China has been an attractive an investment destination in the past three dacades. Foreign ivestors have already been familiar with the investment vehicles,such as Sino-foreign equity joint ventures, Sino-foreign cooperative joint ventures and the wholly foreign-owned enterprise.
In 2009, China issued the Measures for the Administration of the Establishment of Partnerships in China by Foreign Enterprises or Individuals (hereinafter referred as "The Measure"). The Measures stipulates general regulatory principles guiding the establishment of partnerships with foreign investors. Howevers, the foreign-investment partnership (FIP)has not yet been  widely known as other foreign direct investment vehicles.

The China Partnership Enterprise Law, the FIP Measures and other related rules and regulations govern the partnerships,which address project reviews, accounting, tax, foreign exchange, customs and immigration. Similar to other investment vehicles, FIPs are subject to Chinese  foreign direct investment guide.

There are two options for setting up a FIP in China. The first is to have two or more foreign companies and or individuals jointly establish a partnership. The second is to have one or more foreign companies or individuals to establish a partnership together with any Chinese individual, legal entity or other organisation. Alternatively,a foreign company or individual join an already established Chinese partnership. This alternative should also comply with the relevant rules governing FIP.

Despite being a brandnew investmentvehicle in the financial market, investors are becoming more confident in FIP as they put them to use in the establishment of private equity funds. Foreign investors, acting as general partners, are cooperating with Chinese enterprises or individuals and acting as limited partners, to establish a limited partnership.

Compared to other FDI vihicles, FIP has its own advantages, such as easy registration, limited governance,low tax burden etc.

Other foreign investment vehicles like WFOEs, CJVs and EJVs are required to follow strict Chinese laws concerning governmental requirements and administration. These demand a considerable amount of time and workload, while establishing FIPs is much faster and easier in terms of management. Typically, establishing a FIP does not require approval from commerce authorities. FIPs are not subject to any minimum capital contribution requirements under Chinese law, nor are they subject to capital verification procedures, which is mandatory for WFOEs, CJVs and EJVs.

Chinese law considers WFOEs, CJVs and EJVs as corporations and have to follow strict corporate governance requirements, some of which are different from common law systems or even some civil law countries. In a FIP, each partner enjoys decision-making powers according to the partnership agreement. The partners can agree on a special governance arrangement, like making one or several partners the executive partner, which allows partners to better and more effectively run their business.

As WFOEs, EJVs and CJVs are corporations they are subject to both corporate income tax and individual income tax at the shareholder level. However, the Enterprise Income Tax Law does not apply to the partnership income of FIPs. Taxation rules only apply to individual partners, under regulations like Circular 91 from 2000 and Circular 153 from 2008, jointly issued by the Ministry of Finance and State Administration of Taxation. Therefore, FIPs enjoy a pass through taxation policy, where business or other income is not taxed, including all distributions to partners and partnership annual reserves or profits. Partners pay individual income tax according to their shares, as specified in the partnership agreement.