Restrictions on the ratio of foreign investors' shareholdings are loosened. According to the Interim Methods for Trial Establishment of Chinese-Foreign Joint-Ventured Foreign Trade Companies promulgated in 1996, Chinese companies shall take at least 51 per cent in the registered capital of joint-ventured foreign companies, and foreign investors over 25 per cent, and the legal representatives shall be appointed by the Chinese companies.

Obviously, foreign investors are not allowed to take a controlling share. This provision reflected the then background: In 1996, China's service trade was open to the outside world to such a limited extent that it was impossible to allow foreign investors to hold a controlling share.

Today, great changes have taken place. China's economy grows rapidly, and especially, China further speeds up opening up to the outside world after the WTO entry. Great achievements have been made in the reform of foreign trade operational system, and domestic enterprises are entitled to engage in foreign trade under the automatic registration system. In addition, the conditions for foreign investment in foreign trade have also been lowered.

According to the Interim Methods for Establishment of Chinese-Foreign Joint-Ventured Foreign Trade Companies, joint-venture foreign trade companies shall take the form of a limited liability company, and foreign investors shall take over 25 per cent in the registered capital of the joint-ventured foreign trade companies.

The Interim Methods sets the lower-limit rather than the upper-limit of foreign investors' percentage in the registered capital of joint-ventured foreign trade companies.

Foreign investors may take over 51 per cent and hold the controlling shares. Moreover, It does not require that the legal representatives of joint-ventured foreign trade companies shall be appointed by the Chinese companies.

But taking into account Chinese WTO commitments, it stipulates that applications in which the Chinese sides take less than 51 per cent in the registered capital of join-ventured foreign trade companies shall not be accepted before December 11, 2003.