Category |
FOREIGN ECONOMIC RELATIONS AND TECHNOLOGICAL COOPERATION |
Organ of Promulgation |
The State Council |
Status of Effect |
In Force |
Date of Promulgation |
1990-12-12 |
Effective Date |
1990-12-12 |
|
|
Rules for the Implementation of the Law of the People’s Republic of China on Foreign-capital Enterprises |
Contents
Chapter I General Provisions
Chapter II Procedures for Establishment
Chapter III Form of Organization and Registered Capital
Chapter IV Methods of Contributing Investment and the Time Limit
Chapter V Use of Site and the Site Use Fees
Chapter VI Purchasing and Marketing
Chapter VII Taxation
Chapter VIII Control of Foreign Exchange
Chapter IX Financial Affairs and Accounting
Chapter X Workers and Staff Members
Chapter XI Trade Union
Chapter XII Term of Operations, Termination and Liquidation
Chapter XIII Supplementary Provisions
(Approved by the State Council on October 28, 1990, and promulgated by
Decree No. 1 of the Ministry of Foreign Economic Relations and Trade on
December 12, 1990)
Contents
Chapter I General Provisions
Chapter II Procedures for Establishment
Chapter III Form of Organization and Registered Capital
Chapter IV Methods of Contributing Investments and the Time Limit
Chapter V Use of Site and the Site Use Fees
Chapter VI Purchasing and Marketing
Chapter VII Taxation
Chapter VIII Control of Foreign Exchange
Chapter IX Financial Affairs and Accounting
Chapter X Workers and Staff Members
Chapter XI Trade Union
Chapter XII Term of Operations, Termination and Liquidation
Chapter XIII Supplementary Provisions
Chapter I General Provisions
Article 1 These Rules are formulated in accordance with the provisions in
Article 23 of The Law of the People’s Republic of China on Foreign-Capital
Enterprises.
Article 2 Foreign-capital enterprises shall be under the jurisdiction of
and protection by China’s laws.
Foreign-capital enterprises, while engaged in business operational
activities within the territory of China, must abide by Chinese laws and
regulations and must not jeopardize the social and public interests of China.
Article 3 A foreign-capital enterprise to be established in China must be
conducive to the development of China’s national economy, be capable of gaining
remarkable economic results and shall meet at least one of the following
conditions:
(1) the enterprise is to adopt advanced technology and equipment, engage in
the development of new products, conserve energy and raw materials, and
realize the upgrading of products and the replacement of old products with new
ones which can be used for placing similar Imported goods;
(2) its annual output value of export products accounts for more than 50%
of the annual output value of all products, thereby realizing the balance
between revenues and expenditures in foreign exchange or with a surplus.
Article 4 No foreign-capital enterprise shall be established in the
following trades:
(1) the press, publication, broadcasting, television, and movies;
(2) domestic commerce, foreign trade, and insurance;
(3) post and telecommunications;
(4) other trades in which the establishment of foreign-capital enterprises
is forbidden, as prescribed by the Chinese government.
Article 5 The establishment of foreign-capital enterprises shall be
restricted in the following trades:
(1) public utilities;
(2) communications and transportation;
(3) real estate;
(4) trust investment;
(5) leasing.
The application for the establishment of a foreign-capital enterprise in
the trades mentioned in the preceding paragraph shall be submitted to the
Ministry of Foreign Economic Relations and Trade of the People’s Republic of
China (hereinafter referred to the Ministry of Foreign Economic Relations and
Trade) for approval, except as otherwise provided by Chinese laws and
regulations.
Article 6 Application for the establishment of a foreign-capital
enterprise shall not be approved if the proposed enterprise would involve one
of the following circumstances:
(1) injury to China’s sovereignty or to social and public interests;
(2) impairment of China’s national security;
(3) violation of Chinese laws and regulations;
(4) incompatibility with the requirements of China’s national economic
development; or
(5) possible creation of environmental pollution.
