RULES FOR THE IMPLEMENTATION OF THE LAW OF THE PEOPLE'S REPUBLICOF CHINA ON FOREIGN-CAPITAL ENTERPRISES
Important Notice:
This English document is coming from "LAWS AND REGULATIONS OF THE
PEOPLE'S REPUBLIC OF CHINA GOVERNING FOREIGN-RELATED MATTERS" (1991.7)
which is compiled by the Brueau of Legislative Affairs of the State
Council of the People's Republic of China, and is published by the China
Legal System Publishing House.
In case of discrepancy, the original version in Chinese shall prevail.
Whole Document
RULES FOR THE IMPLEMENTATION OF THE LAW OF THE PEOPLE'S REPUBLIC
OF CHINA ON FOREIGN-CAPITAL ENTERPRISES
(Approved by the State Council on October 28, 1990, and promul-
gated by Decree No. 1 of the Ministry of Foreign Economic Relations and
Trade on December 12, 1990)
Contents
Chapter I General Provisions
Chapter II Procedures for Establishment
Chapter III Form of Organization and Registered Capital
Chapter IV Methods of Contributing Investments and the Time Limit
Chapter V Use of Site and the Site Use Fees
Chapter VI Purchasing and Marketing
Chapter VII Taxation
Chapter VIII Control of Foreign Exchange
Chapter IX Financial Affairs and Accounting
Chapter X Workers and Staff Members
Chapter XI Trade Union
Chapter XII Term of Operations, Termination and Liquidation
Chapter XIII Supplementary Provisions
Chapter I General Provisions
Article 1
These Rules are formulated in accordance with the provisions in Article 23
of The Law of the People's Republic of China on Foreign-Capital
Enterprises.
Article 2
Foreign-capital enterprises shall be under the jurisdiction of and
protection by China's laws.
Foreign-capital enterprises, while engaged in business operational
activities within the territory of China, must abide by Chinese laws and
regulations and must not jeopardize the social and public interests of
China.
Article 3
A foreign-capital enterprise to be established in China must be conducive
to the development of China's national economy, be capable of gaining
remarkable economic results and shall meet at least one of the following
conditions:
(1) the enterprise is to adopt advanced technology and equipment, engage
in the development of new products, conserve energy and raw materials, and
realize the upgrading of products and the replacement of old products with
new ones which can be used for placing similar imported goods;
(2) its annual output value of export products accounts for more than 50%
of the annual output value of all products, thereby realizing the balance
between revenues and expenditures in foreign exchange or with a surplus.
Article 4
No foreign-capital enterprise shall be established in the following
trades:
(1) the press, publication, broadcasting, television, and movies;
(2) domestic commerce, foreign trade, and insurance;
(3) post and telecommunications;
(4) other trades in which the establishment of foreign-capital enterprises
is forbidden, as prescribed by the Chinese government.
Article 5
The establishment of foreign-capital enterprises shall be restricted in
the following trades:
(1) public utilities;
(2) communications and transportation;
(3) real estate;
(4) trust investment;
(5) leasing.
The application for the establishment of a foreign-capital enterprise in
the trades mentioned in the preceding paragraph shall be submitted to the
Ministry of Foreign Economic Relations and Trade of the People's Republic
of China (hereinafter referred to as the Ministry of Foreign Economic
Relations and Trade) for approval, except as otherwise provided by Chinese
laws and regulations.
Article 6
Application for the establishment of a foreign-capital enterprise shall
not be approved if the proposed enterprise would involve one of the
following circumstances:
(1) injury to China's sovereignty or to social and public interests;
(2) impairment of China's national security;
(3) violation of Chinese laws and regulations;
(4) incompatibility with the requirements of China's national economic
development; or (5) possible creation of environmental pollution.
Article 7
A foreign-capital enterprise shall make its own managerial decisions
within the approved scope of business operations and shall not be subject
to intervention.
Chapter II Procedures for Establishment
Article 8
The application for the establishment of a foreign-capital enterprise
shall be submitted to the Ministry of Foreign Economic Relations and
Trade, and after examination and approval, a certificate of approval shall
be issued by the Ministry. With respect to the application for the
establishment of a foreign-capital enterprise that comes under one of the
following circumstances, the State Council shall authorize the people's
government of the relevant province, autonomous region, municipality
directly under the Central Government, municipality separately listed on
the state plan, or the special economic zone, to issue the certificate of
approval after examining and approving the application:
(1) the total amount of investment is within the limits of powers for the
examination and approval of investments stipulated by the State Council;
(2) the proposed enterprises does not need the raw and processed materials
to be allocated by the State, or does not influence unfavourably the
national comprehensive balance of energy resources, communications and
transportation, as well as export quotas for foreign trade.
