According to the provisions on the percentage of capital contribution in Article 4 of the Law of Sino-Foreign Equity Joint Ventures, the M&A Provisions stipulates that the contribution by foreign investors to the registered capital of the equity joint ventures should be no less than 25% in general. Considering it may occur that the capital contribution by foreign investors in the equity joint venture upon the M&A is less than 25%, in order to rationally regulate such enterprises for the benefit of protecting the legitimate rights and interests of various parties to the M&A transactions, the M&A Provisions further stipulates: "Where the proportion of a foreign investor's contribution of the registered capital is less than 25%, it shall, unless otherwise provided for in laws or administrative regulations, get the approval and make registration by following the procedures on approving and registering the establishment of foreign-invested enterprises. " Such provision lists the enterprises with proportion of foreign investment less than 25% upon the M&A in the management system of foreign-invested enterprises. The term "unless otherwise provided for in laws or administrative regulations" means that the special provisions on the proportion of foreign investment in banking, insurance and securities industries in laws or administrative regulations, if any, shall prevail. According to the Notice Concerning the Relevant Issues on Strengthening the Approval, Registration, Foreign Exchange Control and Taxation Administration of Foreign-invested Enterprises jointly promulgated by the MOFTEC, the State Taxation Administration, the State Administration for Industry and Commerce, and the SAFE, a foreign-invested enterprise with the proportion of investments contributed by the foreign investors lower than 25% upon the M&A shall not, when importing equipment or articles for its own use under the total investment amount, enjoy tax reduction treatment for such articles and the treatment for foreign-invested enterprises in respect of other taxes unless otherwise provided for in laws or administrative regulations.

The proportion of capital contribution by foreign investors in a foreign-invested enterprise shall be calculated separately in consideration of the actual circumstances in the principles specified by Article 10 of the M&A Provisions. In case of asset M&A, the calculation of the proportion of capital contribution by foreign investors is relatively simple, and like all the newly established foreign-invested enterprises, the percentage of foreign investment in such enterprise may be determined as the ratio of the capital contribution by foreign investors against the capital contribution by all the investors to the registered capital (but not total investment of the enterprise) of such enterprise. In terms of equity M&A, three situations shall be differentiated. Firstly, foreign investors only purchase the equity of the original investors of the target company, and in such case, the target company changes its shareholders and nature of enterprise, without any change in the registered capital or total assets of the company. Therefore, the proportion of capital contribution by foreign investors is equal to the capital contribution by the original investors of the target company. Thus, "the proportion of investments contributed by the foreign investor (in the newly established foreign-invested enterprise) shall be the proportion of the purchased share rights in the original registered capital (in the target company)." Secondly, foreign investors purchase not only the equity of the original investors of the target company but also purchase the added equity capital of the target company separately or jointly with other investors. In such case, though the alteration of the shareholders does not influence on the registered capital of the company, with the added capital of the target company, its owners' equity (net assets) may increase with such increase of the equity capital, and hence the registered capital of the newly established foreign-invested enterprise upon M&A shall be "the sum of the original domestic company' s registered capital and the increased amount", provided that the base for determination of the proportion of the capital contribution by foreign investment is not the registered capital of the newly established enterprise, but its owners' equity (net assets). The reason is that after operation of the original domestic company, its owners' equity (net assets) has deviated from the registered capital, where the former may be higher (when the enterprise witnesses profits) or lower than the latter (when the enterprise witnesses losses). Therefore, "the foreign investor and other original investors of the merged domestic company shall, on the basis of the asset valuation of the domestic company, determine the proportions of their respectively contributed investment in the registered capital of the foreign-invested enterprise."Thirdly, foreign investors do not purchase the equity of the original shareholders of the target company but purchase the added equity of the target company. In such case, the target company may increase its registered capital synchronously with the added capital. Hence, the registered capital of the newly established foreign-invested enterprises upon M&A shall be "the sum of the original domestic company's registered capital and the increased amount". Similarly, in terms of the proportion of capital contribution by various investors, "the foreign investor and other original investors of the merged domestic company shall, on the basis of the asset valuation of the domestic company, determine the proportions of their respectively contributed investment in the registered capital of the foreign-invested enterprise."