Article 7 A foreign-capital enterprise shall make its own managerial
decisions within the approved scope of business operations and shall not be
subject to intervention.
Chapter II Procedures for Establishment
Article 8 The application for the establishment of a foreign-capital
enterprise shall be submitted to the Ministry of Foreign Economic Relations and
Trade, and after examination and approval, a certificate of approval shall be
issued by the Ministry.
With respect to the application for the establishment of a foreign-capital
enterprise that comes under one of the following circumstances, the State
Council shall authorize the people’s government of the relevant province,
autonomous region, municipality directly under the Central Government,
municipality separately listed on the state plan, or the special economic zone,
to issue the certificate of approval after examining and approving the
application:
(1) the total amount of investment is within the limits of powers for the
examination and approval of investments stipulated by the State Council;
(2) the proposed enterprises does not need the raw and processed materials
to be allocated by the State, or does not influence unfavourably the national
comprehensive balance of energy resources, communications and transportation,
as well as export quotas for foreign trade.
Where the people’s government of the province, autonomous region,
municipality directly under the Central Government, municipality separately
listed on the state plan, or the special economic zone has approved the
establishment of a foreign-capital enterprise within its limits of powers
granted by the State Council, it shall, within 15 days after the approval,
submit a report to the Ministry of Foreign Economic Relations and Trade for the
record (hereinafter the Ministry of Foreign Economic Relations and Trade, and
the people’s government of the province, autonomous region, municipality,
directly under the Central Government, municipality separately listed on the
state plan, and the special economic zone shall be called generally as the
examining and approving organ).
Article 9 With respect to a foreign-capital enterprise, the establishment
of which has been applied for, if its products are subject to export licence,
export quota, or import licenee, or are under restrictions by the State, prior
consent of the department of foreign economic relations and trade shall be
obtained in accordance with the limits of powers for administration.
Article 10 A foreign investor shall, prior to the filing of an application
for the establishment of a foreign-capital enterprise, submit a report to the
local people’s government at or above the county level at the place where the
proposed enterprise is to be established. The report shall include: the aim of
the establishment of the proposed enterprise; the scope and scale of business
operation; the products to be produced; the technology and equipment to be
adopted and used; the proportion of the sales of products between the domestic
market and the foreign market; the area of land to be used and the related
requirements; the conditions and quantities of water, electricity, coal, coal
gas and other forms of energy resources required; and the requirement of public
facilities.
The local people’s government at or above the county level shall within 30
days after receiving the report submitted by the foreign investor, give a reply
in writing to the said foreign investor.
Article 11 In case that a foreign investor wishes to establish a
foreign-capital enterprise, an application shall be submitted to the examining
and approving organ through the local people’s government at or above the
county level at the place where the enterprise is to be established, together
with the following documents.
(1) the written application for the establishment of a foreign-capital
enterprise;
(2) a feasibility study report;
(3) the articles of association of the foreign-capital enterprise;
(4) the name-list of the legal representatives (or the candidates for
members of the board of directors) of the foreign-capital enterprise;
(5) the legal certifying documents and the credit position certifying
documents of the foreign investor;
(6) the written reply given by the people’s government at or above the
county level at the place, where the enterprise is to be established;
(7) an inventory of goods and materials needed to be imported;
(8) other documents that are required to be submitted.
The documents mentioned in Items(1) and (3) in the preceding paragraph must
be written in the Chinese language; while the documents mentioned in Items
(2), (4) and (5) in the preceding paragraph may be written in a foreign
language, but a corresponding Chinese translation shall be attached.
In the event that two or more foreign investors jointly file an application
for the establishment of a foreign-capital enterprise, they shall submit a
duplicate of the contract concluded and signed between them to the examining
and approving organ for the record.
Article 12 The examining and approving organ shall, within 90 days after
receiving all the required documents with respect to an application for the
establishment of foreign-capital enterprise, make a decision whether to approve
or disapprove the application. In the event that the examining and approving
organ has found that the documents mentioned above are not complete, or that
some of them are inappropriate, it may call on the applicant to make up the
incomplete documents, or to make necessary revisions, within a prescribed time
limit.
