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CIRCULAR OF THE STATE COUNCIL ON TRANSMISSION OF THE STATE MEDIUM- AND LONG-TERM PROGRAMME ON SCIENCE AND TECHNOLOGY DEVELOPMENT

Category  SCIENCE AND TECHNOLOGY Organ of Promulgation  The State Council Status of Effect  In Force
Date of Promulgation  1992-03-08 Effective Date  1992-03-08  


Circular of the State Council on Transmission of the State Medium- and Long-term Programme on Science and Technology Development


THE STATE MEDIUM- AND LONG-TERM PROGRAMME ON SCIENCE AND TECHNOLOGY
I. Situation And Choice
II. Strategies and Guiding Principles
III. Focal Development Areas
IV. Deepening Reform and Establishing a New System for the Benefit of
V. Adhering to Opening up, Vigorously Promoting International Cooperation
VI. Policy and Measure

(March 8, 1992)

    The State Medium- and Long-term Programme on Science and Technology
Development has been examined and approved by the 94th Executive Meeting of
the State Council and is hereby transmitted to you for its implementation.

    The Medium- and Long-term Outlines on Science and Technology Development
and the Ten-Year Programme and Eighth Five-Year Plan of the People’s
Republic of China on Science and Technology Development has been agreed to
in principle by the State Council and will be circulated separately by the
State Science and Technology Commission.

THE STATE MEDIUM- AND LONG-TERM PROGRAMME ON SCIENCE AND TECHNOLOGY
DEVELOPMENT

    As the human society is greeting a new century, the world is undergoing
tremendous changes. The revolution of new science and technology is
developing swiftly and violently. Market competition is more and more
intense. The international political wind and cloud is in an unpredictable
situation. Our country and nation is faced with urgent and serious
challenges. With a view to realizing the second-stage strategic objectives
by the year 2000 and further making our country among moderately-developed
states by the middle of the next century, we should persist in the four basic
principles, continue reform and opening up and speed up economic and social
development depending on progress in science and technology. That is a great
and hard task, which concerns the future of our country and the fortune of
socialism.

    The present Programme is formulated according to the Decision of the 13th
National Congress of Representatives of the Communist Party of China (CPC) and
gists of successive CPC Central Plenary Sessions ever since the 13th
Congress. The purpose of the Programme is to precisely stipulate strategies,
guidelines, policies and key areas regarding medium and long term development
of natural sciences and technologies in our country and to direct
coordinative development of science and technology on one hand and economy
and society on the other hand by the year 2000 even throughout 2020.
I. Situation And Choice

    1. Science and technology is the first productive force and renders the
greatest revolutionary impetus to economic-social development. Under the
superior socialist system the progress of science and technology and
improvement of management will play a decisive role in our country’s
modernization. To bring economic construction onto the approach of depending
more on science and technology advance and labour quality improvement will
inevitably ensure successive realization of the second-stage strategic
objectives of our country and lay a solid foundation for achievement of the
third-stage strategic objectives. In accordance with the three-stage
strategy of the national economic construction and in the light of the
tendency and trends of international science and technology development, it
is an important historic task to make an overall arrangement for development
of science and technology over the coming 10 to 30 years.

    2. Over the last forty years, our country has made remarkable
achievements in science and technology which attract world attention. Right
now the whole country has a scientific and technological contingent of
10,900,000 people, among which 1,050,000 people are engaged in
development-oriented research. Independent research and development
institutions have numbered over 5,000 and another more than 7,000
research-based development institutions are affiliated to enterprises. A
relatively complete science and technology research system has been
established, and a series of important world-recognized scientific and
technologic achievements have been fulfilled. Our country has mainly depended
upon our own talents in solution of a large number of important scientific
and technologic problems in economic and national defence construction and in
social development. Especially over the last ten years of reform and opening
up when our country has readjusted science and technology development policy,
significant breakthroughs have been made in reform of science and technology
institutional system, organization of tackling key problems, expansion of
technologic achievements, promotion of scientific and technological progress
in countryside, facilitation of development of hi-tech industries and
strengthening of international scientific and technological cooperation and
exchange.

    3. Over the last forty years of scientific and technologic development
we have accumulated rich experiences while we also have a lot of lessons to
draw.

    Our main experiences are as follows: Firstly, scientific and
technological work must persist in being subject to the party’s leadership
and socialist approach. Secondly, we must persist in reform and opening up.
While planned management should be perfected the role of the market in
readjustment must be brought into play so that the transfer
of scientific and technological achievements into production could be
facilitated and combination of science and technology with economy could be
promoted. On the basis of self-reliance, advanced foreign experiences and
achievements in science and technology must be learned from in an active
manner so that development of science and technology could be accelerated.
Thirdly, under the unified leadership of the state, personnel and material
resources should be concentrated to organize attacking key problems and
fulfilling important research tasks that are significant to national
economic development and social progress. Fourthly, while the role of mainstay
of scientific and technological contingents should be brought into full play,
attention should also be paid to combination of the research work of expertise
with technological reform of the mass, integration of leading officials with
the skilled personnel, the workers and farmers so that efforts could be joined
to promote application of scientific and technological achievements and
dissemination of scientific and technological knowledge and to improve
scientific and cultural quality of all nationalities of the people.

    Our major lessons are as follows: Firstly, in both guiding ideology
and actual work of social development, we failed to continuously and
consistently place scientific and technological development at the important
strategic position. Secondly, economic development lacks the support of a
mechanism and internal motive by which scientific and technological progress
is depended upon. Scientific and technological development is short of
vitality arisen from economic development orientation. Large amount of
technological achievements failed to be transformed into productive capacity.
Consequently science and technology is divorced to certain extent from
economic and social development and potentials of science and technology have
not been given full play. Thirdly, scientific and technological work suffers
shortage of overall arrangement, rational division of work and prevalence of
low-level repetition. Often times state circumstances were neglected,
unpractical goals were blindly pursued in expectation of immediate
achievement. Fourthly, important error took place in terms of policy of
intellectuals to the consequence of seriously damaging intellectuals’
enthusiasm and creativity and effecting healthy development of scientific
and technological contingents. The social atmosphere has not been nurtured
in which knowledge and talents are respected.

    4. Scientific and technological work shall be oriented to modernization,
to the world and to the future. The revolution of new sciences and
technologies in modern world has been so vigorously developing that science
and technology has unprecedentedly and extensively penetrated into all fields
of human society. As a consequence, social productivity has been brought to a
great leap forward and in-depth change has happened in the global structure.
Economic and social development in all countries more and more depends upon
progress of science and technology. Combination and overlap occur between
basic researches, pragmatic researches and technological development. The
duration of the transform of technological achievements into commodity
production has become shorter and shorter. Science, technology, education
and production have become more and more closely connected.

    In prospect for the scientific and technological development worldwide
in the forthcoming 10 to 30 years, a series of newly developed sciences and
technologies will undergo breakthrough and new productive technologies and
new conception of natural phenomena will exert in-depth influence upon
development of human society. Development of hi-and-new-tech will further
change the present industrial structure and become an important factor in
the competition of global economy. Economic development and scientific and
technological progress in the world tends to be globalized and competition
in sciences and technologies all the more becomes a decisive factor in
international economic competition. At the same time the human society have
to strengthen international cooperation to solve such global problems as
population, environment, resources and calamity. No country can realize
modernization in a closed-up state.

    5. Science and technology shall be developed in the light of circumstances
of our country. Our country has a large population, poor in resources,
backward in social productivity with 80% of its population living in the
countryside. It will remain in a preliminary stage of socialism for a long
time to come. Economic and social development in our country is restrained by
factors of population, resources and environment, etc.. The population has
recorded over 1.1 billion and is expected to amount to 1.5 billion in the
2020s even the growth rate is brought under strict control. Although the
general volume of majority of resources reserve available in our country is
quite large but per capita distribution of resources is relatively inadequate.
Per capita arable land in our country is only one third of the average level
of the world as a whole while for drinking water that figure is one fourth,
for forest, one fifth and for energy resource only one half. Environment
pollution and ecological degradation have imposed serious threat to
economic and social development.

    Over a long period of time in the past we have developed our economy by
consuming a large amount of resources. A big number of industries were run
with backward technology and poor management, resulting in poor quality of
products and low economic efficiency. Our country is among the states with
highest energy consumption per product unit and productive efficiency of
social labour is equivalent to only 5% of that in advanced countries. The
disparity is basically a kind of difference in level of science and
technology, in education and in management. If we still remain in short of a
sense of urgency and emergency and don’t try to catch up, the disparity
will be broadened and our country will have the danger of failure to achieve
objectives of our socialist modernization and we will not have the position
in the world that we should have.

    6. To realize modernization of science and technology is critical for
realization of economic modernization and remarkable increase of productive
efficiency. We should bring science and technology into maximum play in the
role as the first productive force. We should show respect to knowledge, to
talents and conscientiously transfer economic construction approach to more
reliance upon scientific and technological progress and improvement of
labour quality. This important decision suggests a historic change in
development strategy regarding science, technology, economy and the society
in our country and is most significant to realization of objectives
scheduled for the present century and through to the middle of the next
century.

    Looking into the future, we should have a clear-headed awareness of the
serious situation while we should all the more be conscious of our
advantages and meet those challenges with full confidence. By now our
country has owned relatively strong scientific and technological power and
has achieved a lot of successful experiences. More significantly the ten
years of reform and opening up has vitalized the development of both
economy and science and technology. So long as we conscientiously carry
out the basic guidelines of the party, give full play to the role of
science and technology as the first productive force, rouse ourselves up and
unite in struggle, we will surely be able to accelerate development of
social productivity, shake off poverty and backwardness, realize the
ambitious objectives of modernization and make socialism fully demonstrate
its superiority.
II. Strategies and Guiding Principles

    7. The basic strategy on scientific and technological development in our
country includes strengthening scientific and technological awareness of the
whole nation, improving quality of the labour, mobilizing and attracting
majority of the scientific and technological contingents to devote themselves
to the key battle for national economic construction, emphasizing
technological innovations, strenuously absorbing and utilizing advanced and
applicable technologies in the world and speeding up technological
innovations in all fields of the national economy. Over a long period of time
in the future development of science and technology should be mainly oriented
to large-scaled industrial technology construction and equipment modernization
while at the same time hi-tech and new technologies and industries based
thereupon should be developed in a planned and programmed manner, basic
researches should be strengthened steadily and scientific reserves should
also be reinforced.

    8. Strategic objectives of scientific and technological development in
our country must be based on the general objectives and arrangements for
national economic and social development. Modern sciences and technologies
must be applied to serve the purpose of reinforcing overall national
strength and improving people’s living standards with the focus of helping
solve problems arising from large-scaled modernized production of commodities
in both industry and agriculture, effectively control and alleviate pressures
of population, resources and environment. In several scientific and
technological fields where our country has advantages, we must be bold in
making innovations, maintain the tendency of development and continue to
hold certain position upon the advanced-list of the world. Breakthroughs
must be made in key fields of high and new technologies and basic researches
so that the advanced level of the world could be caught up with and some high
and new technology based industries that have international competitive power
could be established. By the year 2000 major industries of our country should
have their technological level caught up with that of the economically
developed countries in the 1970s or in the early years of 1980s. By the year
2020 they should have equivalent technological level with that of those
countries at the beginning of the 21st century so that the gap with the
advanced level could be further narrowed as a whole.

    As regards development of agricultural sciences and technologies, the
relationship between application expansion and research development must be
dealt with properly. Applicable and supplementary advanced technologies
should be spread. Service systems for the commodity economy which take
science and technology as pillar should be developed actively. Technological
level of agriculture should be heightened. Productive structure, commodity
structure and employment structure in agriculture should be readjusted in
an appropriate manner. At the same time agricultural scientific and
technological work should be strengthened substantially and relevant
disposition in depth should be properly arranged for so that strength could
be reserved for future development of agriculture. The projects of “Spark”,
“Bumper Harvest” and “Prairie Fire”, which are intended for agricultural
economic development, should continue to be implemented.

    Development of industrial science and technology should be focused on
rise of economic efficiency. Enterprises, especially large and medium-sized
enterprises, should attach great value to scientific and technological
progress. All industrial departments should emphasize utilization of modern
sciences and technologies, modern management technologies, particularly
electronic information technology to conduct technological innovations.
Technological level of machinery equipment should also be raised. Energy
should be saved, resource consumption should be cut down, quality should be
improved, variety of products should be developed, work efficiency and
competitive capacity of products should be improved, industrial structure
and product structure should be optimized so that our economy could change
from a situation of high consumption and low efficiency to that of low
consumption but high efficiency.

