China plans new rules to allow foreign companies to set up local units in the form of a locally registered partnership, in a landmark move to attract investment, a draft proposal seen by Reuters showed on Thursday.

The new rules are expected to mainly affect foreign investment, law and accounting firms. But foreign companies that want to form local partnerships must seek approval from China's Ministry of Commerce (MofCom), the document said.

Beijing has historically viewed private equity funds as speculators, though its attitude toward foreign investors has changed in recent years, partly as the government sought to maintain fast economic growth and create more jobs.

"Of course, this is a very positive move by the government but I just feel it's not enough," said one long-time foreign institutional investor in China, adding restrictions remain for foreign-invested partnerships to invest in some sectors.

Many foreign investors have long complained about difficulties in making deals in China.

Last year, U.S. buyout giant Carlyle Group (CYL.UL) walked away from three years of negotiations to buy Xugong, China's top construction equipment maker, after running into bureaucratic obstacles.

For foreign invested partnership companies in China, some restrictions for dealmaking will remain.

"It's interesting that foreigners cannot avoid the MofCom and NDRC approval processes (to make deals in China) by setting up through these foreign-invested partnerships," said Maurice Hoo, a Paul Hastings lawyer.

The National Development and Research Commission (NDRC) is China's top economic planner. Read more >>

***

Related Links

China's FDI Plateaus as Investment Demographics Shift
Foreign direct investment falls again in China
Australia welcomes Chinese investment despite collapse of Chinalco deal

Warning：The use of any news and articles published on eChinacities.com without written permission from eChinacities.com constitutes copyright infringement, and legal action can be taken.