Artricle 13 After the approval of the application for the establishment of a foreign-capital
enterprise by the examining and approving organ, the foreign
investor shall, within 30 days after receiving the certificate of approval,
file an application with the relevant administrative department for industry
and commerce for registration, and obtain a business licence. The date on which
the business licence is issued shall be the date of the establishment of the
said enterprise.
In the event that the foreign investor fails to file an application with
the administrative department for industry and commerce for registration on the
expiration of the 30 days after receiving the certificate of approval, the
certificate of approval for the establishment of the proposed enterprise shall
become invalid automatically,
A foreign-capital enterprise shall, within 30 days after its establishment,
go through the procedures for taxation registration with the tax authorities.
Article 14 Foreign investors may appoint a Chinese service agency for
enterprises with foreign investment or other economic organizations to handle,
on their behalf, the affairs stipulated in Article 9, the first paragraph of
Article 10 and Article 11 of these Rules, but a contract of entrustment shall
be concluded and signed between them.
Article 15 The written application for the establishment of a
foreign-capital enterprise shall include the following contents:
(1) the name or designation, the residence and the place of registration of the foreign investor, and the
name, nationality, and position of the legal
representative;
(2) the name and residence of the foreign-capital enterprise;
(3) the scope of business operations, the varieties of products, and the
scale of production;
(4) the total amount of investment, the registered capital, the source of
funds, and the method of investment contribution and the operation period;
(5) the organizational form and organs, and the legal representative of the
foreign-capital enterprise;
(6) the primary production equipment to be used and the degrees of
depreciation, production technology, technological level and their sources;
(7) the sales orientation and areas, the sales channels and methods, and
the sales proportion between China’s market and foreign markets;
(8) the arrangements for the revenues and expenditures in foreign exchange;
(9) the arrangements for the establishment of relevant organs and the
authorized size of working personnel, the engagement and use of workers and
staff members, their training, salaries and wages, material benefits,
insurance, and labour protection;
(10) the degrees of probable environmental pollution and the measures for
tackling pollution;
(11) the selection of sites and the area of land to be used;
(12) the funds, energy resources, raw and processed materials needed in
capital construction and in production and business operations and the
solutions thereof;
(13) the progress plan for the construction of the project; and
(14) the period of business operations of the foreign-capital enterprise to
be established.
Article 16 The articles of association of a foreign-capital enterprise
shall include the following contents:
(1) the name and the residence;
(2) the aim and the scope of business operations;
(3) the total amount of investments, the registered capital, and the time
limit for contributing investment;
(4) the form of organization;
(5) the internal organizational structures and their functions and powers
as well as their rules of procedures; the functions, duties and limits of
powers of the legal representative as well as of the general manager, chief
engineer, chief accountant and other staff members;
(6) the principles and system of financial affairs, accounting and
auditing;
(7) labour administration;
(8) the term of business operations, termination, and liquidation; and
(9) the procedures for the amendment of the articles of association.
Article 17 The articles of association of a foreign-capital enterprise
shall become effective after the approval by the examining and approving organ.
The same procedure shall apply when amendments are made.
Article 18 The division or merge of foreign-capital enterprises, and the
significant change in capital resulting from other causes, shall be subject to
the approval by the examining and approving organ; in addition, the said
enterprises shall engage a Chinese registered acountant to carry out
verification, and to submit a report on the verification of capital; after the
approval by the examining and approving organ, the enterprises concerned shall
go through the procedures for the change of the registration with the relevant
administative department for industry and commerce.
Chapter III Form of Organization and Registered Capital
Article 19 The organizational form of a foreign-capital enterprise shall
be a limited liability company.
With approval, the enterprise may also take any other liability form.
With respect to a foreign-capital enterprise which is a limited liability
company, the liability of the foreign investor to the enterprise shall be
limited to the amount of investment subscribed and contributed to the
enterprise by the investor.
