Upon entering the WTO, China pledged to fully liberalise its distribution sector within three years. Under the new Measures on the Administration of Foreign-invested Commercial Enterprises, foreign-invested distribution operations such as commission agencies and wholesale and retail enterprises are no longer subject to geographic, equity or quantitative restrictions, while market entry thresholds such as minimum assets and sales volume have been lowered. The Measures stipulate that starting 11 December 2004, wholly foreign-owned commercial enterprises can be established in China, and foreign-invested wholesalers may engage in commission agency and franchising. Furthermore, under CEPA, Hong Kong companies may establish wholly-owned wholesale operations to engage in commission agency, wholesale and retail businesses in the mainland, while Hong Kong permanent residents of Chinese nationality may establish individually-owned businesses in the mainland.

Under current policies, foreign companies of any scale may register and operate wholesale or retail enterprises in any part of China in the form of joint venture or wholly-owned operation. The registered capital requirements for foreign-invested commercial enterprises are Rmb500,000 and Rmb300,000 respectively for wholesale and retail enterprises (with the requirement for foreign-invested wholesale and retail enterprises further reduced to Rmb30,000 under the revised Company Law effective on 1 January 2006). In addition to general consumer goods, foreign-invested wholesale and retail enterprises may also deal in books, newspapers, magazines and drugs.

Under CEPA and the relevant stipulations of the Measures, Hong Kong service providers (including natural persons) meeting the registered capital and total investment requirements may register with the local commerce authorities at provincial level to establish foreign-invested (including wholly-owned) commercial enterprises. Upon issuance of the FIE approval certificate by the approval authority, the applicant may proceed to the industry and commerce administration for registration and issuance of business licence. After tax registration is completed, the new FIE may begin business operations in the mainland. Hong Kong individuals applying to establish individually-owned businesses do not need to go through foreign investment approval procedures.