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2022-10-24

Valid Amount about Investment

When registers a foreign invested enterprise in China, the company needs to decide how much the investment amount in the articles of the company's association.
 
What is the meaning of the investment here for small or medium sized enterprises (SME)?
 
The investment amount set here mostly is used for overseas loan in future for SME. There are two models in China to borrow money from overseas companies. Each company can choose one of the two models. Model one is Investment-Capital Difference. The balance of the  overseas loan can't  exceed the difference between the investment and paid-in capital. Another model is Macro Prudential Model which is on the basis of the company’s equity in the latest financial report, the blance of the overseas loan can't exceed 2 times of the company’s equity.

 
For new SME, in a short-term running, the company's equity in the financial report commonly is not large. When borrow money from overseas entities, the company can compare two models and choose suitable one. But if the company sets the investment amount just as same as the capital amount, the difference between capital and investment is 0, so in fact, the company just has can chose Macro Prudential Model.
 
After known the above, you may want to set the investment amount as large as possible. Below the valid investment amount for your reference.


Investment (USD)                       Lowest Capital   


<3M                                           70% of the investment

3M-10M                                     50% of the investment but can't less than 2.1M

10M-30M                                   40% of the investment but can't less than 5M

>30M                                          2/3 of the investment but can't less than 12M 

#Valid Amount about Investment


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