With respect to a foreign-capital enterprise which takes any other
liability form, the liability of the foreign investor to the enterprise shall
be dealt with in accordance with the provisions of Chinese laws and regulations.
Article 20 The total amount of investment of a foreign-capital enterprise
refers to the total amount of funds needed for the establishment of the
enterprises, i.e. the sum total of the funds invested in capital construction
in accordance with the scope of production and the circulating funds for
production.
Article 21 The registered capital of a foreign-capital enterprise refers
to the total amount of capital registered with the administrative department
for industry and commerce for the purpose of establishing the foreign-capital
enterprise, i.e. the total amount of investment the foreign investor undertakes
to contribute.
The registered capital of a foreign-capital enterprise shall fit in with
the enterprise’s scope of business operations; and the proportion between the
registereed capital and the total amount of investment shall conform with the
provisions of the relevant Chinese laws and regulations.
Article 22 A foreign-capital enterprise shall not reduce the registered
capital during the term of business operations.
Article 23 The increase or assignment of the registered capital of a
foreign-capital enterprise shall be subject to the approval by the examining
and approving organ; in addition, the said enterprise shall go through the
procedures for the change of the registration with the administrative
department for industry and commerce.
Article 24 In case that a foreign-capital enterprise intends to mortgage
or assign its assets or rights and interests to a foreign unit, the case shall
be submitted to the examining and approving organ for approval, and then to the
administrative department for industry and commerce for the record.
Article 25 The legal representative of a foreign-capital enterprise shall
be the person-in-charge who, in accordance with the stipulations in the
enterprise’s articles of association, executes his/her functions and powers on
behalf of the enterprise.
In the event that the legal representative is unable to execute his/her
functions and powers, he/she shall entrust in writing an agent with the
execution of his/her functions and powers.
Chapter IV Methods of Contributing Investment and the Time Limit
Article 26 Foreign investors may use convertible foreign currencies for
the contribution of investment, or use as their investment machinery and
equipment, industrial property rights, and proprietary technology that are
assigned a fixed price.
Foreign investors may, after approval by the examining and approving organ,
use, as their investment, their profits in Renminbi (RMB) earned from other
enterprises with foreign investment established within the territory of China.
Article 27 In case that foreign investors intend to use machinery and
equipment, being assigned a fixed price, as their investment, the said
machinery and equipment must meet the following requirements:
(1) those that are needed for the production of the foreign-capital
enterprise;
(2) those that cannot be produced in China, or that can be produced in
China but cannot be guaranted to meet the needs in terms of technical
performance or time of supply.
The price fixed for the aforesaid machinery and equipment shall not be
higher than the normal price for similar machinery and equipment sold on the
international market at the time.
With respect to the machinery and equipment, being assigned a fixed price
and used as contributing investment, an inventory listing in detail the
assigning of fixed prices as contributing investment, including the names,
categories, quantities, and the assignment of prices, shall be made and
submitted to the examining and approval organ as an appendix to the application
for the establishment of the foreign-capital enterprise.
Article 28 In case that foreign investors intend to use industrial
property rights and proprietary technology, being assigned a fixed price, as
their investment, the said industrial property rights and proprietary
technology must meet the following requirements:
(1) owned by the foreign investors themselves;
(2) capable of producing new products that are urgently needed by China, or
that are suitable for export and marketable abroad.
The assigning of a fixed price for the aforesaid industrial property rights
and proprietary technology shall be in conformity with the general pricing
principles of the international market, and the amount of pricing thereof shall
not exceed 20% of the registered capital of the foreign-capital enterprise.
With respect to those industrial property rights and proprietary
technology, being assigned a fixed price for contributing investment, a
detailed inventory of relevant data, including a duplcate of the proprietary
rights certificate, the effective condition, technological performance, the
practical value, the basis and standard for the calculation of pricing, shall
be prepared and submitted to the examining and approving organ as an appendix
to the application for the establishment of the foreign-capital enterprise.
