Is the subsidiary established by a foreign-funded enterprise a domestic enterprise or a foreign-funded enterprise?

Article 1 of the Law of People's Republic of China (PRC) on Foreign-funded Enterprises stipulates: "In order to expand foreign economic cooperation and technical exchanges and promote the development of China's national economy, People's Republic of China (PRC) allows foreign enterprises and other economic organizations or individuals to set up foreign-funded enterprises in China to protect their legitimate rights and interests."

Article 2 stipulates: "According to the relevant laws of China, enterprises whose capital is wholly invested by foreign investors in China do not include branches of foreign enterprises and other economic organizations in China."

Foreign-funded enterprises established in China are not only protected by the laws of China, but also governed by the laws of China. Foreign-funded enterprises must abide by the laws and regulations of China and shall not harm the social interests of China. Relevant state organs shall manage and supervise foreign-invested enterprises according to law.

In order to protect the legitimate rights and interests of foreign-funded enterprises, the state does not nationalize and expropriate joint ventures and foreign-funded enterprises. Under special circumstances, according to the needs of social interests, it can be levied in accordance with legal procedures and given corresponding compensation.

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