Where the people's government of the province, autonomous region,
municipality directly under the Central Government, municipality
separately listed on the state plan, or the special economic zone has
approved the establishment of a foreign-capital enterprise within its
limits of powers granted by the State Council, it shall, within 15 days
after the approval, submit a report to the Ministry of Foreign Economic
Relations and Trade for the record (hereinafter the Ministry of Foreign
Economic Relations and Trade, and the people's government of the province,
autonomous region, municipality directly under the Central Government,
municipality separately listed on the state plan, and the special economic
zone shall be called generally as the examining and approving organ).
Article 9
With respect to a foreign-capital enterprise, the establishment of which
has been applied for, if its products are subject to export licence,
export quota, or import licence, or are under restrictions by the State,
prior consent of the department of foreign economic relations and trade
shall be obtained in accordance with the limits of powers for
administration.
Article 10
A foreign investor shall, prior to the filing of an application for the
establishment of a foreign-capital enterprise, submit a report to the
local people's government at or above the county level at the place where
the proposed enterprise is to be established. The report shall include:
the aim of the establishment of the proposed enterprise; the scope and
scale of business operation; the products to be produced; the technology
and equipment to be adopted and used; the proportion of the sales of
products between the domestic market and the foreign market; the area of
land to be used and the related requirements; the conditions and
quantities of water, electricity, coal, coal gas and other forms of energy
resources required; and the requirement of public facilities. The local
people's government at or above the county level shall within 30 days
after receiving the report submitted by the foreign investor, give a reply
in writing to the said foreign investor.
Article 11
In case that a foreign investor wishes to establish a foreign-capital
enterprise, an application shall be submitted to the examining and
approving organ through the local people's government at or above the
county level at the place where the enterprise is to be established,
together with the following documents.
(1) the written application for the establishment of a foreign-capital
enterprise;
(2) a feasibility study report;
(3) the articles of association of the foreign-capital enterprise;
(4) the name-list of the legal representatives (or the candidates for
members of the board of directors) of the foreign-capital enterprise;
(5) the legal certifying documents and the credit position certifying
documents of the foreign investor;
(6) the written reply given by the people's government at or above the
county level at the place, where the enterprise is to be established;
(7) an inventory of goods and materials needed to be imported;
(8) other documents that are required to be submitted.
The documents mentioned in Items (1) and (3) in the preceding paragraph
must be written in the Chinese language; while the documents mentioned in
Items (2), (4) and (5) in the preceding paragraph may be written in a
foreign language, but a corresponding Chinese translation shall be
attached.
In the event that two or more foreign investors jointly file an
application for the establishment of a foreign-capital enterprise, they
shall submit a duplicate of the contract concluded and signed between them
to the examining and approving organ for the record.
Article 12
The examining and approving organ shall, within 90 days after receiving
all the required documents with respect to an application for the
establishment of foreign-capital enterprise, make a decision whether to
approve or disapprove the application. In the event that the examining and
approving organ has found that the documents mentioned above are not
complete, or that some of them are inappropriate, it may call on the
applicant to make up the incomplete documents, or to make necessary
revisions, within a prescribed time limit.
Article 13
After the approval of the application for the establishment of a foreign-
capital enterprise by the examining and approving organ, the foreign
investor shall, within 30 days after receiving the certificate of
approval, file an application with the relevant administrative department
for industry and commerce for registration, and obtain a business licence.
The date on which the business licence is issued shall be the date of the
establishment of the said enterprise.
In the event that the foreign investor fails to file an application with
the administrative department for industry and commerce for registration
on the expiration of the 30 days after receiving the certificate of
approval, the certificate of approval for the establishment of the
proposed enterprise shall become invalid automatically. A foreign-capital
enterprise shall, within 30 days after its establishment, go through the
procedures for taxation registration with the tax authorities.
Article 14
Foreign investors may appoint a Chinese service agency for enterprises
with foreign investment or other economic organizations to handle, on
their behalf, the affairs stipulated in Article 9, the first paragraph of
Article 10 and Article 11 of these Rules, but a contract of entrustment
shall be concluded and signed between them.
Article 15
The written application for the establishment of a foreign-capital
enterprise shall include the following contents:
(1) the name or designation, the residence and the place of registration
of the foreign investor, and the name, nationality, and position of the
legal representative;
(2) the name and residence of the foreign-capital enterprise;
(3) the scope of business operations, the varieties of products, and the
scale of production;
(4) the total amount of investment, the registered capital, the source of
funds, and the method of investment contribution and the operation period;
(5) the organizational form and organs, and the legal representative of
the foreign-capital enterprise;
(6) the primary production equipment to be used and the degrees of
depreciation, production technology, technological level and their
sources;
(7) the sales orientation and areas, the sales channels and methods, and
the sales proportion between China's market and foreign markets;
(8) the arrangements for the revenues and expenditures in foreign
exchange;
(9) the arrangements for the establishment of relevant organs and the
authorized size of working personnel, the engagement and use of workers
and staff members, their training, salaries and wages, material benefits,
insurance, and labour protection;
(10) the degrees of probable environmental pollution and the measures for
tackling pollution;
(11) the selection of sites and the area of land to be used;
(12) the funds, energy resources, raw and processed materials needed in
capital construction and in production and business operations and the
solutions thereof;
(13) the progress plan for the construction of the project; and
(14) the period of business operations of the foreign-capital enterprise
to be established.