Article 29 When the machinery and equipment, being assigned a fixed price
and used as contributing investment, have arrived at China’s port, the
foreign-capital enterprise shall apply to China’s commodity inspection
authorities for inspection, which shall then issue an inspection report.
In the event that the variety, quality and quantity of the machinery and
equipment, being assigned a fixed price and used as contributing investment,
are not in conformity with the variety, quality and quantity of the machinery
and equipment, being assigned a fixed price as contributing investment and
listed in the inventory submitted to the examining and approving organ, the
examining and approving organ has the power to require the foreign investors to
make corrections within a prescribed time limit.
Article 30 After the industrial property rights and proprietary technology
priced as contributing investment have been put to use, the examining and
approving organ has the power to carry out inspection. In the event that the
said industrial property rights and proprietary technology are not in
conformity with the data originally provided by the foreign investors, the
examining and approving organ has the power to require the foreign investors to
make corrections within a prescribed time limit.
Article 31 The time limit for a foreign investor to make the investment
contributions shall be clearly stipulated in the written application for the
establishment of the foreign-capital enterprise and also in the articles of
association of the enterprise. A foreign investor may make the investment
contribution by instalments, but the last instalment of the contribution shall
be made within the period of three years beginning from the day when the
business licenee is issued. The first instalment of investment contribution
shall not be less than 15% of the total amount of investment contribution that
the foreign investor undertakes to make, and shall be made in full within a
period of 90 days beginning from the day when the business licenee is issued.
In the event that a foreign investor fails to make in full the first
instalment of the investment contribution within the time limit stipulated in
the preceding paragraph, the certificate of approval for the establishment of
the proposed foreign-capital enterprise shall become invalid automatically. The
foreign-capital enterprise in question shall go through the procedure for
registration cancellation with the relevant administrative department for
industry and commerce, and hand in its business licence for cancellation.
In the event of the failure to go through the procedure for registration
cancellation and to hand in the business licence for cancellation, the
administrative department for industry and commerce shall revoke the business
licence and announce the case publicly.
Article 32 After making the first instalment of investment contribution,
the foreign investor shall make the remaining instalments of contribution
strictly as scheduled. In the event that a foreign investor is in arrears with
the contribution for 30 days without any justification, the case shall be
handled in accordance with the provisions of paragraph 2 of Article 31 of these
Rules.
In the event that a foreign investor has proper reasons for requesting the
postponement of investment contribution, prior consent of the examining and
approving organ shall be obtained, and the case shall also be reported to the
administrative department for industry and commerce for the record.
Article 33 After the foreign investor’s each instalment of investment
contribution, the foreign-capital enterprise shall engage a Chinese registered
accountant to carry out verification, and to prepare a report on the
verification of capital, which shall be submitted to the examining and
approving organ and the administrative department for industry and commerce for
the record.
Chapter V Use of Site and the Site Use Fees
Article 34 With espect to the site to be used by a foreign-capital
enterprise, the local people’s government at or above the county level in the
place where the enterprise is to be located, shall make arrangements after
examination and verification in the light of the local conditions.
Article 35 A foreign-capital enterprise shall, within 30 days from the day
the business licence is issued, go through the procedure for the use of land
and obtain the land certificate by presenting the certificate of approval and
the business licence to the land administration department under the local
people’s government at or above the county level in the place where the
enterprise is to be located.
Article 36 The land certificate shall be the legal instrument for the
foreign-capital enterprise to use land. The foreign-capital enterprise within
its term of operations, may not assign its land-use right without permission.
Article 37 A foreign-capital enterprise shall, when obtaining the land
certificate, pay its land use fee to the land administrative department in the
place where the enterprise is located.
Article 38 In case that a foreign-capital enterprise uses land that has
already been developed, it shall pay the land development fee.
The land development fee, as mentioned in the preceding paragraph, includes
the expense for the requisition of land, the expense for the pulling down of
houses and the settlement allowance, and the expense for the