    With the view of creating a favourable natural and social environment for
our people, research and development of sciences and technologies concerning
social progress should be strengthened, particularly those sciences and
technologies in respect to population, medicine and hygiene, social services,
public infrastructure, environmental and biological protection, calamity
forecasting and prevention, etc..

    Development of high and new technologies should keep on with the
principle of “Restraining Objectives and Emphasizing Key Projects”. The state
should support those high and new technological researches as key areas that
could probably make significant breakthroughs and have promising future of
application. The state should substantially render aid and support to
development of high-and-new-technology-based industries. The state should
actively create conditions and conscientiously manage high-and-new-technology
development zones in a proper manner. International cooperation in and market
expansion of high and new technologies should be accelerated. Import and
export of high and new technologies should be enlarged so that international
resources can be utilized and new-and-high-technology-based industries in our
country can be directed to the approach of globalization. Projects of high
and new technology research and development such as “Attacking Hard-core
Programme”, “863 Programme” and “Torch Programme” should be actively promoted
so that breakthroughs can be made in some fields and commercialization,
industrialization and internationalization of high and new technologies can be
accelerated.

    Basic researches should comply with rule of scientific development
itself. Survey and tracking of several scientific frontiers should be
strengthened so that we could strive to be listed in the advanced
international ranks. Pragmatic basic researches should be targeted at
solutions to important scientific and technological problems related to
economic and social development. A selected and highly capable troop should
be maintained for basic and pragmatic basic researches and should win steady
support from the state. China Academy of Sciences and high education
colleges should be brought into full play and coordination and cooperation
between the two should be strengthened so as to be in the benefit of
education of talents and maintenance of vitality.

    Development of science and technology in the field of national defence
should comply with the principles of shortening battle line, focusing on key
projects, strengthening scientific and technological work and making
innovations step by step. Attention should be paid to research and
development of high technologies that are essential to improving performance
of important conventional weapons and developing new military capacity in the
future and of technologies that will lay a foundation for further development
of sciences and technologies in national defence. Highly sophisticated
technologies in national defence should be developed continuously and the
momentum of their progress should be maintained. Promotion of technological
modernization of weapons and military equipment should continue with a view
to achieving remarkable advance in hi-tech based conventional weapons,
maintaining the effectiveness of the capacity of nuclear deterrence for
self-defence, shortening the gap with advanced levels in the world, catching
up with the world advanced standards in some fields. Science and technology
in national defence of our country could then occupy certain position in the
kingdom of most advanced sciences and technologies in the world.

    9. The basic principle should be adhered to that “economic construction
must rely upon science and technology; scientific and technological work must
be oriented to economic construction”. The progress of science and technology
must be coordinated with the economic and social development. While this
basic principle is observed and carried out the following guiding principles
that have long-term implications should also be complied with and
implemented consciously:

    — The ideology that science and technology is the first productive
force should be observed conscientiously. Awareness of the importance of
science and technology should be disseminated among the whole party and all
the people so that the social atmosphere could be created in which knowledge
and talents are respected. Governments at different levels should
effectively strengthen leadership over scientific and technological work,
give full play to the role of scientific and technological personnel,
improve scientificness, democratization and institutionalization of
decision-making and create environment and conditions in favour of scientific
and technological development.

    — Reform and opening up should be adhered to. Science and technology
should be developed in the environment of reform and opening up. Reform of
scientific and technological system shall be coordinated with the reform of
economic system and political system. While the competitive mechanism and the
role of market should be brought into further play, governments should
strengthen their macro-control function and necessary collective management
measures and conduct intervention and coordination through policy-making,
legislative, administrative and economic means.

    — The principle of combining self-reliance, self-development and
introduction of technologies must be adhered to. Introduction, absorption
and innovation of advanced foreign technologies should be adopted as
an important approach to accelerated development of sciences and
technologies in our country.

    — The principle of “letting a hundred flowers blossom and letting a
hundred schools contend” must be adhered to. Socialist democracy should be
made full use of. Academic freedom should be safeguarded. Survey and
innovation must be encouraged.

    — The principle of combining popularization with the raising of
standards should be adhered to. While both comprehensive and in-depth
arrangements for scientific and technological development are made, the
mass technological innovations should be actively encouraged. Scientific
knowledge should be strenuously popularized and scientific awareness of
the workers should be improved continuously. A long-term struggle should
be conducted against ignorance and superstition.
III. Focal Development Areas

    10. Agricultural sciences and technologies. Agriculture is the foundation
of national economy. Sustained agricultural development is a decisive factor
for long stability and coordinated development of national economy and
concerns the overall situation of construction, reform and social stability.
As population increases year after year, arable land decreases continuously,
agricultural resources are severely deficient and biological environment
deteriorates continuously, extensive approach to agriculture will have no
way out.

    Therefore the principle of agricultural prosperity relying upon science
and technology must be adhered to. Science, technology and modern industry
should be taken for strong pillars. A modernized technological system
must be established for agricultural production. Ratio of land
utilization, productivity of labour and commercialization rate of
commodities should be raised remarkably so that traditional agriculture
could be transformed to modern intensive agriculture which is based on
modern science and technology.

    Focal areas of agricultural science and technology include the following:

    — Arable land available should be effectively protected and utilized to
the full. The total state land resources, particularly large pieces of
moderate and low harvest fields, should be brought under planned
transformation. Drought and semi-drought enduring agricultural technologies,
water saving and irrigating technologies should be strenuously developed.
The potentials of hilly land, grass land, water surface and large pieces of
beach should be developed and tapped. Water conservancy should be conducted.
Erosion of water and soil should be prevented from. Biological environment
should be protected. A reasonable compound biological system covering
farming, forestry, animal husbandry, sideline production and fishery should
be established.

    — More food sources should be developed. New protein resources and
mixed fodder should be developed. Multiple foodstuff producing and processing
technologies should be developed. All kinds of animal and plant resources
should be utilized comprehensively in order that food structure of citizens
in both cities and countryside could be improved.

    — Hybrid vigor and genetic engineering technologies should be utilized
for breeding of new varieties of plants and animals that are highly
productive, fine in quality and highly preventive. Farming skills and
husbandry technologies for, say, application of comprehensive and compound
fertilizer and water-saving irrigation should be studied and developed
intensively so that quantity and quality of agricultural products could be
raised substantially.

    — Agriculture and township enterprises should be equipped with
up-to-date industrial technologies. Technologies for preserving, keeping
fresh, processing, packing and comprehensive utilizing of agricultural
products should be developed in order that agricultural industrialization and
management could be facilitated and surplus labour in agriculture could be
transformed to a commodity economy in the countryside.

    11. Industrial sciences and technologies. Industry is a dominant
department in national economy. The technological level, productive capacity
and economic efficiency of industry in our country dominate the whole
economic development. Our country has established a preliminary industrial
system with relatively complete departments. But generally speaking the
backward situation of industrial technologies remains unchanged in basic
terms. It is observed that equipment, technologies and management skills
are so backward, designs are so out of date and the level of mechanization
and automatization is so low that performance and quality of products are
poor, energy and material consumption is high and economic efficiency and
international competitive capacity of the products are low.

    Therefore the main tasks for industrial scientific and technological
development are: to transform major industrial fields of our country with
modern sciences and technologies and particularly micro-electric technologies;
to readjust and optimize industrial structure; to extensively utilize
new technological theories and new designing methods; to renew equipment,
technologies and products; to develop new manufacturing technologies and
resources exploitation technologies; to raise the level of automation and
computerization in large-scale production; to enlarge the proportion of
domestically made sets of advanced technological equipment in major trades
of industry and improve management technological level and safe production
technological level; and consequently to raise economic efficiency, enrich

CIRCULAR OF THE GENERAL OFFICE OF THE STATE COUNCIL CONCERNING MATTERS RELATING TO STUDENTS STUDYING ABROAD

Category  EDUCATION Organ of Promulgation  The General Office of the State Council Status of Effect  In Force
Date of Promulgation  1992-08-12 Effective Date  1992-08-12  


Circular of the General Office of the State Council Concerning Matters Relating to Students Studying Abroad



(August 12, 1992)

    The vast numbers of students studying abroad love their motherland and are
willing to devote themselves to the prosperity and might of the Chinese
nation. They study hard and many of them have achieved remarkable success and
won honour abroad. Students studying abroad are the treasures of the State.
The Party and Government have always earnestly cared for, united with and
educated the mass of students studying abroad. The motherland wishes that they
can succeed in their studies and come home to make contributions and
achievements. With a view to implementing the spirit of the instructions of
the Party Central Committee on the work for going abroad to study, further
stepping up the work and serving better the cause of the socialist
construction of our country, a circular concerning matters relating to
students studying abroad is hereby made as follows:

    1. Students studying abroad are welcome to come home for a job. Those
studying abroad at public expense shall have an obligation to return to and
serve the country after succeeding in their studies. All students studying
abroad are welcome to come home regardless their political positions in the
past. They may have a short stay for academic exchange and cooperation, or
visit relatives and friends, or take a holiday. All those who made improper
remarks or did wrong things abroad are exempt from investigation. Even if
those who participated in the anti-Chinese Government organizations and were
engaged in activities of endangering the security, honour and interests of the
State, so long as they can withdraw from such organizations and no longer be
engaged in the anti-Government activities which violate the Constitution and
laws of our country, all of them are also welcome to come home for a job.

    2. Students studying abroad who hold an expired common service passport or
a common service passport for one exit-entry trip may be permitted to extend
or renew their passports. Applications to change a common service passport
into a common private passport may be accepted. Those who have acquired
foreign nationality shall offer an application to renounce their Chinese
nationality, which shall be handled in accordance with the Nationality Law of
our country, and they shall be regarded as Chinese of foreign nationality.

    3. Applications submitted by students studying abroad for extension or
renewal of their passports, or for renunciation of Chinese nationality shall
be accepted. If they are involved in financial and other unsettled affairs
with the originally sending departments or units, the students studying abroad
shall seek a settlement through consultation with such departments or units.
This will not affect the completion of the above-mentioned formalities.

    4. Students studying abroad may leave the country again after a short stay
home without renewing the formalities for approval, provided that they hold
our country’s valid passports bearing foreign re-entry visas.

    5. Sending units shall keep in close contact with students studying abroad
and take the initiative to care for their work and lives. Returned students
may, according to the principle of “mutual choice”, go back to their original
work units or seek jobs for themselves, may work in enterprises with foreign
investment, or establish their own enterprises. Exchange and cooperation with
foreign countries is encouraged. Returned students may concurrently hold other
positions abroad with the content of the units to which they belong.

    6. Family members of students studying abroad shall be allowed to visit
them abroad if they so apply for. The public security organs shall examine the
applications according to the Law of the People’s Republic of China on the
Control of the Exit and Entry of Citizens.

    7. Each locality and each department shall, in the spirit of this
Circular, adopt specific measures to make it convenient for students studying
abroad to come home, simplify entry and exit formalities and make proper
arrangements for work and lives of returned students.

    8. In places where returned students live concentratedly, local
governments, departments concerned or social organizations concerned shall, in
the light of actual need, set up service institutions for students studying
abroad, which help students studying abroad deal with relevant affairs and
provide them with various services.

    9. Our country’s embassies and consulates abroad shall represent the State
in handling matters relating to studying abroad. They shall protect the
legitimate rights and interests of students studying abroad, help them in
their study, research, work and daily lives, relieve them of worries and solve
their problems and timely introduce our country’s condition. Education shall
be given to students studying abroad for the purpose of urging them to observe
the laws of the residing countries, studying hard, respecting themselves,
getting on well with people in the residing countries, loving the motherland,
maintaining the honour and interests of the country and wining glory for the
country.