Article 16
The articles of association of a foreign-capital enterprise shall include
the following contents:
(1) the name and the residence;
(2) the aim and the scope of business operations;
(3) the total amount of investments, the registered capital, and the time
limit for contributing investment;
(4) the form of organization;
(5) the internal organizational structures and their functions and powers
as well as their rules of procedures; the functions, duties and limits of
powers of the legal representative as well as of the general manager,
chief engineer, chief accountant and other staff members;
(6) the principles and system of financial affairs, accounting and
auditing;
(7) labour administration;
(8) the term of business operations, termination, and liquidation; and (9)
the procedures for the amendment of the articles of association.
Article 17
The articles of association of a foreign-capital enterprise shall become
effective after the approval by the examining and approving organ. The
same procedure shall apply when amendments are made.
Article 18
The division or merge of foreign-capital enterprises, and the significant
change in capital resulting from other causes, shall be subject to the
approval by the examining and approving organ; in addition, the said
enterprises shall engage a Chinese registered accountant to carry out
verification, and to submit a report on the verification of capital; after
the approval by the examining and approving organ, the enterprises
concerned shall go through the procedures for the change of the
registration with the relevant administrative department for industry and
commerce.
Chapter III Form of Organization and Registered Capital
Article 19
The organizational form of a foreign-capital enterprise shall be a limited
liability company. With approval, the enterprise may also take any other
liability form.
With respect to a foreign-capital enterprise which is a limited liability
company, the liability of the foreign investor to the enterprise shall be
limited to the amount of investment subscribed and contributed to the
enterprise by the investor. With respect to a foreign-capital enterprise
which takes any other liability form, the liability of the foreign
investor to the enterprise shall be dealt with in accordance with the
provisions of Chinese laws and regulations.
Article 20
The total amount of investment of a foreign-capital enterprise refers to
the total amount of funds needed for the establishment of the enterprises,
i.e. the sum total of the funds invested in capital construction in
accordance with the scope of production and the circulating funds for
production.
Article 21
The registered capital of a foreign-capital enterprise refers to the total
amount of capital registered with the administrative department for
industry and commerce for the purpose of establishing the foreign-capital
enterprise, i.e. the total amount of investment the foreign investor
undertakes to contribute.
The registered capital of a foreign-capital enterprise shall fit in with
the enterprise's scope of business operations; and the proportion between
the registered capital and the total amount of investment shall conform
with the provisions of the relevant Chinese laws and regulations.
Article 22
A foreign-capital enterprise shall not reduce the registered capital
during the term of business operations.
Article 23
The increase or assignment of the registered capital of a foreign-capital
enterprise shall be subject to the approval by the examining and approving
organ; in addition, the said enterprise shall go through the procedures
for the change of the registration with the administrative department for
industry and commerce.
Article 24
In case that a foreign-capital enterprise intends to mortgage or assign
its assets or rights and interests to a foreign unit, the case shall be
submitted to the examining and approving organ for approval, and then to
the administrative department for industry and commerce for the record.
Article 25
The legal representative of a foreign-capital enterprise shall be the
person-in-charge who, in accordance with the stipulations in the
enterprise's articles of association, executes his/her functions and
powers on behalf of the enterprise.
In the event that the legal representative is unable to execute his/her
functions and powers, he/she shall entrust in writing an agent with the
execution of his/her functions and powers.
Chapter IV Methods of Contributing Investment and the Time Limit
Article 26
Foreign investors may use convertible foreign currencies for the
contribution of investment, or use as their investment machinery and
equipment, industrial property rights, and proprietary technology that are
assigned a fixed price. Foreign investors may, after approval by the
examining and approving organ, use, as their investment, their profits in
Renminbi (RMB) earned from other enterprises with foreign investment
established within the territory of China.
Article 27
In case that foreign investors intend to use machinery and equipment,
being assigned a fixed price, as their investment, the said machinery and
equipment must meet the following requirements:
(1) those that are needed for the production of the foreign-capital
enterprise;
(2) those that cannot be produced in China, or that can be produced in
China but cannot be guaranteed to meet the needs in terms of technical
performance or time of supply. The price fixed for the aforesaid machinery
and equipment shall not be higher than the normal price for similar
machinery and equipment sold on the international market at the time.
With respect to the machinery and equipment, being assigned a fixed price
and used as contributing investment, an inventory listing in detail the
assigning of fixed prices as contributing investment, including the names,
categories, quantities, and the assignment of prices, shall be made and
submitted to the examining and approval organ as an appendix to the
application for the establishment of the foreign-capital enterprise.
