To encourage and assist processing trade enterprises in seeking transformation and upgrade and establishing research and development centres and headquarters in Dongguan, the city government of Dongguan announced in November that an Rmb1 billion special fund for the transformation and upgrade of processing trade enterprises would be set up. Furthermore, in order to assist factories engaged in processing with supplied materials in transforming into foreign-invested enterprises (including equity joint venture, co-operative joint venture and wholly foreign-owned enterprises) with legal person status, all administration fees and licence fees payable by enterprises in applying for examination and approval of setting up a new entity and in changing the business registration will be subsidised in full amount. As for capital verification and other charges, a 50% subsidy would be granted.
Earlier, relevant departments in Dongguan have jointly formulated a set of operation processes and guidelines for factories engaged in processing with supplied materials in Dongguan applying to transform into a foreign-invested enterprise (FIE) without relocating or suspending production. Major contents of the guidelines are as follows:
(1) Principle of voluntariness. For a processing trade factory to transform into an FIE, the prerequisite is the foreign party must be voluntary.
(2) Principle of uninterrupted production. Before the processing trade factory revokes its business registration, the investor is allowed to first set up a provisional FIE and the two enterprises are allowed to co-exist within a certain period. Permission is granted by customs for the enterprise to use both the old and new registration numbers within a specified timeframe during which the enterprise undergoes transformation. Before the original processing trade contract is verified and cancelled, the enterprise undergoing transformation is allowed to continue to execute the processing trade contract. During the transformation period, the enterprise may transfer the left-over materials to the new enterprise.
(3) Principle of change. For projects that do not require prior examination and approval, the environmental protection department and work safety supervision department would issue their approval comments in the form of "change of status". If the enterprise undergoing transformation chooses not to change its premises, the fire prevention procedures of the original enterprise may continue to apply. The foreign economic and trade department and industry and commerce administration department would allow the new enterprise to apply for approval documents, permits and business licence using the old papers. The transformed enterprise is also allowed by customs to remain in the same management category and enjoy the same preferential policies as the original enterprise.
(4) Principle of convenience. Enterprises undergoing transformation are not required to go through relevant customs procedures according to the supervision measures applicable to new enterprises. All relevant departments would set up dedicated service counters to handle matters concerning enterprise transformation and would offer prompt service. All these departments would also post their staff to the enterprise transformation and upgrade service centre where one-stop services for the processing of business licence would be offered to enterprises undergoing transformation.
In response to the impact brought about by the financial tsunami on small and medium-sized enterprises and the processing trade, Dongguan has announced that an Rmb1 billion special fund aimed at financing the transformation and upgrade of small and medium-sized industrial enterprises and processing trade enterprises would be set up. Enterprises engaged in processing with supplied materials and compensation trade and seeking to transform into FIEs in the same locality as well as existing FIEs with normal operation are qualified to be listed in the "directory of small and medium-sized industrial enterprises and processing trade enterprises eligible for key support by the government". As such, they can enjoy policies on financing and guaranteed loan support in accordance with the detailed provisions in the Plan of Dongguan City on Financing and Guaranteed Loan Support for Small and Medium-sized Industrial Enterprises and Processing Trade Enterprises.
Other policies aiding and promoting the transformation of processing trade enterprises include granting subsidies to foreign-invested production enterprises for developing the domestic market and expanding the share of their domestic sale, and providing counter guarantee to FIEs applying to the Bank of China for issuing letters of guarantee for customs duty deposits for the restricted category under processing trade.