PROVISIONAL REGULATIONS ON CONSUMPTION

Category  TAXATION Organ of Promulgation  The State Council Status of Effect  In Force
Date of Promulgation  1993-12-13 Effective Date  1994-01-01  


Provisional Regulations of the People’s Republic of China on Consumption


Appendix: CONSUMPTION TAXABLE ITEMS AND TAX RATES (TAX AMOUNTS) TABLE

Tax

(Adopted at the 12nd Executive Meeting of the State Council on November

26, 1993, promulgated by Decree No.135 of the State Council of the People’s
Republic of China on December 13, 1993 and effective as of January 1, 1994)

    Article 1  All units and individuals engaged in the production,
sub-contracting for processing or the importation of consumer goods prescribed
by these Regulations (hereinafter referred to as ‘taxable consumer goods’)
within the territory of the People’s Republic of China are taxpayers of
Consumption Tax (hereinafter referred to as ‘taxpayers’) and shall pay
Consumption Tax in accordance with these Regulations.

    Article 2  The taxable items, tax rates (tax amounts) of Consumption Tax
shall be determined in accordance with the Consumption Tax Taxable Items and
Tax Rates (Tax Amounts) Table attached to these Regulations.

    Any adjustments to the Consumption Tax taxable items, tax rates (tax
amounts) shall be determined by the State Council.

    Article 3  For taxpayers dealing in taxable consumer goods with different
tax rates, the sales amounts and sales volumes for the taxable consumer goods
with different tax rates shall be accounted for separately. If the sales
amounts and sales volumes have not been accounted for separately or if the
taxable consumer goods with different tax rates are combined into a whole set
of consumer goods for sales, the higher tax rate shall apply.

    Article 4  Taxable consumer goods produced by the taxpayer shall be
subject to tax upon sales. For self-produced taxable consumer goods for the
taxpayer’s own use in the continuous production of taxable consumer goods, no
tax shall be assessed; tax shall be assessed when the goods are transferred
for other use.

    For taxable consumer goods sub-contracted for processing, the tax shall be
collected and paid by the sub-contractor upon delivery to the contractor. For
taxable consumer goods sub-contracted for processing used by the contractor
for the continuous production of taxable consumer goods, the tax paid can be
credited in accordance with the regulations.

    Imported taxable consumer goods shall be subject to tax upon import
declaration.

    Article 5  The computation of tax payable for Consumption Tax shall follow
either the rate on value or the amount on volume method. The formulas for
computing the tax payable are as follows:

    The tax payable computed under the rate on value mentod

                          
= Sales amount * Tax rate

    The tax payable computed under the amount on volume mentod

                          
= Sales volume * Tax amount per unit

    For taxable consumer goods sold by taxpayer where the sales amounts are
computed in foreign currencies, the taxable amounts shall be converted into
Renminbi according to the exchange rates prevailing in the foreign exchange
market.

    Article 6  The “sales amount” as stipulated in Article 5 of these
Regulations shall be the total consideration and other charges receivable from
the buyer for the taxable consumer goods sold by the taxpayer.

    Article 7  Self-produced taxable consumer goods for the taxpayer’s own use
that shall be subject to tax in accordance with the stipulations of the first
paragraph in Article 4 of these Regulations shall be assessed according to the
selling price of similar consumer goods produced by the taxpayer. If the
selling price of similar consumer goods is not available, the tax shall be
assessed according to the composite assessable value. The formula for
computing the composite assessable value is as follows:

    Composite assessable value = (Cost + Profit) / (1 – Consumption Tax rate)

    Article 8  Taxable consumer goods sub-contracted for processing shall be
assessed according to the selling price of similar consumer goods of the
sub-contractor. If the selling price of similar consumer goods is not
available, the tax shall be assessed according to the composite assessable
value. The formula for computing the composite assessable value is as follows:

    Composite assessable value

      = (Cost of material + Processing fee) / (1 – Consumption Tax rate)

    Article 9  Imported taxable consumer goods which adopt the rate on value
method in computing the tax payable shall be assessed according to the
composite assessable value. The formula for computing the composite assessable
value is as follows:

    Composite assessable value

    = (Customs dutiable value + Customs Duty) / (1 – Consumption Tax rate)

    Article 10  Where the taxable value of the taxable consumer goods of the
taxpayer is obviously low and without proper justification, the taxable value
shall be determined by the competent tax authorities.

    Article 11  For taxpayers exporting taxable consumer goods, the
Consumption Tax shall be exempt, except as otherwise determined by the State
Council. The measures for exemption of exported taxable consumer goods shall
be regulated by the State Administration for Taxation.

    Article 12  Consumption Tax shall be collected by the tax authorities.
Consumption Tax on the importation of taxable consumer goods shall be
collected by the customs office on behalf of the tax authorities.

    Consumption Tax on taxable consumer goods brought or mailed into China by
individuals shall be levied together with Customs Duty. The detailed measures
shall be formulated by the Tariff Policy Committee of the State Council
together with the relevant departments.

    Articie 13  Taxpayers selling taxable consumer goods and self-producing
taxable consumer goods for their own use, except otherwise as determined by
the State, shall report and pay tax to the local competent tax authorities
governing the taxpayers.

    For taxable consumer goods sub-contracted for processing, the Consumption
Tax due shall be paid to the local competent tax authorities where the
sub-contractors are located.

    For imported taxable consumer goods, the tax shall be reported and paid by
the importers or their agents to the customs offices where the imports are
declared.

    Article 14  The Consumption Tax assessable period shall be one day, three
day, five days, ten days, fifteen days or one month. The actual assessable
periods of the taxpayers shall be separately determined by the competent tax
authorities according to the magnitude of the tax payable of the taxpayers;
tax that cannot be assessed in regular periods can be assessed on a
transaction-by-transaction basis.

    Taxpayers that adopt one month as an assessable period shall report and
pay tax within ten days following the end of the period. If an assesable
period of one day, three days, five days, ten days or fifteen days is adopted,
the tax shall be prepaid within five days following the end of the period, and
a monthly return shall be filed with any balance of tax due settled within ten
days from the first day of the following month.

    Article 15  Taxpayers importing taxable consumer goods shall pay tax
within seven days after the completion and issuance of the tax payment
certificates by the customs office.

    Article 16  The collection and administration of Consumption Tax shall be
conducted in accordance with the relevant provisions of the Law of the
People’s Republic of China on Tax Collection and Administration and these
Regulations.

    Article 17  The collection of Consumption Tax from foreign investment
enterprises and foreign enterprises shall be conducted in accordance with the
resolutions of the Standing Committee of the National People’s Congress.

    Article 18  The Ministry of Finance shall be responsible for the
interpretation of these Regulations and for the formulation of the rules for
the implementation of these Regulations.

    Article 19  These Regulations shall come into effect from January 1, 1994.
The relevant regulations of the State Council regarding the collection of
Consumption Tax prior to the promulgation of these Regulations shall be
superseded on the same date.

Appendix: CONSUMPTION TAXABLE ITEMS AND TAX RATES (TAX AMOUNTS) TABLE


        Taxable Items            Scope
of charge    Tax Unit   Tax Rate/Amount

    I. Tobacco

    1. Grade A cigarettes        Including Imported                  
45%

                                
Cigarettes

    2. Grade B cigarettes                                            
40%

    3. Cigars                                                        
40%

    4. Cut tobacco                                                    30%

   II. Alcoholic drinks and

       alcohol                                          

    1. White spirits made from                                        25%

       cereal

    2. White spirits made from                                        15%

       potatoes

    3. Yellow spirits                                  
ton           240yuan

    4. Beer                                            
ton           220yuan

    5. Other alcoholic drinks                                        
10%

    6. Alcohol                                                        5%

  III. Cosmetics                 Including
cosmetics                  30%

                                
sets

   IV. Skin-care and hair-care                                        17%

       products

    V. Precious jewelry and      Including all kinds of              
10%

       precious jade and stones  gold, silver, jewelry,

                                
and precious stone

                                
ornaments

   VI. Firecrackers and                                              
15%

       fireworks

  VII. Gasoline                                        
litre         0.2yuan
VIII. Diesel oil                                      
litre         0.1yuan

   IX. Motor vehicle tyres                                            10%

    X. Motorcycles                                                    10%

   Xl. Motor Cars

    1. Those with a cylinder                                          8%

         capacity (i.e. emission

         capacity) of more than

         2,200 ml (including

         2,200 ml)

       Those with a cylinder                                          5%

         capacity of between

         1,000-2,200 ml

         (including 1,000 ml)

       Those with a cylinder                                          3%

         capacity of less than

         1,000 ml

    2. Cross-country vehicles

         (four-wheel drive)

       Those with a cylinder                                          5%

         capacity of more than

         2,400 ml (including

         2,400 ml)

       Those with a cylinder                                          3%

         capacity of less than

         2,400 ml

    3. Minibuses and vans        less than 22 seats

       Those with a cylinder                                          5%

         capacity of more than

         2,000 ml (including

         2,000 ml)

       Those with a cylinder                                          3%

         capacity of less than

         2,000 ml








CIRCULAR OF THE STATE COUNCIL CONCERNING THE STRICT EXAMINATION AND APPROVAL AND CHECKS ON VARIOUS DEVELOPMENT ZONES

Category  SPECIAL ECONOMIC ZONES AND COASTAL ECONOMIC DEVELOPMENT ZONES Organ of Promulgation  The State Council Status of Effect  In Force
Date of Promulgation  1993-04-28 Effective Date  1993-04-28  


Circular of the State Council Concerning the Strict Examination and Approval and Checks on Various Development Zones



(Promulgated by the State Council on April 28, 1993)

    It is one of the important measures of China’s reform and opening-up
policy to set up rationally distributed development zones in places where
conditions permit, concentrate the effort in developing their infrastructure
construction, put into effect preferential policies and create a good
investment environment in order to attract foreign investment. Practice shows
that this is an effective measure and should be maintained in the future.
However, since last year there has been a boom in development zones with
increasing numbers involved in a wider range of activities. As a result, they
have taken over large plots of cultivated land and needed considerable
funding. It is obvious that they have now gone beyond practical needs and,
indeed, economic endurance. In a few places, the tax and land laws issued by
the State are ignored and governments of various levels have exceeded their
authority to make and issue tax-free measures without permission, which has
caused harmful effects. Without strict and resolute measures to check this
trend, it will aggravate the shortage of funding, energy resources,
communications and transportation and supply of raw materials, which will
effect the normal running of the national economy and the healthy development
of opening to the outside world. The following circular is hereby issued
concerning this issue.

    1. Development zones should follow a double level system of examination
and approval — the State Council and the people’s government of provinces,
autonomous regions and municipalities directly under the Central Government.
The people’s governments at various levels under the provinces, autonomous
regions and municipalities under the Central Government cannot examine and
approve the establishment of various development zones.

    2. The State Council has the authority to examine and give approval for
the establishment of economic technology development zones, bonded areas,
hi-tech industrial development zones, state tourist and holiday zones and
frontier economic cooperation zones. If any of the above-mentioned development
zones are to be set up, the people’s government of the concerned province,
autonomous region or municipality directly under the Central Government and
the department of the State Council in charge of the project should guide the
primary planning and the study of its feasibility, then report to the State
Council.

    3. In order to attract foreign investment to develop projects in industry,
agriculture, international tourism and hi-tech industry, the people’s
governments of provinces, autonomous regions and municipalities directly under
the Central Government can, according to local resources, practical needs and
conditions, approve the establishment of a small number of development zones
(tourist and holiday zones), make related preferential policies within the
limit of their authority, and report to the State Council. But the development
zones set up with the approval of the people’s governments of the provinces,
autonomous regions and municipalities directly under the Central Government
cannot continue to use the post_title and policy of the development zones set up
with the approval of the State Council.

    4. The examination and approval of development zones should strengthen
overall planning and rational distribution, and pay attention to
socio-economic efficiency. The government should strictly control the areas of
development zones and emphasize that such projects should actually result in
development. It will insist that progress on such projects should only be made
according to the capability of those involved to develop the plot, build and
make profits. The government should examine and approve the land strictly
according to the law, save land resources and strictly control the occupation
of cultivated land. In principal, cultivated land within the basic farmland
protective region is not to be occupied.

    5. Every region should carry out an inspection of the various development
zones set up without the approval of the State Council or the people’s
governments of provinces, autonomous regions and municipalities directly under
the Central Government. The government should firmly and resolutely terminate
approval for the continued development of zones where the basic construction
conditions are lacking, the project or funding is unsettled, too much land is
occupied or the land is occupied without use. The land should then be returned
to the peasants. To abandon cultivated land or leave a land uncultivated is
strictly forbidden.