Article 28
In case that foreign investors intend to use industrial property rights
and proprietary technology, being assigned a fixed price, as their
investment, the said industrial property rights and proprietary technology
must meet the following requirements:
(1) owned by the foreign investors themselves;
(2) capable of producing new products that are urgently needed by China,
or that are suitable for export and marketable abroad.
The assigning of a fixed price for the aforesaid industrial property
rights and proprietary technology shall be in conformity with the general
pricing principles of the international market, and the amount of pricing
thereof shall not exceed 20% of the registered capital of the foreign-
capital enterprise.
With respect to those industrial property rights and proprietary
technology, being assigned a fixed price for contributing investment, a
detailed inventory of relevant data, including a duplicate of the
proprietary rights certificate, the effective condition, technological
performance, the practical value, the basis and standard for the
calculation of pricing, shall be prepared and submitted to the examining
and approving organ as an appendix to the application for the
establishment of the foreign-capital enterprise.
Article 29
When the machinery and equipment, being assigned a fixed price and used as
contributing investment, have arrived at China's port, the foreign-capital
enterprise shall apply to China's commodity inspection authorities for
inspection, which shall then issue an inspection report.
In the event that the variety, quality and quantity of the machinery and
equipment, being assigned a fixed price and used as contributing
investment, are not in conformity with the variety, quality and quantity
of the machinery and equipment, being assigned a fixed price as
contributing investment and listed in the inventory submitted to the
examining and approving organ, the examining and approving organ has the
power to require the foreign investors to make corrections within a
prescribed time limit.
Article 30
After the industrial property rights and proprietary technology priced as
contributing investment have been put to use, the examining and approving
organ has the power to carry out inspection. In the event that the said
industrial property rights and proprietary technology are not in
conformity with the data originally provided by the foreign investors, the
examining and approving organ has the power to require the foreign
investors to make corrections within a prescribed time limit.
Article 31
The time limit for a foreign investor to make the investment contributions
shall be clearly stipulated in the written application for the
establishment of the foreign-capital enterprise and also in the articles
of association of the enterprise. A foreign investor may make the
investment contribution by instalments, but the last instalment of the
contribution shall be made within the period of three years beginning from
the day when the business licence is issued. The first instalment of
investment contribution shall not be less than 15% of the total amount of
investment contribution that the foreign investor undertakes to make, and
shall be made in full within a period of 90 days beginning from the day
when the business licence is issued.
In the event that a foreign investor fails to make in full the first
instalment of the investment contribution within the time limit stipulated
in the preceding paragraph, the certificate of approval for the
establishment of the proposed foreign-capital enterprise shall become
invalid automatically. The foreign-capital enterprise in question shall go
through the procedure for registration cancellation with the relevant
administrative department for industry and commerce, and hand in its
business licence for cancellation. In the event of the failure to go
through the procedure for registration cancellation and to hand in the
business licence for cancellation, the administrative department for
industry and commerce shall revoke the business licence and announce the
case publicly.
Article 32
After making the first instalment of investment contribution, the foreign
investor shall make the remaining instalments of contribution strictly as
scheduled. In the event that a foreign investor is in arrears with the
contribution for 30 days without any justification, the case shall be
handled in accordance with the provisions of paragraph 2 of Article 31 of
these Rules.
In the event that a foreign investor has proper reasons for requesting the
postponement of investment contribution, prior consent of the examining
and approving organ shall be obtained, and the case shall also be reported
to the administrative department for industry and commerce for the record.
Article 33
After the foreign investor's each instalment of investment contribution,
the foreign-capital enterprise shall engage a Chinese registered
accountant to carry out verification, and to prepare a report on the
verification of capital, which shall be submitted to the examining and
approving organ and the administrative department for industry and
commerce for the record.
Chapter V Use of Site and the Site Use Fees
Article 34
With expect to the site to be used by a foreign-capital enterprise, the
local people's government at or above the county level in the place where
the enterprise is to be located, shall make arrangements after examination
and verification in the light of the local conditions.
Article 35
A foreign-capital enterprise shall, within 30 days from the day the
business licence is issued, go through the procedure for the use of land
and obtain the land certificate by presenting the certificate of approval
and the business licence to the land administration department under the
local people's government at or above the county level in the place where
the enterprise is to be located.
Article 36
The land certificate shall be the legal instrument for the foreign-capital
enterprise to use land. The foreign-capital enterprise within its term of
operations, may not assign its land-use right without permission.
Article 37
A foreign-capital enterprise shall, when obtaining the land certificate,
pay its land use fee to the land administrative department in the place
where the enterprise is located.
Article 38
In case that a foreign-capital enterprise uses land that has already been
developed, it shall pay the land development fee.
