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CIRCULAR OF THE MINISTRY OF FOREIGN TRADE AND ECONOMIC COOPERATION (MOFTEC), STATE ADMINISTRATION OF TAXATION (SAT), STATE ADMINISTRATION OF INDUSTRY AND COMMERCE (SAIC), AND STATE ADMINISTRATION OF FOREIGN EXCHANGE (SAFE) ON ISSUES RELATED TO IMPROVING THE ADMINISTRATION OF ENTERPRISES WITH FOREIGN INVESTMENT IN TERMS OF EXAMINATION AND APPROVAL, REGISTRATION, FOREIGN EXCHANGE AND TAXATION

The Ministry of Foreign Trade and Economic Cooperation, the State Administration of Taxation, the State Administration for Industry
and Commerce, the State Administration of Foreign Exchange

Circular of the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), State Administration of Taxation (SAT), State Administration
of Industry and Commerce (SAIC), and State Administration of Foreign Exchange (SAFE) on Issues Related to Improving the Administration
of Enterprises with Foreign Investment in Terms of Examination and Approval, Registration, Foreign Exchange and Taxation

WaiJingMaoFaFa [2002] No.575

December 30, 2002

Commissions (departments, bureaus) of foreign trade and economic cooperation in all provinces, autonomous regions, municipalities
directly under the Central Government, and municipalities separately listed on the State plan; administration bureaus of industry
and commerce in all provinces, autonomous regions, municipalities directly under the Central Government, and other authorized bureaus;
SAFE, and its branches and exchange administration offices in all provinces, autonomous regions and municipalities directly under
the Central Government, and SAFE branches in Shenzhen, Dalian, Qingdao, Xiamen and Ningbo; bureaus of state taxation and of local
taxation in all provinces, autonomous regions, municipalities directly under the Central Government, and municipalities separately
listed on the State plan:

In order to keep abreast with the new situation of utilizing foreign funds and normalize the administration of enterprises with foreign
investment, in view of the new circumstances and problems arising out of the recent utilization of foreign funds, the Circular on
Issues Related to Improving the Administration of Enterprises with Foreign Investment in Terms of Examination and Approval, Registration,
Foreign Exchange and Taxation (see attachment) has been formulated jointly by the MOFTEC, SAT, SAIC, and SAFE and is hereby distributed
to you for implementation.

Attachment:Circular on Issues Related to Improving the Administration of Enterprises with Foreign Investment in Terms of Examination and Approval,
Registration, Foreign Exchange and Taxation

Pursuant to the Law of the People’s Republic of China (PRC) on Chinese-foreign Equity Joint Ventures, the Law of the PRC on Chinese-foreign
Contractual Joint Ventures, the Law of the PRC on Foreign-capital Enterprises, the Company Law of the PRC, the Contract Law of the
PRC, the Regulations on the Exchange System of the PRC, and other relevant laws and regulations, a circular on issues related to
improving the administration of enterprises with foreign investment in terms of examination and approval, registration, foreign exchange
and taxation is given hereunder with a view to keeping abreast of the new situation of absorbing foreign funds, normalizing the administration
of enterprises with foreign investment, ensuring the sound development of enterprises with foreign investment, and protecting the
lawful rights and interests of Chinese and foreign investors:

1.

The establishment of an enterprise with foreign investment as well as its contract and articles of association (including the modification
of the contract and articles of association) shall be examined and approved according to the current approving procedures of enterprises
with foreign investment provided by relevant laws and regulations of the State.

2.

According to the current laws and regulations related to foreign investment, the proportion contributed by foreign investors in a
Chinese-foreign equity joint venture or a Chinese-foreign contractual joint venture shall in general not be less than 25 percent
of its registered capital. In case the proportion of the foreign investment is less than 25 percent, unless otherwise provided in
law or administrative regulations, examination and approval as well as registration shall be handled according to the current examining,
approving and registering procedures for the establishment of enterprises with foreign investment. A certificate of approval of enterprise
with foreign investment marked with the words “Proportion of foreign investment is less than 25 percent” shall be issued to the approved;
a business license of enterprise with foreign investment with the words “Proportion of foreign investment is less than 25 percent”
marked in the column of “type of enterprise” shall be issued to the registered.