    6. All regions and departments should uphold the State policies, laws and
regulations, strictly abide by the tax and land laws, and related policies and
regulations issued by the State. It is forbidden to ignore or exceed the
authority of the State and to make preferential policies, reduce tax or yield
interest in disguised form without permission. The people’s governments and
the department of the State Council concerned should strengthen supervision of
this issue.

    7. The people’s governments of provinces, autonomous regions and
municipalities directly under the Central Government should report before the
end of June 1993 to the General Office of the State Council on the inspection
work carried out on various development zones.






DECISION OF THE STANDING COMMITTEE OF THE NATIONAL PEOPLE’S CONGRESS REGARDING THE TREATMENT OF THE EXISTING HONG KONG LAWS ACCORDING TO ARTICLE 160 OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BASIC LAW

Category  SPECIAL ADMINISTRATIVE REGION Organ of Promulgation  The Standing Committee of the National People’s Congress Status of Effect  In Force
Date of Promulgation  1997-02-23 Effective Date  1997-02-23  


Decision of the Standing Committee of the National People’s Congress Regarding the Treatment of the Existing Hong Kong Laws According
to Article 160 of the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China



(Adopted at the 24th Meeting of the Standing Committee of the Eighth

National People’s Congress on February 23, 1997)

    The Basic Law of the Hong Kong Special Administrative Region of the
People’s Republic of China (hereinafter referred to as the Basic Law)
provides in its Article 160: “Upon the establishment of the Hong Kong Special
Administrative Region, the laws previously in force in Hong Kong shall be
adopted as laws of the Region except for those which the Standing Committee
of the National People’s Congress declares to be in contravention of this
Law. If any laws are later discovered to be in contravention of this Law, they
shall be amended or cease to have force in accordance with the procedure as
prescribed by this Law.” Article 8 of the same Law provides: “The laws
previously in force in Hong Kong, that is, the common law, rules of equity,
ordinances, subordinate legislation and customary law shall be maintained,
except for any that contravene this Law, and subject to any amendment by the
legislature of the Hong Kong Special Administrative Region.” According to the
aforesaid provisions, and having deliberated the suggestions by the
Preparatory Committee for the Hong Kong Special Administrative Region
regarding the treatment of the laws previously in force in Hong Kong, the
24th Meeting of the Eighth National People’s Congress hereby makes the
following decisions:

    1. The laws previously in force in Hong Kong, including the common law,
rules of equity, ordinances, subordinate legislation and customary law, shall
be adopted as laws of the Hong Kong Special Administrative Region, except for
those contravening the Basic Law.

    2. The ordinances and subordinate legislation previously in force in Hong
Kong, which are listed in Appendix I of this Decision, shall not be adopted
as laws of the Hong Kong Special Administrative Region for their contravening
the Basic Law.

    3. Some provisions of certain ordinances and subordinate legislation
previously in force in Hong Kong, which are listed in Appendix II of this
Decision, shall not be adopted as laws of the Hong Kong Special
Administrative Region for their contravening the Basic Law.

    4. The laws previously in force in Hong Kong which have been adopted as
laws of the Hong Kong Special Administrative Region shall, starting July 1,
1997, make necessary modification, adaptation, restriction or exception in
applying, so as to tally with the relevant provisions of the Basic Law and
the status of Hong Kong after the resumption of the exercise by the People’s
Republic of China of the sovereignty over Hong Kong. For instance, the
application of the New Territories Land (Exemption) Ordinance shall conform
to the above-mentioned principles.

    In addition to the aforesaid principles, among the ordinances and
subordinate legislation previously in force,

    (1) If any laws concerning foreign affairs related with the Hong Kong
Special Administrative Region are inconsistent with any national law in force
in Hong Kong, the latter shall prevail, with conformation with the
international rights and obligations which the Central People’s Government
enjoys or bears.

    (2) Any provisions granting privileges to Britain or other nations or
regions of the British Commonwealth shall not be maintained, except for those
reciprocity provisions between Hong Kong and Britain or other nations or
regions of the British Commonwealth.

    (3) As for provisions concerning the rights, immunity and duties of
military forces stationed to Hong Kong by Britain, those not contravening the
Basic Law and the Garrison Law of the Hong Kong Special Administrative Region
of the People’s Republic of China shall be maintained and apply to the
military forces stationed to Hong Kong by the Central People’s Government of
the People’s Republic of China.

    (4) Provisions concerning English language’s higher authenticity than
Chinese language shall be interpreted as both of them are formal languages.

    (5) Provisions containing citations of British laws may continue to be
referred to and apply during the transition process before any amendment has
been made to them, provided that they do not impair the sovereignty of the
People’s Republic of China or contravene the Basic Law.

    5. Unless the context otherwise requires, the laws previously in force in
Hong Kong adopted as laws of the Hong Kong Special Administrative Region
under Article 4 of this Decision shall have their post_titles or expressions
interpreted and applied in accordance with the substitution principles
provided for in Appendix III.

    6. Any laws previously in force in Hong Kong adopted as laws of the
Hong Kong Special Administrative Region may be amended or invalidated in
accordance with the procedures stipulated by the Basic Law, if, in the
future, they are discovered to contravene the Basic Law.

    Appendix I

    The following ordinances and subordinate legislation among the laws
previously in force in Hong Kong shall not be adopted as laws of the Hong
Kong Special Administrative Region because of their contravening the Basic
Law:

    1. Trustees (Hong Kong Government Securities) Ordinance (Chapter 77,
Laws of Hong Kong);

    2. Application of English Law Ordinance (Chapter 88, Laws of Hong Kong);

    3. Foreign Marriage Ordinance (Chapter 180, Laws of Hong Kong);

    4. Chinese Extradition Ordinance (Chapter 235, Laws of Hong Kong);

    5. Colony Armorial Bearings (Protection) Ordinance (Chapter 315, Laws of
Hong Kong);

    6. Secretary of State for Defence (Succession to Property) Ordinance
(Chapter 193, Laws of Hong Kong);

    7. Royal Hong Kong Regiment Ordinance (Chapter 199, Laws of Hong Kong);

    8. Compulsory Service Ordinance (Chapter 246, Laws of Hong Kong);

    9. Army and Royal Air Force Legal Services Ordinance (Chapter 286, Laws
of Hong Kong);

    10. British Nationality (Miscellaneous Provisions) Ordinance
(Chapter 186, Laws of Hong Kong);

    11. British Nationality Act 1981 (Consequential Amendments) Ordinance
(Chapter 373, Laws of Hong Kong);

    12. Electoral Provisions Ordinance (Chapter 367, Laws of Hong Kong);

    13. Legislative Council (Electoral Provisions) Ordinance (Chapter 381,
Laws of Hong Kong); and

    14. Boundary and Election Commission Ordinance (Chapter 432, Laws of
Hong Kong).

    Appendix II

    Certain provisions of the following ordinances and subordinate
legislation among the laws previously in force in Hong Kong shall not be
adopted as laws of the Hong Kong Special Administrative Region because of
their contravening the Basic Law:

    1. The definition of “permanent residents of Hong Kong” in Section 2, and
the provisions of “permanent residents of Hong Kong” in Appendix 1,
Immigration Ordinance (Chapter 115, Laws of Hong Kong);

    2. Any provisions for the implementation in Hong Kong of the British
Nationality Act;

    3. Provisions concerning election in Urban Council Ordinance
(Chapter 101, Laws of Hong Kong);

    4. Provisions concerning election in Regional Council Ordinance
(Chapter 385, Laws of Hong Kong);

    5. Provisions concerning election in District Boards Ordinance
(Chapter 366, Laws of Hong Kong);

    6. Subordinate legislation A, Urban Council, Regional Council and Board
Election Expenses Order and subordinate legislation C, Resolution of the
Legislative Council, of Corrupt and Illegal Practices Ordinance (Chapter 288,
Laws of Hong Kong);

    7. Provisions concerning the interpretation and the purpose of the
Ordinance in Section 2(3), provisions concerning the “affection to previous
law” in Section 3 and provisions concerning the “interpretation of laws in
the future” in Section 4, of Hong Kong Bill of Rights Ordinance (Chapter 383,
Laws of Hong Kong);

    8. Provisions concerning the Ordinance’s overriding position in
Section 3(2), of Personal Data (Privacy) Ordinance (Chapter 486, Laws of Hong
Kong);

    9. Major amendments, having been made since July 17, 1992, to the
Societies Ordinance (Chapter 151, Laws of Hong Kong); and

    10. Major amendments, having been made since July 27, 1995, to the Public
Order Ordinance (Chapter 245, Laws of Hong Kong).

    Appendix III:

    The laws previously in force in Hong Kong adopted as laws of the Hong
Kong Special Administrative Region shall generally have their post_titles and
expressions interpreted and applied in accordance with the following
substitution principles:

    1. Any reference of “the Queen”, “royal”, “the British Government”,
“Secretary of State” or other similar post_titles or expressions shall be regarded
as referring to the central or other competent authorities of China, if the
provisions are concerning the Hong Kong land use right or involving the
affairs under the central administration or the relationship between the Hong
Kong Special Administrative Region and the central authorities prescribed by
the Basic Law; in other context, they shall be regarded as referring to
the government of the Hong Kong Special Administrative Region.

    2. Any reference of “the Queen in Privy Council” or the “Privy Council”
shall be regarded as referring to the Court of Final Appeal of the Hong Kong
Special Administrative Region, if the provisions are concerning the right of
appeal; in other context, it shall be treated in accordance with the
provisions of the preceding paragraph.

    3. Any government organizations or semi-governmental organizations which
have their name preceded by “royal” shall delete the word “royal” and
regarded as organizations of the Hong Kong Special Administrative Region.

    4. Any reference of “this colony” shall be regarded as referring to the
Hong Kong Special Administrative Region; any provisions concerning the
territories of Hong Kong shall be applied after relevant interpretations have
been made in accordance with the map of the administrative division of the
Hong Kong Special Administrative Region published by the State Council.

    5. Any reference of “Supreme Court” and “High Court” shall be regarded as
respectively referring to the High Court and the Court of First Instance of
the High Court.

    6. Any reference of “Governor”, “Governor in Executive Council”, “Chief
Secretary”, “Attorney General”, “Chief Justice”, “Secretary for Home Affairs”,
“Secretary for Constitutional Affairs”, “Commissioner of Customs and Excise”
or “Judges” shall be regarded as respectively referring to the Chief Executive
of the Hong Kong Special Administrative Region, Chief Executive in the
Executive Council, Administrative secretary, Secretary of Justice, Chief
Justice of the Court of Final Appeal or Chief Judge of the High Court,
Secretary for Home Affairs, Secretary for Electoral Affairs, Commissioner of
Customs and Excise and Judges of the High Court.

    7. Any post_titles or expressions in the Chinese texts of laws previously in
force in Hong Kong, of or regarding the Legislative Council, the judiciary or
the executive authorities or the personnel thereof shall be interpreted and
applied in accordance with relevant provisions of the Basic Law.

    8. Any reference of “the People’s Republic of China”, “China” or other
similar post_titles or expressions shall be regarded as referring to the People’s
Republic of China including Taiwan, Hong Kong and Macao; any individual or
simultaneous reference of the mainland, Taiwan, Hong Kong or Macao shall be
regarded as referring to a part of the People’s Republic of China.

    9. Any reference of “foreign countries” or other similar post_titles or
expressions shall be regarded as referring to any country or region other
than the People’s Republic of China or, in accordance with the context of the
law or articles or sections, regarded as referring to “any area outside the
Hong Kong Special Administrative Region”; any reference of “foreigners” or
other similar post_titles or expressions shall be regarded as referring to any
persons other than citizens of the People’s Republic of China.

    10. Any provisions as “the stipulations of this ordinance shall not
prejudice nor may be regarded as prejudice to the rights of the Queen, her
crown prince or successor to the throne” shall be interpreted as “the
stipulations of this ordinance shall not prejudice nor may be regarded as
prejudice to the rights enjoyed by the Central Government or the government
of the Hong Kong Special Administrative Region according to the provisions of
the Basic Law and other laws.






CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON APPLICABLE RATE OF INCOME TAX FOR THE BRANCHES OF THE ENTERPRISES WITH FOREIGN INVESTMENT

The State Administration of Taxation

Circular of the State Administration of Taxation on Applicable Rate of Income Tax for the Branches of the Enterprises with Foreign
Investment

GuoShuiFa [1997] No.49

April 9, 1997

The state and local tax bureaus of various provinces, autonomous regions, municipalities directly under the Central Government and
municipalities separately listed on the State plan:

Recently, the issues on how to determine the applicable income tax rate for the branches established in the area within the territory
of our country where different rates of income tax exist by the enterprises with foreign investment under the Income Tax Law of the
People’s Republic of China on the Enterprises with Foreign Investment and Foreign Enterprises (hereinafter referred to as Tax Law)
have been enquired for many times by the local taxation institutions. In accordance with Article 5 and Article 7 of Law of Income
Tax and Article 71 of Rules for the Implementation of it, the above issues should be handled depending on the following situations:

I.

The branches established in our country by the enterprises with foreign investment and undertaking the production, commodity trade
and services are applied to the income tax rate of the local enterprises with the same trade. The headquarters of the foreign-funded
enterprises should pay the income tax of the branches on a consolidated basis.

II.

The profits of products by the enterprises with foreign investment which produce and sell the products in our country by their own
is applied to the income tax rate of the local enterprises in the area where the products are produced, no matter whether the enterprises
sell the products through the sales agent or not and no matter how the sales organizations square the account. The income tax should
be calculated and paid on a consolidated basis by their headquarters.

III.

The previous settlements opposite to this Circular can be adjusted according to the relevant provisions of this Circular from 1996.



 
The State Administration of Taxation
1997-04-09

 







INTERIM MEASURES ON THE ESTABLISHMENT OF CHINESE-FOREIGN EQUITY JOINT RESEARCH AND DEVELOPMENT INSTITUTIONS AND CHINESE-FOREIGN CONTRACTUAL JOINT RESEARCH AND DEVELOPMENT INSTITUTIONS

The State Science and Technology Commission

Interim Measures on the Establishment of Chinese-foreign Equity Joint Research and Development Institutions and Chinese-foreign Contractual
Joint Research and Development Institutions

the State Science and Technology Commission

September 10,1997

Chapter I General Provisions

Article 1

These Measures are formulated in accordance with the provisions of Article 36 of the Law of the People’s Republic of China on Progress
of Science and Technology for the purposes of safeguarding the lawful rights and interests of Chinese-foreign (overseas) equity joint
research and development institutions and Chinese-foreign (overseas )contractual joint research and development institutions (hereinafter
referred to as “Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions”), enhancing basic
research, applied research and experimental developments, and fostering international scientific and technological cooperation and
exchange.

Article 2

These Measures are applicable to Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions
established by foreign and overseas organizations or individuals (hereinafter referred to as “the foreign party”) with Chinese scientific
research institutes and research and development institutions of higher education institutions (hereinafter referred to as “the Chinese
party”) within the territory of the People’s Republic of China.

Article 3

A Chinese-foreign equity joint research development institution refers to a research and development institution which is jointly
established by a Chinese party and a foreign party on the basis of a joint venture agreement where both parties invest capital, equipment
and scientific and technological resources. The investment amount of the foreign party in a Chinese-foreign equity joint research
and development institution must account for no less than 25 per cent of the total investment amount. A Chinese-foreign equity joint
research and development institution shall have the qualification of an institution legal person.

Article 4

A Chinese-foreign contractual joint research and development institution refers to a research and development institution which is
established in cooperation by a Chinese party and a foreign party on the basis of a contract. A Chinese-foreign contractual joint
research and development institution shall not have the qualification of a legal person.

Article 5

The establishment of a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution shall abide
by the laws, regulations and policies of the People’s Republic of China and implement the principles of equity and mutual benefit,
honesty and trustworthiness, sharing of achievements, joint assumption of risk, protection of intellectual property and respect for
international practices.

Article 6

Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions shall, in the fields of natural
science and its interrelated scientific and technological fields, engage in basic research, applied research, high scientific and
technological research, social public welfare-related scientific research, and in technological developments and experimental developments
within the above mentioned fields.

Where a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution is to engage in production
or business operations, it must obtain approval from its competent department in advance, then separately undertake enterprise legal
person registration with the local administrative department for industry and commerce and apply for the relevant business license.

Article 7

To establish a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution, the foreign party
to the equity or cooperation shall supply advanced scientific and technological achievements, information materials and testing equipment
or send highly skilled scientific and technological personnel to participate in the joint research and development work.

Article 8

The State Science and Technology Commission shall be responsible for macro-administration, coordination and guidance in respect of
Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions throughout the country. The various
departments and directly affiliated organizations of the State Council shall centrally administer Chinese-foreign equity and Chinese-foreign
contractual joint research and development institutions within their respective departments. The science and technology commissions
of the provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed in
the State plan shall centrally administer Chinese-foreign equity and Chinese-foreign contractual join research and development institutions
within their respective administrative areas.

Chapter II Establishment, Alteration and Termination

Article 9

The establishment of a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution must meet
the following requirements:

(1)

complying with the overall arrangements of the State’s allocation of scientific and technological resources;

(2)

its research and development shall be in a direction which complies with technology and industry policies of the State;

(3)

possessing articles of association complying with China’s laws, regulations and policies;

(4)

possessing necessary scientific research funds, testing equipment, intelligence information and other scientific research requirements;

(5)

possessing a certain number of scientific research personnel;

(6)

possessing fixed premises and organizational structure;

(7)

other requirements stipulated by the competent department.

Article 10

The establishment of a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution shall be examined
and approved according to the following jurisdictions:

(1)

When a research and development institution under the jurisdiction of a department or a directly subordinate institution of the State
Council applies to establish a Chinese-foreign equity joint research and development institution, the matter shall be approved by
the competent department, and reported to the State Science and Technology Commission for examination and verification, and then
examined and approved by the Office of the State Commission for Public Service Structure and Establishment Administration.

(2)

When a research and development institution under the jurisdiction of a province, autonomous region, municipality directly under the
Central Government or municipality separately listed in the State plan applies to establish a Chinese-foreign equity joint research
and development institution, the matter shall be approved by the local competent department, and reported to the science and technology
commission of the province, autonomous region, municipality directly under the Central Government or municipality separately listed
in the State plan for examination and verification, and then examined and approved by the local departments for public service structure
and establishment administration.

(3)

When a research and development institution applies to establish a Chinese-foreign contractual joint research and development institution,
the matter shall be examined and approved by the competent department in accordance with the subordination framework, and then reported
to the science and technology committee at the same level for the record.

Article 11

To establish a Chinese-foreign equity joint research and development institution, the joint venture agreement shall specify the following
items:

(1)

the names, addresses and countries or regions of the two parties to the joint venture;

(2)

the name and domicile of the research and development institution;

(3)

the field, specialization and direction of research and development;

(4)

the total capital amount of the institution;

(5)

the means of investment, investment amounts and conditions for the transfer of investment in respect of all parties;

(6)

the organizational structure of the research and development institution;

(7)

the enpost_titlement to and sharing of scientific and technological achievements and intellectual properties;

(8)

the life of the joint venture and liquidation procedures after its termination;

(9)

liability for breach of contract;

(10)

measures for resolving disputes;

(11)

the language(s) to be used in the agreement and the conditions required for the agreement to take effect.

A feasibility proof and assessment report, the articles of association of the research and development institution and a capital verification
certificate shall be attached to the joint venture agreement.

Article 12

To establish a Chinese-foreign contractual joint research and development institution, the contractual venture contract shall specify
the following items:

(1)

the names, addresses and countries or regions of the two parties to the contractual venture;

(2)

the type of the research and development institution and its name and domicile;

(3)

the fields of scientific experimentation, research and development or technological innovations in which the institution is to engage;

(4)

the conditions of cooperation;

(5)

the means of cooperation;

(6)

the enpost_titlement to and sharing of scientific and technological achievements and intellectual properties;

(7)

the life of the contractual venture and relevant matters after its termination;

(8)

liability for breach of contract;

(9)

measures for resolving disputes;

(10)

the language(s) to be used in the contract and the conditions required for the contract to take effect.

A feasibility study report and the articles of association of the research and development institution shall be attached to the contract.

Article 13

No Chinese-foreign equity or Chinese-foreign contractual joint research and development institution may be established in any fields
which involve State security or vital interests where confidentiality is essential, or in any fields in which investment in China
by foreign or overseas organizations is prohibited in accordance with the laws, regulations or policies of the State.

Article 14

A Chinese-foreign equity joint research and development institution which is to be divided or merged, or to alter its articles of
association, relocate or amend its name, etc., must obtain approval from its original examination and approval organ. Its claims
and debts shall be borne by the altered research and development institution.

A Chinese-foreign contractual joint research and development institution which is to alter the contents of its contract must report
the matter to its original examination and approval organ for the record.

Article 15

A Chinese-foreign equity or Chinese-foreign contractual joint research and development institution may apply for renewal with its
original examination and approval organ 60 days before the expiry of the joint venture agreement or contract.

Article 16

To establish a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution, the two parties may
use currency, factories, equipment, instruments and other assets as investment; they may also use intellectual properties, scientific
and technological achievements, land-use rights and other intangible assets as investment. These assets shall be assessed by an assets
assessment institution recognized by the administration department of State-owned assets.

Chapter III Rights and Obligations

Article 17

A Chinese-foreign equity joint research and development institution shall enjoy the following rights:

(1)

enjoying legal person property rights;

(2)

formulating research and development plans, deciding research and development topics;

(3)

deciding internal organizational structures and personnel allocations;

(4)

employing scientific and technological personnel and deciding their wages and remuneration on its own;

(5)

obtaining intellectual properties and entering into technology transfer contracts with other parties in respect of these intellectual
properties.

Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions may apply to undertake science
and technology projects listed in State plans or science and technology projects commissioned by enterprises or society.

Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions meeting the requirements stipulated
by the State may, upon approval by the relevant departments, recruit students with masters or doctorate degree.

Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions may open their laboratories, research
centers, experimental bases, etc., to domestic and foreign parties.

Article 18

Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions shall, in accordance with the provisions
of the laws and regulations of the People’s Republic of China, stick to their research and development direction, and promote the
progress of science and technology, the transformation of scientific and technological achievements and the popularization of scientific
and technological knowledge.

Article 19

A Chinese-foreign equity joint research and development institution which employs scientific and technological personnel shall enter
into a contract of appointment with these personnel. The contract shall specify the appointment, dismissal, wage and remuneration,
welfare benefits, labor protection, personal insurance, intellectual properties and other issues. When appointing part-time personnel,
an agreement shall be concluded with the unit to which the personnel belong.

Article 20

For scientific and technological achievements and intellectual properties which result from the work of a Chinese-foreign equity or
Chinese-foreign contractual joint research and development institution, their enpost_titlement to and sharing shall be handled in accordance
with the provisions of the joint venture agreement or contractual contract. If no relevant provisions are included in the joint venture
agreement or contractual contract, the above-mentioned achievements shall be jointly owned by the two parties, and the Chinese party
shall enjoy priority right of usage and transfer.

Chapter IV Awards and Penalties

Article 21

The inventions, discoveries and other scientific and technological achievements which are completed by Chinese-foreign equity and
Chinese-foreign contractual joint research and development institutions within the Chinese territory may, subject to the recommendation
by the competent department, receive a State Natural Science Prize, Invention Prize or Scientific and Technological Progress Prize
of the People’s Republic of China.

Foreign joint venture partners and contractual venture partners in Chinese-foreign equity and Chinese-foreign contractual joint research
and development institutions, who have made an important contribution in promoting China’s scientific and technological advancement,
may be awarded an International Science and Technology Cooperation Prize in accordance with the provisions of Article 54 of the
Law of the People’s Republic of China on Progress of Science and Technology.

Article 22

Where a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution departs from its research
and development direction and violates the laws or regulations of China, it shall be ordered by the competent department to rectify
the situations within a prescribed time limit; if the rectification is ineffective, the institution shall be dismantled.

Where a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution infringes upon or steals
other’s intellectual properties or encroaches other’s technological and economic rights and interests, it shall bear the corresponding
legal liability.

Article 23

Where any of the relevant administrative departments or their staff neglect their duties, commit illegalities by fraudulent means
or for personal gains, or oppress or obstruct research and development activities, penalties shall be imposed in accordance with
the laws and administrative regulations.

Chapter V Supplementary Provisions

Article 24

Financial administration and accounting practices of Chinese-foreign equity and Chinese-foreign contractual joint research and development
institutions shall be governed in accordance with relevant provisions of the Ministry of Finance.

Article 25

Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions established before the promulgation
of these Measures shall undertake examination and approval procedures again in accordance with the provisions of these Measures.

