Introduction

Chapter 2 of this thesis considered the regulation of cross-provincial establishment of companies in China, concluding that in some circumstances, businesses in China encounter difficulties when trying to establish firms across provinces. Moreover, the existing regulatory framework cannot effectively deal with these obstacles.

Part II of this book provided the theoretical framework to study cross-border business establishment. As shown by the theory, there are some public interest justifications to impose different requirements on cross-border establishment on the one hand and regular establishment on the other hand. Nevertheless, regulating cross-border establishment can profit certain interest groups. Another issue treated by Part II was whether cross-border business establishment should be regulated at central level or at local level. The theory demonstrates that some public interest grounds can be used to justify regulating cross-border establishment at central level. However, some interest groups can benefit from centralization of the regulation of cross-border establishment.

In this chapter, the framework developed in Part II will be employed to examine regulation of the inter-provincial establishment of companies in China. Section 2 summarizes the rules concerning inter-provincial establishment and points out that regulators at central level shoulder the responsibility of governing this activity. Section 3 provides a public interest analysis of the regulation of the inter-provincial establishment of companies. More specifically, section 3.1 examines public interest grounds to differentiate requirements for inter-provincial and general establishment. Public interest arguments in favour of empowering central regulators to govern the inter-provincial establishment of companies are explored in section 3.2. Section 4 analyses the regulation of the inter-provincial establishment of companies from a private interest perspective. Section 4 starts with the discussion of private interest justifications for having different rules for inter-provincial establishment and general establishment in section 4.1. Thereafter, private interest reasons to regulate the inter-provincial establishment of companies at central level are discussed in section 4.2. Section 5 contains a conclusion.

Regulation of the Inter-provincial Establishment of Companies in China

As discussed in Chapter 2, minimum capital requirements and licensing are essential requirements to expand across provincial borders in China. Firms from one province seeking to establish operations in another can choose between subsidiaries and branches. Minimum capital requirements apply for subsidiaries, but not for branches. Apart from the capitalization rules, obtaining an establishment registration license is a necessary step to open subsidiaries and branches in China.