The land development fee, as mentioned in the preceding paragraph,
includes the expense for the requisition of land, the expense for the
pulling down of houses and the settlement allowance, and the expense for
the construction of basic installations that match the foreign-capital
enterprise. The land development fee may be calculated and collected by
the land development unit in a lump-sum, or by yearly instalments.
Article 39
In case that a foreign-capital uses land that has not been developed, it
may develop the land by itself, or it may entrust a department concerned
in China to develop the land. The infrastructure construction shall be
carried out under the unified arrangement of the local people's government
at or above the county level in the place where the enterprise is to be
located.
Article 40
The standard for the calculation and collection of land use fee and land
development fee shall be handled in accordance with the pertinent
provisions of China.
Article 41
The term for the use of land by a foreign-capital enterprise shall be the
same as the approved operation period of the said enterprise.
Article 42
A foreign-capital enterprise, besides obtaining the land-use right in
accordance with the provisions of this Chapter, may also obtain the same
right in accordance with the pertinent provisions of other Chinese laws
and regulations.
Chapter VI Purchasing and Marketing
Article 43
A foreign-capital enterprise shall formulate and execute its production
and operation plans on its own; the said production and operation plans
shall be submitted to the competent department in charge of the trade, in
the place where the said enterprise is located, for the record.
Article 44
A foreign-capital enterprise is entitled to make decisions for itself on
the purchase, for its own use, of machinery and equipment, raw and
processed materials, fuels, parts and components, fittings, primary parts,
means of transport, and articles for office use (hereinafter uniformly
called "goods and materials").
A foreign-capital enterprise shall, when purchasing goods and materials in
China under the same conditions, enjoy the same treatment as enjoyed by
the Chinese enterprises.
Article 45
In case that a foreign-capital enterprise sells its products on the
Chinese market, it shall conduct its sales in accordance with the approved
sales proportion. In the event that sales of products on the Chinese
market by a foreign-capital enterprise exceed the approved sales
proportion, the case shall be subjected to the approval by the examining
and approving organ.
Article 46
A foreign-capital enterprise is entitled to export of its own accord,
goods produced by itself; it may also appoint a Chinese foreign trade
company or a company outside the territory of China to sell its goods on a
commission basis.
A foreign-capital enterprise is entitled to sell, of its own accord, the
products produced by itself on the Chinese market in accordance with the
approved sales proportion; it may also appoint a Chinese Commercial agency
to sell its products on a commission basis.
Article 47
Where machinery and equipment being assigned a fixed price and used by
foreign investors as contributing investment require, according to the
pertinent provisions of China, import licences, the foreign investors
shall, on the strength of the approved inventory of equipment and goods
and materials of the said enterprise to be imported, file an application
directly, or through an agency entrusted by them, with the licence-issuing
organ for obtaining due import licences.
Where a foreign-capital enterprise has to import, in accordance with the
approved scope of business, goods and materials for its own use and needed
by its production and if, according to the pertinent provisions of China,
it is necessary for the said enterprise to obtain import licences, it
shall work out an annual plan for importation, and apply, every six
months, to the licence-issuing organ for the licences.
With respect to products to be exported by a foreign-capital enterprise,
if, according to the pertinent provisions of China, it is necessary for
the said enterprise to obtain an export licence, it shall work out an
annual plan for exportation, and apply, every six months, to the licence-
issuing organ for the licence.
Article 48
The prices of the goods and materials and technological labour service
imported by a foreign-capital enterprise shall not be higher than the
normal prices of similar goods and materials and technological labour
service on the international market at the time. The price of export
products produced by a foreign-capital enterprise shall be fixed by the
enterprise itself with reference to the international market prices at the
time, but the prices must not be lower than the reasonable export prices.
With respect to the evasion of tax by using such methods as importing at
high prices while exporting at low prices, the tax authorities shall have
the power, in accordance with the pertinent provisions of the tax law, to
investigate the legal responsibilities therefor. The pricing of products
to be sold by a foreign-capital enterprise on the Chinese market in
accordance with the approved sales proportion shall be governed by the
pertinent provisions of China concerning the administration of prices.
The pricing mentioned in the preceding paragraph shall be reported to the
administrative authorities for prices and the tax authorities for the
record, and shall be placed under their supervision.
Article 49
A foreign-capital enterprise shall provide statistical data and submit
statistical statements to the departments concerned in accordance with the
provisions in the Statistics Law of the People's Republic of China and the
relevant provisions of China concerning the statistical system for the
utilization of foreign capital.
Chapter VII Taxation
Article 50
A foreign-capital enterprise shall pay taxes and duties in accordance with
the provisions of Chinese laws and regulations.
Article 51
The workers and staff members of a foreign-capital enterprise shall pay
individual income tax in accordance with the provisions of Chinese laws
and regulations.
