China WFOE Registration Guide (3) – Preparation of Feasibility Study Report

Feasibility study report is one of the documents to be submitted to the China Government for the purpose of application for registration of a Wholly Foreign Owned Enterprise.

The aim of a feasibility analysis is to conduct a systematic all-in study and proof of the necessity and viability for kicking off a project in areas ranging from technology, economy, market, finance, resources to environmental protection and safety. Given relevant stipulations of the State and the particularities of the specific city, a feasibility report should include the following items:

1. The name, nature, address, and tenure of operation of the prospective enterprise.
2. The names of the investment parties, country (region) of registration, legal address, the name, title and country of the legal person, and a profile of the overseas investor (including capital credibility and operation prospects)
3. Scope and scale of operation, which include specific product name, size of production, marketing channels and ratio of domestic and overseas sales. Be concrete and specific on the scope and scale which should be compatible with the registered capital, operation site, major equipment and technical competence of the company. Be exact and standard in wording.
4. Market projections. It covers product properties, market demands both at home and abroad and sales forecast.
5. Production know-how and equipment. Source of the know-how, its suitability and reliability should be specified. The number of the equipment, its model, scale, place of origin and degree of depreciation are also to be spelled out. Where the investment is made in kind or equipment, the items for evaluation and the total value shall be listed. If the foreign party of a joint-venture or a foreign-funded enterprise takes industry ownership or exclusive technology as capital contribution, make sure to state explicitly the validity, properties, practical value, grounds and criteria, and total value of the said ownership or technology as well as means of recovery and deduction.
6. Production craftsmanship.
7. The names, qualities and sources of major raw materials and back-up parts.
8. Requirement list of land, factory premises, water, electricity, installed capacity, fuel and means of transport (vehicles)
9. Corporate setup and staff training. This includes total number of company staff, its make-up (foreign staff, managers, technicians, and frontline workers) and a tentative training program.
10. Environmental impact analysis and training scheme (including waste water, residue and gas).
11. Investment calculations which cover sum total of investment, registered capital, the proportions of capital contributions of the parties concerned, the ratio, means, sources of capital contribution and the capital input plan. The balance between investment total and registered capital should be stated in terms of domestic funding and overseas funding.
12. Comprehensive program and progress forecast of the project in execution. The cycle and progress of prospecting, of equipment purchasing and manufacturing, construction schedule, the month and year of trial-testing and operation, and the projection of production capacity tenure.
13. Cost and benefit analysis. Focus is on the composition and calculation of production cost, analysis of major financial indicators, analysis of balance sheet, investment payoff period, and balance of foreign exchange.
14. Other items that merit elaboration.
15. Overall appraisal and conclusion, which relate to technical and economic considerations as well as outstanding issues and suggestions.