3.

An enterprise with foreign investment in which the proportion of foreign investment is less than 25 percent shall, unless otherwise
provided in law or administrative regulations, not enjoy the preferential treatment of tax reduction or exemption for importing self-satisfying
equipment and articles under the item of its total investment and other taxation treatment given to enterprises with foreign investment.

A foreign-funded stock limited company that has enjoyed the treatment given to enterprises with foreign investment, after increasing
its registered capital and stocks or transferring its stocks to foreign investors, may still enjoy the treatment given to enterprises
with foreign investment according to relevant provisions.

4.

As to an enterprise with foreign investment in which the proportion of foreign investment is less than 25 percent, if the investor
contributes in cash, the full contribution shall be made within three months after receiving the business license; if the investor
contributes in kind, industrial property rights and etc, the full contribution shall be made within six months after receiving the
business license.

5.

In case a foreign investor purchases the stock of a domestic enterprise of any nature and any type, the said domestic enterprise shall,
according to the provisions of relevant laws and regulations of the State and the current examining and approving procedure for enterprises
with foreign investment, be altered into an enterprise with foreign investment upon the approval of the approving agency concerned
and follow the industrial policy on foreign investment. After the approval, the approving agency shall issue a certificate of approval
of enterprise with foreign investment, and the administration agency of industry and commerce shall issue a business license of enterprise
with foreign investment.

A Chinese natural person shareholder in the said domestic enterprise who has owned its stock for more than one year may, if approved,
still be the Chinese investor of the enterprise with foreign investment established after the alteration.

A domestic Chinese natural person shall not, for the time being, establish an enterprise with foreign investment with a foreign company,
enterprise, other economic organization, or individual in the form of new establishment or purchase.

6.

A foreign investor that has purchased the stock of a domestic enterprise shall make full payment of the purchase within three months
after the issuance of the business license of enterprise with foreign investment. If deferred payment is necessary due to special
reasons, with the approval of the approving agency concerned, no less than 60 percent of the total amount shall be paid within six
months after the issuance of the business license of enterprise with foreign investment, and the total amount shall be fully paid
within one year, and the net profit shall be distributed in proportion to the actual contributions to the registered capital. Before
making full payment for the purchase, the controlling investor shall not obtain the decision-making power of the enterprise, and
may not incorporate his/her equity and assets in the said enterprise into his/her own financial statements in the form of a consolidated
statement. The certificate of foreign exchange registration of foreign funds issued by the SAFE office in the locality where the
stock transferor resides shall be the valid document verifying the payment for the purchase by the foreign investor.

In case a foreign investor purchases the stock of a domestic enterprise, the two parties of the stock transfer shall set a deadline
for the payment for the purchase of stock by the foreign investor in the agreement of stock transfer. In case the said deadline is
not prescribed in the agreement, the approving agency shall not approve the transfer.

7.

An enterprise with foreign investment shall apply to the SAFE office in its place of registration for foreign exchange registration
with the certificate of approval of enterprise with foreign investment and the business license of enterprise with foreign investment.

When allowing a foreign investor to purchase the stock of a domestic enterprise, the approving agency shall send a duplicate of the
approval to the SAFE offices in the localities where the said domestic enterprise is located and where the transferor of the stock
resides. The SAFE office in the locality where the transferor of the stock resides shall supervise the collection of foreign exchange.

8.

Approving agencies, agencies of industrial and commercial registration, and SAFE offices in all localities shall strictly implement
the provisions of this Circular. As from the day when this Circular is put into effect, approval, industrial and commercial registration,
and foreign exchange registration shall not be handled for those that fail to go through the procedure of approval according to this
Circular.