Article 52
The following goods and materials imported by a foreign-capital enterprise
shall be exempted from Customs duties and consolidated industrial and
commercial tax:
(1) the machinery and equipment, parts and components, building materials
as well as other materials used as investment by the foreign investor and
needed for construction, as well as the installation and reinforcement of
machinery;
(2) the machinery and equipment, parts and components, means of
communications and transportation for use in production, and equipment for
use in production and management, imported, for their own use, by a
foreign-capital enterprise with the funds included in the total amount of
investment;
(3) the raw materials and processed materials, auxiliary materials,
primary parts, parts and components, and articles and materials for
packaging imported by a foreign-capital enterprise for the production of
export products.
In the event that the imported goods and materials, as mentioned in the
preceding paragraph, are resold within the territory of China, or are used
in the production of products to be sold within the territory of China,
the foreign-capital enterprise concerned shall pay the taxes or make up
the taxes in accordance with the provisions of the tax law of China.
, Article 53
The export commodities produced by a foreign-capital enterprise, except
those whose exportation is restricted by China, shall be exempted form
Customs duties and consolidated industrial and commercial tax in
accordance with the tax law of China.
Chapter VIII Control of Foreign Exchange
Article 54
Foreign exchange affairs of a foreign-capital enterprise shall be handled
in accordance with the pertinent laws and regulations of China concerning
foreign exchange control.
Article 55
A foreign-capital enterprise shall, on the strength of the business
licence issued by the administrative department for industry and commerce,
open an account at a bank which may handle foreign exchange business
within the territory of China, and its receipts and payments in foreign
exchange shall be subject to the supervision by the interested bank. The
foreign exchange revenue of a foreign-capital enterprise shall be
deposited in the foreign exchange account of the bank where it has opened
an account; and the foreign exchange expenses shall be paid from the
foreign exchange account.
Article 56
A foreign-capital enterprise shall achieve by itself the balance of
revenues and expenditures in foreign exchange.
In the event that a foreign-capital enterprise is unable to strike by
itself the balance between revenues and expenditure in foreign exchange,
the foreign investor shall indicate it clearly in the application for the
establishment of the enterprise, and put forward a specific plan for
solving the problem; the examining and approving organ shall give a reply
after consultation with departments concerned.
In the event that the foreign investor has indicated in the application
for the establishment of the foreign-capital enterprise, that the balance
of revenues and expenditure in foreign exchange would be achieved by
itself, no government department shall be responsible for the solution of
the balance problem of revenues and expenditure in foreign exchange for
the said enterprise.
With respect to products, manufactured by a foreign-capital enterprise,
urgently needed in China, capable of replacing similar imported goods, and
permitted to be sold in China, the payments may be made in foreign
exchange, subject to the approval by the Chinese administrative department
for foreign exchange control.
Article 57
In case that a foreign-capital enterprise has the necessity to open a
foreign exchange account at a bank outside the territory of China to meet
the needs of production and business operations, the case shall be
submitted to the Chinese administrative department for foreign exchange
control for approval and, in accordance with the provisions of the Chinese
administrative department for foreign exchange control, regular reports on
the conditions of revenues and expenditures in foreign exchange and
statements of account shall be submitted.
Article 58
The wages and salaries as well as other rightful earnings in foreign
exchange of foreign workers and staff members and of those from Hong Kong,
Macao and Taiwan working in a foreign-capital enterprise may be remitted
freely out of the country after taxes have been paid in accordance with
the provisions of the Chinese tax law.
Chapter IX Financial Affairs and Accounting
Article 59
A foreign-capital enterprise shall, in accordance with Chinese laws,
regulations and the provisions of financial organs, set up financial and
accounting systems, which shall be reported, for the record, to the
financial departments and the tax authorities at the place where the
enterprise is located.
Article 60
The fiscal year of a foreign-capital enterprise shall begin from January 1
and end on December 31 of Gregorian calendar.
Article 61
Reserve funds and bonus and welfare funds for workers and staff members
shall be withdrawn from the profits after a foreign-capital enterprise has
paid income tax in accordance with the provisions of the Chinese tax law.
The proportion of reverse funds to be withdrawn shall not be lower than
10% of the total amount of profits after payment of tax; the withdrawal of
reserve funds may be stopped when the total cumulative reserve has reached
50% of the registered capital. The proportion of bonus and welfare funds
for workers and staff members to be withdrawn shall be determined by the
foreign-capital enterprise of its own accord.
In the event that deficits of previous fiscal years of a foreign-capital
enterprise have not been made up, it may not distribute the profits, while
the undistributed profits of previous fiscal years may be distributed
together with the distributable profits of the current fiscal year.
Article 62
Accounting vouchers, account books and accounting statements made by a
foreign-capital enterprise shall be written in the Chinese language; if
they are written in a foreign language, notes in the Chinese language are
required.
