China has removed the minimum capital requirements for registering a new company, among other reforms aimed at lowering the threshold for business startups and stimulating the private economy.
The minimum registered capital requirement of 30,000 yuan ($4,900) to start a limited liability company will be removed, as will the 100,000 yuan requirement for an individual company and the 5 million yuan requirement for an incorporated company.
There will also be no more limitations on the proportion and duration of the paid-in capital, and it will be no longer a matter of business registration. Instead, the amount and duration of registered capital will depend on the founder of the company.
The reforms were announced at an executive meeting of the State Council led by Premier Li Keqiang on Friday.
"By widening the market access and establishing a transparent and efficient modern company registration system, we aim to further streamline government administration, create fair competition and support smaller businesses, especially innovative enterprises," Li said.
The measures will help expand private investment, strengthen the foundation for the economic recovery, as well as create more job opportunities, Li said.
The latest reforms also involve replacing the annual inspection of companies with a reporting system that can be viewed online to increase the transparency of business operations. Requirements for company registration address will also be simplified.
In the meantime, Li called for advancing the building of an integrity system: Enterprises with deceptive practices will be put on a "blacklist" that will be publicly available.
Ju Jinwen, an expert on private economy at the Chinese Academy of Social Sciences, hailed the reform measures as "long-awaited breakthroughs" in company registration.
He said the minimum requirement of registered capital was meant to protect the interest of creditors, but it performed little function as in many cases the registered capital was actually borrowed.
"The reform solves the issue by lowering the threshold but strengthening midlevel supervision. It is in line with many other market-oriented reforms pushed forward by the new leaders," he said.
"Its ultimate goal is to inspire entrepreneurship among private investors," Ju said.
From 2006 to 2012, the proportion of private investment as a percentage of total volume in China has increased from 49.8 percent to 61.4 percent.
