national companies and medium-sized enterprises in connection with their M&A in China (including acquisitions of non-listed public companies quoted on the National Equities Exchange and Quotations, state-owned enterprises and private companies), as well as Chinese listed companies and state-owned enterprises on their overseas M&A and investments. I also have experience in capital market, RMB private equity fund formation, private equity investment, etc.

I graduated from Peking University with dual bachelor’s degrees of law and economics, and obtained Master of Laws in Corporate and Financial Law from the University of Hong Kong.

Taylor Wessing is full-service international law firm with 32 offices across Europe, Asia and the US. The firm has around 400 partners and over 1100 lawyers, working with clients from a variety of industries, in particular TMT, life sciences, energy and private wealth.


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