Article 63
Business accounting of a foreign-capital enterprise shall be conducted
independently. The annual accounting statements and liquidation
accounting statements of a foreign-capital enterprise shall be prepared in
accordance with the provisions of the Chinese competent departments for
financial and tax affairs. If accounting statements are prepared in
foreign currencies, accounting statements in which the foreign currencies
are converted into Renminbi (RMB) shall be prepared at the same time. The
annual accounting statements and liquidation accounting statements of a
foreign-capital enterprise shall be verified by a Chinese registered
accountant, who shall submit a verification report.
The annual accounting statements and liquidation accounting statements of
a foreign-capital enterprise, as stipulated in the second and third
paragraphs of this Article, together with the verification report prepared
by a Chinese registered accountant, shall be submitted, within a
prescribed time limit, to the Chinese competent departments for financial
and tax affairs and also to the examining and approving organ and the
administrative department for industry and commerce for the record.
Article 64
The foreign investor may engage Chinese or foreign accounting personnel to
consult the account books of a foreign-capital enterprise, and the
expenses thus entailed shall be borne by the foreign investor.
Article 65
A foreign-capital enterprise shall submit its annual statement of assets
and liabilities and annual statement of profit and loss to the competent
departments for financial and tax affairs, and also to the examining and
approving organ as well as the administrative department for industry and
commerce for the record.
Article 66
A foreign-capital enterprise shall set up account books at the place where
the said enterprise is located, and shall receive supervision of the
competent departments for financial and tax affairs.
With respect to any foreign-capital enterprise which violates the
provisions in the preceding paragraph, the competent departments for
financial and tax affairs may impose a fine, and the administrative
department for industry and commerce may order to suspend its business
operations or revoke its business licence.
Chapter X Workers and Staff Members
Article 67
In case that a foreign-capital enterprise employs workers and staff
members within the territory of China, both the enterprise and the workers
and staff members shall, in accordance with the Chinese laws and
regulations, conclude and sign a labour contract. Matters as employment,
dismissal, salaries and wages, welfare, labour protection and labour
insurance shall be clearly stipulated in the contract.
Foreign-capital enterprises may not hire child labourers.
Article 68
A foreign-capital enterprise shall be responsible for the vocational and
technical training of its workers and staff members, and shall set up a
check-up and appraisal system, so that workers and staff members are
capable of meeting the needs of the enterprise's production and
development in terms of production and managerial skills.
Chapter XI Trade Union
Article 69
The workers and staff members of a foreign-capital enterprise shall have
the right to set up a grass-roots trade union organization and carry out
trade union activities in accordance with the provisions of the Trade
Union Law of the People's Republic of China.
Article 70
The trade union in a foreign-capital enterprise shall represent the
interests of workers and staff members, and have the right to conclude
labour contracts with the enterprise on their behalf, and to supervise the
execution of the labour contracts.
Article 71
The basic tasks of the trade union in a foreign-capital enterprise shall
be as follows: to safeguard the lawful rights and interests of workers and
staff members in accordance with the provisions of Chinese laws and
regulations, and to assist the enterprise in the rational arrangements and
use of welfare and bonus funds for the workers and staff members; to
organize workers and staff members in carrying on political study, in
learning scientific, technical and professional knowledge, in carrying out
cultural, artistic and sports activities; to educate workers and staff
members in complying with labour discipline and in striving to fulfil
various economic tasks of the enterprise. When a foreign-capital
enterprise holds discussions on problems concerning the commendation and
punishment of workers and staff members, the wage system, welfare
benefits, labour protection and labour insurance, representatives of the
trade union shall have the right to attend the discussions as nonvoting
attendants. A foreign-capital enterprise shall listen to the opinions of
the trade union, and win its cooperation.
Article 72
A foreign-capital enterprise shall give an active support to the work of
the trade union of the enterprise, and, in accordance with the provisions
of the Trade Union Law of the People's Republic of China, provide the
trade union organization with the necessary houses and equipment for
handling trade union work, holding meetings, and conducting such
collective undertakings as welfare benefits, and sports activities for
workers and staff members. Every month, the enterprise shall appropriate a
sum equal to 2% of the actual total amount of wages and salaries of
workers and staff members to the trade union as outlay, and the trade
union of the enterprise shall use this sum of money in accordance with the
measures for the administration of trade union outlay, as formulated by
the All-China Federation of Trade Unions.
Chapter XII Term of Operations, Termination and Liquidation
Article 73
The term of operations of a foreign-capital enterprise shall be proposed
by the foreign investor in the written application for the establishment
of the enterprise in the light of the specific conditions of different
enterprises, and shall be subjected to the approval by the examining and
approving organ.
Article 74
The term of operations of a foreign-capital enterprise shall be calculated
from the day when the business licence is issued.
In the event that the term of operations of a foreign-capital enterprise
has to be extended upon its expiration, the enterprise shall, 180 days
before the expiration of the term of operations, file an application for
the extension of the term of operations with the examining and approving
organ. The examining and approving organ shall, within 30 days from the
day of receiving the application, determine whether to approve or
disapprove the extension.