Article 26

The State Science and Technology Commission shall be responsible for the interpretation of these Measures.

Article 27

These Measures shall enter into force as of the date of promulgation.



 
The State Science and Technology Commission
1997-09-10

 







CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION CONCERNING HANDLING THE ISSUES ON THE BUSINESS INCOME TAX OF ENTERPRISES WITH FOREIGN INVESTMENT WHEN FOREIGN INVESTMENT IS UNCOMPLETED

The State Administration of Taxation

Circular of the State Administration of Taxation Concerning Handling the Issues on the Business Income Tax of Enterprises with Foreign
Investment When Foreign Investment is Uncompleted

GuoShuiFa [1999] No.60

April 14,1999

The state taxation bureaus various provinces, autonomous regions, municipalities directly under the Central Government and municipalities
separately listed on the State plan, Shenzhen local Taxation Bureau:

In order to implement the preferential tax policy for the enterprises with foreign investment and reinforce the administration of
taxation, the issues on handling the problems of the income tax of the enterprises with foreign investment that the investment of
foreign investors is uncompleted are clarified as following according to the Law of Income Tax of the People’s Republic of China
on Enterprises with Foreign Investment and Foreign Enterprises:

I.

The situation that the investment of foreign investors of the enterprises with foreign investment is uncompleted means that foreign
investors of the enterprises with foreign investment do not fulfilled or fulfilled totally the investment obligations of registered
capital during the time limit confirmed in the relevant laws, the rules and regulations or the investment contract

II.

The enterprises with foreign investment which are cancelled legally the qualifications by the relevant departments resulting from
uncompleted investment of foreign investors are not applied taxation obligations prescribed in the tax law and provisions on the
income tax for the enterprises with foreign investment if they engage in the various businesses with the name of enterprises with
foreign investment. They should pay the business income tax under the relevant tax laws on the domestic-funded enterprises.

III.

The enterprises with foreign investment whose investment of foreign investors is uncompleted may pay the income tax under the tax
law and provisions for the enterprises with foreign investment before their qualifications are cancelled legally by the relevant
departments. The enterprises with foreign investment whose capital of the foreign partner cannot account for 25% of all investors’
capital in place should not enjoy the preferential income taxation.

IV.

If the enterprises with foreign investment without the qualification cancelled whose investment of foreign investors is uncompleted
can invest capital lacked or its capital accounts for 25% of all investors’ capital in place in later years, they can enjoy the
preferential policy of the lower tax rate from then on and the remaining term of derating tax term at fixed time since enterprise
profit-making year after verification by the local competent taxation authority. The preferential tax hereinbefore should not be
made up.

V.

The local taxation institutions should carry out strictly this Circular when they compute and collect the business income tax in 1998.
During the effective time prescribed in the second Paragraph of Article 31 in the Law of the People’s Republic of China on the
Administration of Tax Collection, the events concerning hereinabove before 1998 should be executed according to this Circular.



 
The State Administration of Taxation
1999-04-14

 







EXPERIMENTAL MEASURES FOR COMMERCIAL ENTERPRISES WITH FOREIGN INVESTMENT

19990617the State Council20040601

The State Economic and Trade Commission, the Ministry of Foreign Trade and Economic Cooperation

Decree of the State Economic and Trade Commission and the Ministry of Foreign Trade and Economic Cooperation

No.12

“Experimental Measures for Commercial Enterprises with Foreign Investment” is approved by the State Council of the People’s Republic
of China on June 17, 1999, and is promulgated now. This law is effective since promulgation.

Director of the State Economic and Trade Commission: Sheng Huaren

Minister of the Ministry of Foreign Trade and Economic Cooperation: Shi Gangsheng

June 25,1999

Experimental Measures for Commercial Enterprises with Foreign Investment

Article 1

These Measure are formulated in accordance with such laws and regulations as the Law of the People’s Republic of China’s on Chinese
and Foreign Equity Joint ventures and the Law of the People’s Republic of China on Chinese and Foreign Cooperative Joint Ventures
in order to deepen the opening-up policy, promote the revolution and development of commercial enterprises, propel the building of
domestic market and ensure the healthy and orderly implementation of pilots that widen commercial field and employ foreign investment.

Article 2

These Measures apply to equity or cooperative commercial enterprises established by foreign and Chinese companies, enterprises within
China (hereinafter referred to as jointly-operated commercial enterprises). The establishment of commercial enterprises wholly funded
by foreigners is not allowed temporarily.

Article 3

The jointly-operated commercial enterprises must adapt to the commercial development plans of the cities where they are located, be
able to introduce the advanced marketing and managing experience in the globe, stimulate the modernization of domestic commerce,
propel the export of domestic products, and bring economic and social benefits.

Article 4

The areas in which jointly-operated commercial enterprises may be established shall be prescribed by the State Council, presently
they are confined to provincial capitals, capitals of autonomous regions, municipalities directly under the Central Government, municipalities
separately listed on the State plan and special economic zone (hereinafter referred to as pilot areas).

Article 5

The investors of jointly-operated commercial enterprises must conform to the following conditions:

(1)

Foreign operators or the major ones of foreign operators in the jointly-operated commercial enterprises (hereinafter referred to as
foreign operators) shall be enterprises that possess comparatively strong economic power, advanced marketing skills and managing
experiences, wide international marketing network, good reputation and remarkable operating achievement and the capability of propelling
the export of China’s products through the established jointly-operated commercial enterprises. Foreign operators who apply to establish
retail-oriented jointly operated commercial enterprises shall possess an average sale of more than 2 billion US Dollars three years
before application and asset of more than 0.2 billion US Dollars one year before application. Foreign operators who apply to establish
wholesale-oriented jointly-operated commercial enterprises shall possess an average wholesale volume of more than 2.5 billion US
Dollars 3 years before application and asset of more than 0.3 billion US Dollars one year before application.

(2)

The Chinese operators or the major ones of Chinese operators (hereinafter referred to as Chinese operators) shall be current enterprises
that possess comparatively strong economic power and operating capacity. Their asset shall be more than 50 million RMB (30 million
RMB in the middle and western areas) one year before application. If Chinese operators are commercial enterprises, the average sale
of the three years before application shall be more than 0.3 billion RMB (0.2 billion in the middle and western areas); if they are
foreign trade enterprises, the average self-operated import and export volume three years before application shall be more than 50
million US Dollars (the export volume shall be no less than 30 million US Dollars).

Article 6

Jointly-operated commercial enterprises must conform to the following conditions:

(1)

conforming to the relevant Chinese laws, regulations and provisions;

(2)

conforming to commercial development plans of the cities where they are located;

(3)

The registered asset of retail-oriented jointly-operated commercial enterprises shall not be less than 50 million RMB, that of those
in middle and western areas shall not be less than 30 million RMB; the registered asset of wholesale-oriented commercial enterprises
shall not be less than 80 million RMB, that of those in middle and western areas shall not be less than 60 million RMB.

(4)

If the jointly-operated commercial enterprises have the operation of more than 3 chain stores (except the grocery store for people’s
convenience, professional stores and exclusive stores), Chinese operators shall offer a proportion of more than 51% of the total
capital; if the jointly-operated commercial enterprises are in good operating condition, the foreign operators have purchased a large
quantity of domestic products and there is a possibility to take the advantage of foreign operators’ international marketing network
to promote the export of domestic products, foreign operators can hold the share after the approval of the State Council. Chinese
operators shall provide no less than 35% of the total capital in the jointly-operated commercial enterprises with no more than three
branch stores (including three) as well as in grocery store for people’s convenience, professional stores and exclusive stores which
are in chain operation. In the wholesale oriented jointly-operated commercial enterprises (including retail enterprises engaged in
wholesale business simultaneously), Chinese operators must offer a proportion of more than 51% of the total capital.

(5)

The branch store of the jointly-operated commercial enterprises are confined to the concatenate form that foreign and Chinese operators
both invest and operate directly. Other concatenate forms such as free chains or concessionary chains are prohibited temporarily.

(6)

The operating period shall not exceed 10 years, 40 years for the middle and western areas.

Article 7

Under the condition that foreign operators contract with jointly-operated commercial enterprises concerning the use of trademark and
trade name and technological transfer, the related expenses that foreign operators collect shall not exceed 0.3% of the enterprise’s
sale volume of the year and the limited period for collection is 10 years.

Article 8

Jointly-operated commercial enterprises shall be established according to the following procedure: Chinese operators shall submit
feasibility reports (fungible of project propositions) and relevant documents to economic and trade commissions (economic commissions,
planning and economic commissions, the same in the following part) in the pilot areas, which in conjunction with the competent domestic
trade departments shall report to the State Economic and Trade Commission according to the prescribed procedures. The State Economic
and Trade Commission shall examine and approve the reports after consulting the Ministry of Foreign Trade and Economic Cooperation.
After the feasibility reports (fungible of project propositions) have been approved, the foreign trade and economy departments in
the pilot areas shall submit the contracts and articles of associations to the Ministry of Foreign Trade and Economic Cooperation
according to the prescribed procedures, which shall examine and approve the contracts and articles of associations. Jointly-operated
commercial enterprises which have been approved shall, within one month since the date of receiving the approval certificate, register
with the State Administration for Industry and Commerce on the strength of the Approval Certificate for Enterprises with Foreign
Investment issued by the State Administration for Industry and Commerce.

Article 9

To establish jointly-operated commercial enterprises, the following documents shall be submitted:

I.

the declaring document on the study of feasibility

(1)

the feasibility report compiled by all operators (fungible of project proposition);

(2)

bank’s certification on property and credit, certificate of registration (photocopy), legal representative certificate (photocopy)
of all operators;

(3)

all operators’ annual asset and liability table, profit and loss table of the recent three years audited by accounting agency;

(4)

(if Chinese operator makes investment with State-owned property) the confirmation document of State-owned property managing departments
on the assessing report concerning Chinese operator’s investing State-owned property;

(5)

the species of merchandises that the planned jointly-operated commercial enterprises will operate;

(6)

other related documents.

II.

the declaring documents concerning contract and articles of association

1.

the declaring documents on the study of feasibility and the approving documents thereof;

2.

contracts and articles of association of the planned jointly-operated commercial enterprises signed by accredited representatives
of all operative parties;

3.

list of import and export merchandises;

4.

the members of the board of directors of the planned jointly-operated commercial enterprises and the accreditation of directors from
all parties;

5.

the notice of the approval of enterprise’s appellation provided by the State Administration for Industry and Commerce;

6.

other related documents.

Article 10

If State-owned circulation enterprises invest to establish jointly-operated commercial enterprises, the assessing setups accredited
by State-owned property management departments shall make scientific and righteous assessment on the tangible and intangible property
invested in the light of the Measures on the Management of Assessment of State-owned Property. The assessment result serves as the
foundation for evaluating State-owned property after the confirmation of State-owned property management departments at or above
province level.

Article 11

If the established jointly-operated commercial enterprises expect to involve wholesale business, establish branch stores or replace
the cooperative party, the Ministry of Foreign Trade and Economic Cooperation shall conduct examination and approval after consulting
the State Economic and Trade Commission; other changes of the established jointly-operated commercial enterprises shall be examined
and approved by the original examining and approving organ according to the current provisions concerning enterprises with foreign
investment. Jointly operated commercial enterprises shall submit the following documents:

(1)

application report;

(2)

the report on enterprise’s operating situation;

(3)

the report on the property evaluation;

(4)

the report and certification on the enterprise’s export situation;

(5)

related decisions of the board of directors;

(6)

agreement on the revision of contract and provision;

(7)

other related documents. The enterprise shall register with the State Administration for Industry and Commerce and undergo the procedures
of revision within one month since the date when the revised contract and articles of association are approved.

Article 12

The operation scopes of jointly-operated commercial enterprises are:

1.

the operation scopes of retail-oriented jointly-operated commercial enterprises are:

(1)

commercial retail operation (including sell on a commission basis or sell by mail);

(2)

organize the export business of domestic products;

(3)

export and import business of its own merchandises;

(4)

the related matching services.

2.

the operation scopes of wholesale-oriented jointly-operated commercial enterprises are: wholesale of domestic and self-operated import
merchandises within China, organizing the export of domestic products.

Article 13

Retail-engaged jointly-operated commercial enterprises can also operate wholesale business.