An enterprise established before the implementation of this Circular with the proportion of foreign investment below 25 percent shall
make up the procedure of approval and registration within half a year after the day when this Circular is put into effect. For those
that fail to make up the procedure, the relevant agency of industrial and commercial registration shall order them to do so in a
prescribed time limit. Anyone that does not make up the procedure beyond the time limit shall be punished by the relevant agency
of industrial and commercial registration according to article 63 of the Regulations on the Administration of the Registration of
Company. An enterprise that does not go through the relevant procedures after being punished shall not be let pass the annual inspection
for the current year.

The administration agencies of industrial and commercial registration in all localities shall, according to the provisions of this
Circular, count up the number of enterprises concerned, adjust the jurisdiction of registration, and do a good job in the transfer
of enterprises’ files. The registration alteration for enterprises that have made up the procedure of approval shall be exclusively
under the jurisdiction of the agencies of registration with the authority to register enterprises with foreign investment in the
localities where the said enterprises reside.

9.

In the case of conflict with previous provisions, this Circular shall prevail.

10.

This Circular shall apply to the establishment of enterprises with foreign investment in the mainland by investors from the regions
of Taiwan, Hong Kong and Macao.

11.

This Circular shall enter into force as of January 1, 2003.



 
The Ministry of Foreign Trade and Economic Cooperation, the State Administration of Taxation, the State Administration
for Industry and Commerce, the State Administration of Foreign Exchange
2002-12-30

 






AMENDMENT OF THE STANDING COMMITTEE OF THE NATIONAL PEOPLE’S CONGRESS TO THE CONSTITUTION

Amendment of the Standing Committee of the National People’s Congress to the Constitution of the PRC

     (Effective Date:–Ineffective Date:)

At its Seventh meeting, the Standing Committee of the Ninth National People’s Congress, having discussed the proposal of the Central
Committee of the Communist Party of China on amending parts of the Constitution of the People’s Republic of China, has worked out
in accordance with the provisions in Article 64 of the Constitution the present Draft Amendment to the Constitution and hereby submits
it to the Second Session of the Ninth National People’s Congress for examination:

The seventh paragraph of the Preamble to the Constitution, which reads: “Both the victory in China’s New-Democratic Revolution and
the successes in its socialist cause have been achieved by the Chinese people of all nationalities, under the leadership of the Communist
Party of China and guidance of Marxism-Leninism and Mao Zedong Thought, by upholding truth, correcting errors and surmounting numerous
difficulties and hardships. China is at the primary stage of socialism. The basic task of the nation is to concentrate its effort
on socialist modernization in line with the theory of building socialism with Chinese characteristics. Under the leadership of the
Communist Party of China and the guidance of Marxism- Leninsm and Mao Zedong Thought, the Chinese people of all nationalities will
continue to adhere to the people’s democratic dictatorship and the socialist road, persevere in reform and opening to the outside
world, steadily improve socialist institutions, develop socialist democracy, improve the socialist legal system and work hard and
self-reliantly to modernize the country’s industry, agriculture, national defense and science and technology step by step to turn
China into a socialist country that is prosperous, powerful, democratic and culturally advanced,” is revised as follows: “Both the
victory in China’s New- Democratic Revolution and the successes in its socialist cause have been achieved by the Chinese people of
all nationalities, under the leadership of the Communist Party of China and guidance of Marxism- Leninism and Mao Zedong Thought,
by upholding truth, correcting errors and surmounting numerous difficulties and hardships. China will be in the primary stage of
socialism for a long time to come. The basic task of the nation is to concentrate its effort on socialist modernization along the
road of building socialism with Chinese characteristics. Under the leadership of the Communist Party of China and the guidance of
Marxism-Leninism, Mao Zedong Thought and Deng Xiaoping Theory, the Chinese people of all nationalities will continue to adhere to
the people’s democratic dictatorship and the socialist road, persevere in reform and opening to the outside world, steadily improve
socialist institutions, develop the socialist market economy, develop socialist democracy, improve the socialist legal system and
work hard and self- reliantly to modernize the country’s industry, agriculture, national defense and science and technology step
by step to turn China into a socialist country that is prosperous, powerful, democratic and culturally advanced.”