The foreign-capital enterprise shall, after obtaining the approval for an
extension of its term of operations and within 30 days of receiving the
approval for the extension, go through the procedure for the change of
registration with the administrative department for industry and commerce.
Article 75
A foreign-capital enterprise that falls under one of the following
circumstances shall terminate its business operations:
(1) the term of operations expires;
(2) the foreign investor decides to dissolve it because of poor operation
and management resulting in serious losses;
(3) business cannot be carried on because of heavy losses as a result of
natural disasters, wars or other force majeure;
(4) bankruptcy;
(5) disbanded by law because it has violated Chinese laws and regulations
or jeopardized social and public interests;
(6) other causes for dissolution, as stipulated in the enterprise's
articles of association, have occurred.
If a foreign-capital enterprise falls under any of the circumstances as
stipulated in Items (2), (3) and (4) of the preceding paragraph, it shall
submit, of its own accord, an application for the termination of business
operations to the examining and approving organ for verification and
approval. The date of approval after verification by the examining and
approving organ shall be the date of the said enterprise's termination.
Article 76
In case that a foreign-capital enterprise terminates its business
operations in accordance with the provisions in Items (1), (2), (3) and
(6) of Article 75, the enterprise shall, make a public announcement and
notify the creditors; and, it shall, within 15 days from the day of the
public termination announcement for liquidation, the principles of
liquidation, and the candidates for the liquidation committee to the
examining and approving organ for verification and approval before
liquidation is carried out.
Article 77
The liquidation committee shall be composed of the legal representatives
of the foreign-capital enterprise, the representatives of the creditors,
the representatives from the competent authorities concerned; Chinese
registered accountants and lawyers shall be engaged in the liquidation.
Priority shall be given to the payment of expenses for liquidation made
from the existing property of the foreign-capital enterprise.
Article 78
The liquidation committee shall execute the following functions and
powers:
(1) to convene a meeting of creditors;
(2) to take over and liquidate the property of the enterprise in question,
and to prepare the statement of assets and liabilities and the inventory
of property;
(3) to propose a basis for the valuation and computation of the property
of the enterprise in question;
(4) to work out a liquidation plan;
(5) to recover creditors' rights and to pay the debts;
(6) to receive the payments from shareholders which have not yet been
made;
(7) to distribute the remaining property;
(8) to represent the foreign-capital enterprise in bringing a suit or
responding to a suit.
Article 79
Prior to the conclusion of the liquidation of foreign-capital enterprise,
the foreign investor shall not remit or carry the said enterprise's funds
out of the territory of China, nor dispose of the enterprise's property
privately.
If, upon the conclusion of the liquidation of a foreign-capital
enterprise, its net assets and remaining property exceed its registered
capital, the excess portion shall be regarded as profit on which income
tax shall be imposed in accordance with the Chinese tax law.
Article 80
Upon the conclusion of the liquidation of a foreign-capital enterprise, it
shall go through the procedures for the cancellation of registration with
the administrative department for industry and commerce, and to hand in
the business licence for cancellation.
Article 81
While disposing of the assets and properties of a foreign-capital
enterprise, Chinese enterprises or other economic organizations shall,
under equal conditions, have the priority in purchasing the aforesaid
assets and properties.
Article 82
In case that a foreign-capital enterprise terminates its business
operations in accordance with the provisions in Item (4) of Article 75,
its liquidation shall be carried out with reference to the pertinent laws
and regulations of China. In case that a foreign-capital enterprise
terminates its business operations in accordance with the provisions in
Item (5) of Article 75, its liquidation shall be carried out in accordance
with the pertinent provisions of China.
Chapter XIII Supplementary Provisions
Article 83
With respect to the various categories of insurance for a foreign-capital
enterprise, it shall take out insurance from insurance companies within
the territory of China.
Article 84
If a foreign-capital enterprise concludes economic contracts with any
other Chinese enterprise or economic organization, the Economic Contract
Law of the People's Republic of China shall be applied.
If a foreign-capital enterprise concludes economic contracts with any
foreign company, enterprise or individual, the Law of the People's
Republic of China on Economic Contracts Involving Foreign Interests shall
be applied.
Article 85
Cases concerning the establishment, in China's mainland, of enterprises,
the capital of which is owned solely by the companies, enterprises, and
other economic organizations or individuals in the regions of Hong Kong,
Macao or Taiwan, or by Chinese citizens residing in foreign countries,
shall be handled with reference to these Rules.
Article 86
Foreign workers and staff members, and workers and staff members from Hong
Kong, Macao and Taiwan, who are working in a foreign-capital enterprise,
may carry into the country means of transport and articles for daily use
that are within reasonable quantities and for their own use, and they
shall go through the import procedures in accordance with pertinent
provisions of China.
Article 87
The right to interpret these Rules shall reside in the Ministry of Foreign
Economic Relations and Trade.
Article 88
These Rules shall go into effect as of the date of promulgation.
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