Article 14

Jointly-operated commercial enterprises are prohibited form engaging in acting business of export and import .

Article 15

Jointly-operated commercial enterprises, operating merchandises on which the State has special provisions as well as those export
and import merchandises with quota and license involved, shall undergo examining and approving procedure according to related provisions
of the State. The annual import volume of the jointly operated commercial enterprise shall not exceed 30% of its annual selling volume.

Article 16

Jointly-operated commercial enterprises shall conform to laws and regulations of the People’s Republic of China and subject themselves
to the jurisdiction of China’s laws and regulations. Their normal operating activities and lawful rights and interests are protected
by China’s laws and regulations. If the activities of jointly operated commercial enterprises violate laws or regulations of China,
the enterprises shall be punished in accordance with the relevant laws and regulations of China.

Article 17

These Measure shall be strictly followed in the establishment of jointly-operated commercial enterprises at all localities. The Sate
Economic and Trade Commission, the Ministry of Foreign Trade and Economic Cooperation, the State Administration for Industry and
Commerce shall investigate and deal with those acts violating these Measure. All local economic and trade commissions, foreign trade
and economic department and related departments shall investigate the pilots timely, summarize experience earnestly and solve the
problems appropriately.

Article 18

The State Economic and Trade Commission, the Ministry Foreign Trade and Economic Cooperation, the State Administration for Industry
and Commerce or their authorized organs shall conduct supervision and administration on the commercial enterprises with foreign investment
in accordance with law.

Article 19

The establishment of jointly-operated commercial enterprises in the mainland of China by investors from Hong Kong Special Administrative
Region, Macao and Taiwan shall be deal with in accordance with these Measures.

Article 20

The State Economic and Trade Commission and the Ministry of Foreign Trade and Economic Cooperation are responsible for the interpretation
of these Measure.

Article 21

These Measures enter into force as of the date of promulgation.



 
The State Economic and Trade Commission, the Ministry of Foreign Trade and Economic Cooperation
1999-06-25

 







CONTRACT LAW OF THE PEOPLE’S REPUBLIC OF CHINA

The National People’s Congress

Order of the President of the People’s Republic of China

No.15

Contract Law of the People’s Republic of China has been adopted at the Second Session of the Ninth National People’s Congress on March
15, 1999, and is hereby promulgated, it will come into force as of October 1, 1999.

President of the People’s Republic of China Jiang Zemin

March 15, 1999

Contract Law of the People’s Republic of China

General Provisions

Chapter 1 General Provisions

Article 1

This Law is enacted in order to protect the lawful rights and interests of the contracting parties, to maintain social and economic
order, and to promote the process of socialist modernization.

Article 2

A contract in this Law refers to an agreement among natural persons, legal persons or other organizations as equal parties for the
establishment, modification of a relationship involving the civil rights and obligations of such entities.

Agreements concerning personal relationships such as marriage, adoption, guardianship, etc. shall be governed by the provisions in
other laws.

Article 3

Contracting parties shall have equal legal status, and no party may impose its will on the other party.

Article 4

The parties have the right to lawfully enter into a contract of their own free will in accordance with the law, and no unit or individual
may illegally interfere therewith.

Article 5

The parties shall adhere to the principle of fairness in deciding their respective rights and obligations.

Article 6

The parties shall observe the principle of honesty and good faith in exercising their rights and performing their obligations.

Article 7

In concluding and performing a contract, the parties shall comply with the laws and administrative regulations, respect social ethics,
and shall not disrupt the social and economic order or impair the public interests.

Article 8

A lawfully established contract shall be legally binding on the parties thereto, each of whom shall perform its own obligations in
accordance with the terms of the contract, and no party shall unilaterally modify or terminate the contract.

The contract established according to law is protected by law.

Chapter 2 Conclusion of Contracts

Article 9

In entering into a contract, the parties shall have appropriate capacities for civil rights and civil acts.

A party may appoint an agent to enter into a contract on its behalf in accordance with the law.

Article 10

The parties may use written, oral or other forms in entering into a contract.

A contract shall be in written form if the laws or administrative regulations so provide. A contract shall be concluded in written
form if the parties so agree.

Article 11

“Written form” refers to a form such as a written contractual agreement, letter, electronic data text(including a telegram, telex,
fax, electronic data exchange and e-mail)that can tangibly express the contents contained therein.

Article 12

The contents of a contract shall be agreed upon by the parties, and shall generally contain the following clauses:

(1)

post_titles or names and domiciles of the parties;

(2)

subject matter;

(3)

quantity;

(4)

quality;

(5)

price or remuneration;

(6)

time limit, place and method of performance;

(7)

liability for breach of contract; and

(8)

method to settle disputes.

The parties may conclude a contract by reference to a model text of each kind of contract.

Article 13

The parties shall conclude a contract in the form of an offer and an acceptance.

Article 14

An offer is an expression of an intent to enter into a contract with another person. Such expression of intent shall comply with the
following:

(1)

its contents shall be specific and definite;

(2)

it indicates that the offeror will be bound by the expression of intent in case of acceptance by the offeree.

Article 15

An invitation for offer is an expression of an intent to invite other parties to make offers thereto. Mailed price lists, public notices
of auction and tender, prospectuses and commercial advertisements, etc. are invitations for offer.

Where the contents of a commercial advertisement meet the requirements for an offer, it shall be regarded as an offer.

Article 16

An offer becomes effective when it reaches the offeree.

If a contract is concluded through data-telex, and a recipient designates a specific system to receive the date-telex, the time when
the data-telex enters such specific system shall be the time of arrival; if no specific system is appointed, the time when the data-telex
first enters any of the recipient’s systems shall be regarded as the time of arrival.

Article 17

An offer may be withdrawn. The withdrawal notice shall reach the offeree before or at the same time when the offer arrives.

Article 18

An offer may be revoked. The revocation notice shall reach the offeree before it has dispatched a notice of acceptance.

Article 19

An offer may not be revoked, if

(1)

the offeror indicates a fixed time for acceptance or otherwise explicitly states that the offer is irrevocable; or

(2)

the offeree has reasons to rely on the offer as being irrevocable and has made preparation for performing the contact.

Article 20

An offer shall lose efficacy under any of the following circumstances:

(1)

the notice of rejection reaches the offeror;

(2)

the offeror revokes the offer in accordance with the law;

(3)

the offeree fails to dispatch an acceptance before the expiration of the time limit for acceptance;

(4)

the offeree makes substantial changes to the contents of the offer.

Article 21

An acceptance is the expression of an intention to by the offeree to assent to the offer.

Article 22

The acceptance shall be made in the form of a notice, except where acceptance may be made by an act on the basis of customary business
practice or as expressed in the offer.

Article 23

An acceptance shall reach the offeror within the time limit prescribed in the offer.

Where no time limit is prescribed in the offer, the acceptance shall reach the offeror in accordance with the following provisions:

(1)

if the offer is made in dialogues, the acceptance shall be made immediately unless otherwise agreed upon by the parties;

(2)

If the offer is made in forms other than a dialogue, the acceptance shall reach the offeror within a reasonable period of time.

Article 24

Where an offer is made by letter or telegram, the time limit for acceptance shall accrue from the date shown in the letter or from
the date on which the telegram is handed in for dispatch. If no such date is shown in the letter, it shall accrue from the postmark
date on the envelope. Where an offer is made by means of instantaneous communication, such as telephone or facsimile, etc. the time
limit for acceptance shall accrue from the moment that the offer reaches the offeree.

Article 25

A contract is established when the acceptance becomes effective.

Article 26

An acceptance becomes effective when its notice reaches the offeror. If notice of acceptance is not required, the acceptance shall
become effective when an act of acceptance is performed in accordance with transaction practices or as required in the offer.

Where a contract is concluded in the form of date-telex, the time of arrival of an acceptance shall be governed by the provisions
of Paragraph 2, Article 16 of this Law.

Article 27

An acceptance may be withdrawn, but a notice of withdrawal shall reach the offeror before or at the same time when the notice of acceptance
reaches the offeror.

Article 28

Where an offeree makes an acceptance beyond the time limit for acceptance, the acceptance shall be a new offer except that the offeror
promptly informs the offeree of the effectiveness of the said acceptance.

Article 29

If the offeree dispatched the acceptance within the time limit specified for acceptance, and under normal circumstances the acceptance
would have reached the offeror in due time, but due to other reasons the acceptance reaches the offeror after the time limit for
acceptance has expired, such acceptance shall be effective, unless the offeror notifies the offeree in a timely manner that it does
not accept the acceptance due to the failure of the acceptance to arrive within the time limit.

Article 30

The contents of an acceptance shall comply with those of the offer. If the offeree substantially modifies the contents of the offer,
it shall constitute a new offer. The modification relating to the subject matter, quality, quantity, price or remuneration, time
or place or method of performance, liabilities for breach of contract and method of dispute resolution, etc. shall constitute the
substantial modification of an offer.

Article 31

If the acceptance does not substantially modifies the contents of the offer, it shall be effective, and the contents of the contract
shall be subject to those of the acceptance, except as rejected promptly by the offeror or indicated in the offer that an acceptance
may not modify the offer at all.

Article 32

Where the parties conclude a contract in written form, the contract is established when it is signed or sealed by the parties.

Article 33

Where the parties conclude the contract in the form of letters or data-telex, etc., one party may request to sign a letter of confirmation
before the conclusion of the contract. The contract shall be established at the time when the letter of confirmation is signed.

Article 34

The place of effectiveness of an acceptance shall be the place of the establishment of the contract.

If the contract is concluded in the form of data-telex, the main business place of the recipient shall be the place of establishment.
If the recipient does not have a main business place, its habitual residence shall be considered to be the place of establishment.
Where the parties agree otherwise, such agreement shall apply.

Article 35

Where the parties conclude a contract in written form, the place where both parties sign or affix their seals on the contract shall
be the place of establishment.

Article 36

Where a contract is to be concluded in written form as required by relevant laws and administrative regulations or as agreed by the
parties, and the parties failed to conclude the contract in written form, but one party has performed the principal obligation and
the other party has accepted it, the contract is established.

Article 37

Where a contract is to be concluded in written form, if one party has performed its principal obligation and the other party has accepted
it before signing or sealing of the contract, the contract is established.

Article 38

Where the State has issued a mandatory plan or a State purchasing order based on necessity, the relevant legal persons and the other
organizations shall conclude a contract between them in accordance with the rights and obligations as stipulated by the relevant
laws and administrative regulations.

Article 39

Where standard terms are adopted in concluding a contract, the party supplying the standard terms shall define the rights and obligations
between the parties abiding by the principle of fairness, and shall inform the other party to note the exclusion or restriction of
its liabilities in a reasonable way, and shall explain the standard terms upon request by the other party.

Standard terms are clauses that are prepared in advance for general and repeated use by one party, and which are not negotiated with
the other party when the contract in concluded.

Article 40

When standard terms are under the circumstances stipulated in Articles 52 and 53 of this Law, or the party which supplies the standard
terms exempts itself from its liabilities, increases the liabilities of the other party, and deprives the material rights of the
other party, the terms shall be invalid.

Article 41

If a dispute over the understanding of the standard terms occurs, it shall be interpreted in accordance with common understanding.
Where there are two or more kinds of interpretation, an interpretation unfavorable to the party supplying the standard terms shall
prevail. Where the standard terms are inconsistent with non-standard terms, the latter shall prevail.

Article 42

The party shall be liable for damage if it is under one of the following circumstances in concluding a contract and thus causing losses
to the other party:

(1)

pretending to conclude a contract, and negotiating in bad faith;

(2)

deliberately concealing important facts relating to the conclusion of the contract or providing false information;

(3)

performing other acts which violate the principle of good faith.

Article 43

A trade secret the parties learn in concluding a contract shall not be disclosed or improperly used, no matter the contract is established
or not. If the party discloses or improperly uses such trade secret and thus causing loss to the other party, it shall be liable
for damages.

Chapter 3 Validity of Contracts

Article 44

The contract established according to law becomes effective upon its establishment.

With regard to contracts that are subject to approval or registration as stipulated by relevant laws or administrative regulations,
the provisions thereof shall be followed.

Article 45

The parties may agree on that the effectiveness of a contract be subject to certain conditions. A contract whose effectiveness is
subject to certain conditions shall become effective when such conditions are accomplished. The contract with dissolving conditions
shall become invalid when such conditions are satisfied.