2. A new paragraph is added to Article 5 of the Constitution as the first paragraph, which provides: “The People’s Republic of China
governs the country according to law and makes it a socialist country ruled by law.”

3. Article 6 of the constitution, which reads: “The basis of the socialist economic system of the People’s Republic of China is socialist
public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people.
The system of socialist public ownership supersedes the system of exploitation of man by man; it applies the principle of ‘From each
according to his ability, to each according to his work'”, is revised as follows: “The basis of the socialist economic system of
the people’s Republic of China is socialist public ownership of the means of production, namely, ownership by the whole people and
collective ownership by the working people. The system of socialist public ownership supersedes the system of exploitation of man
by man; it applies the principle of ‘from each according to his ability, to each according to his work’.” “In the primary stage of
socialism, the state upholds the basic economic system under which the public ownership is dominant and diverse forms of ownership
develop side by side and keeps to the distribution system under which distribution according to work is dominant and diverse modes
of distribution coexist.”

4. The first paragraph of Article 8 of the Constitution, which reads: “In rural areas the responsibility system, the main form of
which is household contract that links remuneration to output, and other forms of cooperative economy, such as producers, supply
and marketing, credit and consumers’ cooperatives, belong to the sector of socialist economy under collective ownership by the working
people. Working people who are members of rural economic collectives have the right, within the limits prescribed by law, to farm
plots of cropland and hilly land allotted for their private use, engage in household sideline production and raise privately owned
livestock”, is revised as follows: “The rural collective economic organizations apply the dual operation system characterized by
combination of centralized operation with decentralized operation on the basis of operation by households under a contract. In rural
areas, all forms of Cooperative economy, such as producers’ supply and marketing, credit and consumers’ cooperatives, belong to the
sector of socialist economy under collective ownership by the working people. Working people who are members of rural economic collectives
have the right, within the limits prescribed by law, to farm plots of cropland and hilly land allotted for their private use, engage
in household sideline production and raise privately owned livestock.”

5. Article 11 of the Constitution, which reads: “The individual economy of urban and rural working people, operating within the limits
prescribed by law, is a complement to the socialist public economy. The state protects the lawful rights and interests of the individual
economy.” “The state guides, assists and supervises the individual economy by administrative control.” “The state permits the private
sector of the economy to exist and develop within the limits prescribed by law. The private sector of the economy is a complement
to the socialist public sector of the economy. The State protects the lawful rights and interests of the private sector of the economy,
and exercises guidance, supervision and control over the private sector of the economy”, is revised as follow:” The Non-public sectors
of the economy such as the individual and private sectors of the economy, operating within the limits prescribed by law, constitute
an important component of the socialist market economy.” “The state protects the lawful rights and interests of the individual and
private sectors of the economy, and exercises guidance, supervision and control over the individual and private sectors of the economy.”

6. Article 28 of the Constitution, which reads: “The state maintains public order and suppresses treasonable and other counter- revolutionary
activities; it penalizes criminal activities that endanger public security and disrupt the socialist economy as well as other criminal
activities; and it punishes and reforms criminals”, is revised as follows: “The State maintains public order and suppresses treasonable
and other criminal activities that endangers state security; it penalizes criminal activities that endanger public security and disrupt
the socialist economy as well as other criminal activities; and it punishes and reforms criminals.”

    





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CONSTITUTION ACT, 1982 – page 22

NOTES (1) The enacting clause was repealed by the Statute Law Revision Act, 1893, 56-57 Vict., c. 14 (U.K.). It read as...

CONSTITUTION ACT, 1982 – page 21

CONSTITUTION ACT, 1982 – page 20

CONSTITUTION ACT, 1982 – page 19

CONSTITUTION ACT, 1982 – page 18

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