CHINA yesterday announced further measures to streamline procedures enabling major overseas investments on the mainland.

In the latest initiative, new rules have been enacted involving the establishment of partnership firms.

The rules, effective next March, allow overseas investors to set up partnership firms in China either by themselves or with domestic partners.

Partnership firms, which are contract-based, have more flexibility in their setting up, day-to-day operations and legal responsibilities compared with shareholding-based joint ventures.

Up until now only Chinese investors with onshore yuan funds have been able to set up partnership firms.

Under the new rules, setting up foreign-partnership firms in China does not need approval from the Ministry of Commerce and investors only have to register with local-level authorities.

The regulations stipulate that investments should be in the form of fully convertible currency, or yuan, and spell out procedures for investors on how to establish, operate, change the structure of or close their firms.

At present, China only has specific regulations on foreign joint ventures or solely foreign-invested firms.

The new rules cleared the way for overseas investors to set up partnership firms, the State Council, the nation's cabinet, said in a statement yesterday.

Shi Lei, a professor of corporate management at Fudan University, said the rules were a move to stabilize and encourage foreign investment.

"It simplifies the procedure for overseas investors to set up firms in China," Shi said.

"Foreign investment remains an important source to strengthen the Chinese economy and raise the quality of China's growth."

Foreign direct investment in China tumbled 12.6 percent from a year earlier in the first 10 months due to fallout from the global financial crisis.

However, it has shown recovery in recent months. In October, foreign direct investment increased 5.7 percent year on year to US$7.1 billion.

China has pledged to provide better support and enhance government efficiency to encourage foreign investment.

The Ministry of Commerce has conducted an overall examination of administrative procedures to better regulate the process, cutting down on charges and reducing steps in procedures.

To help foreign companies raise funds, the government said it would also improve financial services and accelerate studies on allowing foreign-incorporated enterprises to list on the mainland's stock exchanges.