If a party improperly prevent the satisfaction of a condition for its own interests, the condition shall be regarded as having been
accomplished. If a party improperly facilitates the satisfaction of a condition, such condition shall be regarded as not to have
been satisfied.

Article 46

The parties may agree on a conditional time period as to the effectiveness of the contract. A contract subject to an effective time
period shall come into force when the period expires. A contract with termination time period shall become invalid when the period
expires.

Article 47

A contract concluded by a person with limited civil capacity of conduct shall be effective after being ratified afterwards by the
person’s statutory agent, but a pure profit-making contract or a contract concluded which is appropriate to the person’s age, intelligence
or mental health conditions need not be ratified by the person’s statutory agent.

The counterpart may urge the statutory agent to ratify the contract within one month. It shall be regarded as a refusal of ratification
that the statutory agent does not make any expression. A bona fide counterpart has the right to withdraw it before the contract is
ratified. The withdrawal shall be made by means of notice.

Article 48

A contract concluded by an actor who as no power of agency, who oversteps the power of agency, or whose power of agency has expired
and yet concludes it on behalf of the principal, shall have no legally binding force on the principal without ratification by the
principal, and the actor shall be held liable.

The counterpart may urge the principal to ratify it within one month. It shall be regarded as a refusal of ratification that the principal
does not make any expression. A bona fide counterpart has the right to withdraw it before the contract is ratified. The withdrawal
shall be made by means of notice.

Article 49

If an actor has no power of agency, oversteps the power of agency, or the power of agency has expired and yet concludes a contract
in the principal’s name, and the counterpart has reasons to trust that the actor has the power of agency, the act of agency shall
be effective.

Article 50

Where a statutory representative or a responsible person of a legal person or other organization oversteps his/her power and concludes
a contract, the representative act shall be effective except that the counterpart knows or ought to know that he/she is overstepping
his/her powers.

Article 51

Where a person having no right to disposal of property disposes of other persons’ properties, and the principal ratifies the act afterwards
or the person without power of disposal has obtained the power after concluding a contract, the contract shall be valid.

Article 52

A contract shall be null and void under any of the following circumstances:

(1)

a contract is concluded through the use of fraud or coercion by one party to damage the interests of the State;

(2)

malicious collusion is conducted to damage the interests of the State, a collective or a third party;

(3)

an illegitimate purpose is concealed under the guise of legitimate acts;

(4)

damaging the public interests;

(5)

violating the compulsory provisions of laws and administrative regulations.

Article 53

The following exception clauses in a contract shall be null and void:

(1)

those that cause personal injury to the other party;

(2)

those that cause property damages to the other party as result of deliberate intent or gross negligence.

Article 54

A party shall have the right to request the people’s court or an arbitration institution to modify or revoke the following contracts:

(1)

those concluded as a result of significant misconception;

(2)

those that are obviously unfair at the time when concluding the contract.

If a contract is concluded by one party against the other party’s true intentions through the use of fraud, coercion, or exploitation
of the other party’s unfavorable position, the injured party shall have the right to request the people’s court or an arbitration
institution to modify or revoke it.

Where a party requests for modification, the people’s court or the arbitration institution may not revoke the contract.

Article 55

The right to revoke a contract shall extinguish under any of the following circumstances:

(1)

a party having the right to revoke the contract fails to exercise the right within one year from the day that it knows or ought to
know the revoking causes;

(2)

a party having the right to revoke the contract explicitly expresses or conducts an act to waive the right after it knows the revoking
causes.

Article 56

A contract that is null and void or revoked shall have no legally binding force ever from the very beginning. If part of a contract
is null and void without affecting the validity of the other parts, the other parts shall still be valid.

Article 57

If a contract is null and void, revoked or terminated, it shall not affect the validity of the dispute settlement clause which is
independently existing in the contract.

Article 58

The property acquired as a result of a contract shall be returned after the contract is confirmed to be null and void or has been
revoked; where the property can not be returned or the return is unnecessary, it shall be reimbursed at its estimated price. The
party at fault shall compensate the other party for losses incurred as a result therefrom. If both parties are fault, each party
shall respectively be liable.

Article 59

If the parties have maliciously conducted collusion to damage the interests of the State, a collective or a third party, the property
thus acquired shall be turned over to the State or returned to the collective or the third party.

Chapter 4 Performance of Contracts

Article 60

Each party shall fully perform its own obligations as agreed upon.

The parties shall abide by the principle of good faith, and perform obligations of notification, assistance, and confidentiality,
etc. in accordance with the nature and purpose of the contract and the transaction practice.

Article 61

Where, after the contract becomes effective, there is no agreement in the contract between the parties on such contents as quality,
price or remuneration, or place of performance etc., or such agreement is ambiguous, the parties may agree upon supplementary terms
through consultation; if a supplementary agreement cannot be reached, such terms shall be determined in accordance with the relevant
provisions of the contract or the transaction practices.

Article 62

Where certain contents agreed upon by the parties in the contract are ambiguous and cannot be determined in accordance with the provisions
in Article 61 of this Law, the following provisions shall be applied:

(1)

if quality requirement is not clear, performance shall be in accordance with the state standard or industry standard; absent any state
or industry standard, performance shall be in accordance with the customary standard or any particular standard consistent with the
purpose of the contract;

(2)

if price or remuneration is not clear, performance shall be in accordance with the prevailing market price at the place of performance
at the time the contract was concluded, and if adoption of a price commissioned by the government or based on government issued pricing
guidelines is required by law, such requirement applies;

(3)

where the place of performance is not clear, if the obligation is payment of money, performance shall be at the place where the payee
is located; if the obligation is delivery of immovable property, performance shall be at the place where the immovable property is
located; for any other subject matter, performance shall be effected at the place of location of the party fulfilling the obligations.

(4)

if the time of performance is not clear, the obligor may perform, and the obligee may require performance, at any time, provided that
the other party shall be given the time required for preparation;

(5)

if the method of performance is not clear, performance shall be rendered in a manner which is conducive to realizing the purpose of
the contract;

(6)

if the responsibility for the expenses of performance is not clear, the party fulfilling the obligations shall bear the expenses.

Article 63

Where the government-fixed price or government-directed price is followed in a contract, if the said price is readjusted within the
time limit for delivery as stipulated in the contract, the payment shall be calculated according to the price at the time of delivery.
Where a party delays in delivering the subject matter, the original price shall be adopted if the price rises; and the new price
shall be adopted if the price falls. Where a party delays in taking delivery of the subject matter or making payment, the new price
shall be adopted if the price rises, and the original price shall be adopted if the price falls.

Article 64

Where the parties agree that the obligor shall perform the obligations to a third party, and the obligor fails to perform its obligations
to such third party or its performance of the obligations is not in conformity with the agreement, the obligor shall be liable to
the obligee for breach of contract.

Article 65

Where the parties agree that a third party performs the obligations to the obligee, and the third party fails to perform the obligations
or the performance is not in conformity with the agreement, the obligor shall be liable to the obligee for breach of contract.

Article 66

Where both parties have obligations toward one another and there is no order of priority in respect of the performance of obligations,
the parties shall perform the obligations simultaneously. Each party has the right to reject any demand by the other party for performance
prior to the performance by the other party. If the performance of the obligations of the party who is to perform first is not in
conformity with the agreement, the party who is perform later has the right to reject the other party’s demand for corresponding
performance.

Article 67

Where both parties have obligations toward each other and there is an order of priority in respect of the performance, and the party
who is to perform first fails to perform, the party who is to perform later has the right to reject the other party’s demand for
performance. If the performance of the obligations of the party who is to perform first is not in conformity with the agreement,
the party who is to perform later has the right to reject the other party’s demand for corresponding performance.

Article 68

The party required to perform first may suspend its performance if it has conclusive evidence showing that the other party is under
any of the following circumstances:

(1)

its business has seriously deteriorated;

(2)

it has engaged in transfer of assets or withdrawal of funds for the purpose of evading debts;

(3)

it has lost its business creditworthiness;

(4)

it is in any other circumstance which will or may cause it to lose its ability to perform.

Where a party suspends performance without conclusive evidence, it shall be liable for breach of contract.

Article 69

If a party suspends its performance in accordance with the provisions of Article 68 of this Law, it shall timely notify the other
party. If the other party provides appropriate assurance for its performance, the party shall resume performance. After performance
was suspended, if the other party fails to regain its ability to perform and fails to provide appropriate assurance within a reasonable
time, the suspending party may terminate the contract.

Article 70

Where the obligee fails to notify the obligor of its separation, merger, or change of the domicile, thereby making it difficult for
the obligor to perform its obligations, the obligor may suspend its performance or escrow the subject matter.

Article 71

The obligee may reject the obligor’s advance performance of its obligations, except that the advance performance does not harm the
obligee’s interests.

Any additional expense incurred by the obligee due to the obligor’s advance performance of its obligations shall be borne by the obligor.

Article 72

An obligee may reject the obligor’s partial performance, except that the partial performance of its obligations does not harm the
obligee’s interests.

Any additional expense incurred by the obligee due to the obligor’s partial performance of its obligations shall be borne by the obligor.

Article 73

Where the obligor is remiss in exercising its due creditor’s right, thereby harming the obligee’s interests, the obligee may petition
the People’s Court for subrogation in its own name, except that the creditor’s right exclusively belongs to the obligor.

The extent to which the subrogation rights can be exercised is limited to the obligee’s rights. The expenses necessary for the obligee
to exercise such subrogation rights shall be borne by the obligor.

Article 74

Where the obligor waives its creditor’s right against a third party that is due or assigns its property without reward, thereby harming
the obligee’s interests, the obligee may petition the People’s Court for cancellation of the obligor’s act. Where the obligor assigns
its property at a low price which is manifestly unreasonable, thereby harming the obligee’s interests, and the assignee is aware
of the situation, the obligee may also petition the People’s Court for cancellation of the obligor’s act.

The extent to which the right to cancel can be exercised is limited to the rights of the obligee. The expenses necessary for the obligee
to exercise the right to cancel shall be borne by the obligor.

Article 75

The right to cancel shall be exercised within one year form the date the obligee knows or should have known of the matter for cancellation.
Such right to cancel shall lapse if the obligee fails to exercise such rights within five years from the date of the occurrence of
such act.

Article 76

Once a contract becomes effective, a party may not refuse to perform its obligations thereunder due to a change in its name, or its
legal representative, the person in charge, or the person handling the contract.

Chapter 5 Modification and Assignment of Contracts

Article 77

A contract may be modified if the parties reach a consensus through consultation.

If the laws or administrative regulations so provide, approval and registration procedures for such modification shall be gone through
in accordance with such provisions.

Article 78

Where an agreement by the parties on the contents of a modification is ambiguous, the contract shall be presumed as not having been
modified.

Article 79

The obligee may assign its rights under a contract, in whole or in part, to a third party, except under the following circumstances:

(1)

such rights may not be assigned in light of the nature of the contract;

(2)

such rights may not be assigned according to the agreement between the parties;

(3)

such rights may not be assigned according to the provisions of the laws.

Article 80

Where the obligee assigns its rights, it shall notify the obligor. Such assignment will have no effect on the obligor without notice
thereof.

A notice by the obligee to assign its rights shall not be revoked, unless such revocation is consented to by the assignee.

Article 81

Where the obligee assigns its right, the assignee shall acquire the collateral rights related to the principal rights, except that
the collateral rights exclusively belong to the obligee.

Article 82

Upon receipt of the notice of assignment of rights, the obligor may assert against the assignee any defenses it has against the assignor.

Article 83

Upon receipt by the obligor of the notice of assignment of rights, the obligor shall have vested rights against the assignor, and
if the rights of the obligor vest prior to or at the same time as the assigned rights, the obligor may claim an offset against the
assignee.

Article 84

Where the obligor delegates its obligations under a contract in whole or in part to a third party, such delegation shall be subject
to the consent of the obligee.

Article 85

Where the obligor delegates its obligation, the new obligor may exercise any defense that the original obligor had against the obligee.

Article 86

Where the obligor delegates its obligation, the new obligor shall assume the incidental obligations related to the main obligations,
except that the obligations exclusively belong to the original obligor.

Article 87

Where the laws or administrative regulations stipulate that the assignment of rights or transfer of obligations shall undergo approval
or registration procedures, such provisions shall be followed.

Article 88

Upon the consent of the other party, one party may transfer its rights together with its obligations under contract to a third party.

Article 89

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...