What is registered capital in China? According to the Company Law of the PRC, the registered capital of a limited liability company refers to the amount of capital contributions subscribed for by all its shareholders as registered with the company registration authority.

A foreign invested enterprise (FIE) in China, normally registered as a limited liability company, must open a capital account to receive capital contribution from its foreign investors. Once the business license of the FIE is obtained, it is required to apply for and complete a foreign direct investment registration with the local branch of the State Administration of Foreign Exchange through its opening bank before it is allowed to open a capital account. The foreign investors must contribute and pay up their subscribed amount of the registered capital to the capital account of the FIE in accordance with the schedule and provision set out in the articles of association of the FIE.

The registered capital is not a deposit that must be maintained in the bank and cannot be used. It can be used to pay salaries and rent, to purchase goods or for any other normal operating expenses of the FIE. However, there are some rules and regulations should be followed for the use of registered capital.

1. Declaration and Registration of Contributed Capital
   
   The FIE shall go to the bank to declare and register the cash contribution in time when the foreign investors have remitted the registered capital from abroad. The contributed capital cannot be used (including but not limited to foreign exchange settlement, foreign exchange payment, domestic transfer) unless it has been registered by the bank for accounting entry of cash contribution.
   
   
2. Restriction on the Use of Registered Capital
   
   Upon receipt of the foreign exchange capital remitted by the foreign investors, a FIE may apply for voluntary settlement of foreign exchange according to its actual business needs or choose to apply for foreign exchange settlement upon payment. For each foreign exchange settlement based on the principle of foreign exchange settlement upon payment, the FIE will be required by the bank to provide the relevant contracts, invoices and other vouchers to examine the authenticity and compliance in the use of the capital funds. When the FIE applies to use the capital in the name of reserve funds, the bank may not require submission of the aforesaid authenticity documentations. However, the cumulative amount of monthly payments for reserve funds shall not exceed an equivalent of USD100,000.
   
   According to the regulations of the State Administration of Foreign Exchange of the PRC, the registered capital and RMB funds obtained from foreign exchange settlement of a FIE shall not be used for the following purposes:
   
   

   (1)	directly or indirectly used for payment beyond its business scope or prohibited under the laws and regulations of the PRC;
   (2)	directly or indirectly used for securities investments, unless otherwise prescribed under the laws and regulations of the PRC;
   (3)	directly or indirectly used to grant loans to non-affiliated enterprises unless expressly permitted by its business scope;
   (4)	used for the construction or purchase of real estate not for self-use, except for real estate enterprises.

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