Detailed Rules for the Implementation of the Law of the People's Republic of China on Wholly Foreign-owned Enterprises

Detailed Rules for the Implementation of the Law of the People's Republic of China on Wholly Foreign-owned Enterprises

Order of the Ministry of Foreign Trade and Economic Cooperation No.1

December 12, 1990

Contents
Chapter I General Provisions
Chapter II Establishment Procedures
Chapter III Form of Organization and Registered Capital
Chapter IV Ways and Time Limit for Contributing investment
Chapter V Land Use and Fees
Chapter VI Purchase and Sales
Chapter VII Taxation
Chapter VIII Foreign Exchange Control
Chapter IX Financial Affairs and Accounting
Chapter X Staff and Workers
Chapter XI Trade Unions
Chapter XII Duration, Termination and Liquidation
Chapter XIII Supplementary Provisions

Chapter I General Provisions
　
Article 1 These Detailed Rules are formulated in accordance with the provisions of Article 23 of the Law of the People's Republic of China on Enterprises Operated Exclusively with Foreign Capital
　
Article 2 All wholly foreign-owned enterprises are subject to the jurisdiction and protection of Chinese laws. Business activities conducted by a wholly foreign-owned enterprise within the territory of China must comply with Chinese laws and regulations without injury to the social public interests of China.
　
Article 3 Before a wholly foreign-owned enterprise can be established it must be shown to be beneficial to the development of the Chinese national economy, be able to gain remarkable economic results and meet at least one of the following requirements :
1. Using advanced technology and equipment which can help develop new products, save energy and raw materials, upgrade existing products and/or substitute for imports;
2. Reaching 50 percent or more of the annual output value of the export product in the total output value of all products of that year with a balance or surplus in foreign exchange receipts and expenditure.
　
Article 4 Establishment of wholly foreign-owned enterprises in the following business lines is prohibited:
1. News, publishing, broadcasting, television, film production;
2. Domestic commerce, foreign trade, insurance;
3. Posts and telecommunications;
4. Any others prohibited by the provisions of the Chinese government.
　
Article 5 The establishment of a wholly foreign-owned enterprise is restricted in the following lines of business:
1. Public utilities;
2. Communications and transportation;
3. Real estate;
4. Trust investment;
5. Leasing.
An application to establish a wholly foreign-owned enterprise in the lines of business described in the preceding paragraph is subject to approval by 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) , unless otherwise stipulated in the Chinese laws and regulations.
　
Article 6 An application for establishing a wholly foreign-owned enterprise shall not be approved if the enterprise involves any of the following circumstances :
1. Detriment to China's sovereignty or public interests;
2. Endangerment of the security of China;
3. Violation of Chinese laws and regulations;
4. Nonconformity with the requirements of the development of China's national economy;
5. Possibility of environmental pollution.
　
Article 7 A wholly foreign-owned enterprise, within the approved scope of operation, is entitled to do business independently without interference whatever.

Chapter II Establishment Procedures
　
Article 8 After the examination and approval of application for the establishment of wholly foreign-owned enterprises by the Ministry of Foreign Economic Relations and Trade, certificates of approval shall be granted by the Ministry.
The State Council may authorize the people's governments in provinces, autonomous regions, or municipalities directly under the central government , special cities with independent plans and Special Economic Zones to examine and approve the applications for establishing wholly foreign-owned enterprises under the following situations and certificates of approval are granted by such people's governments after the approval :
1. The total investment is within the authorization for approval as set by the State Council ;
2. No allocations of raw materials by the State are required and the national overall balance of energy resources, transportation and quotas for export are not affected.
The approval of the establishment of a wholly foreign-owned enterprise by the people's governments in provinces, autonomous regions, municipalities directly under the central government, special cities with independent plans and Special Economic Zones within the authorization for approval set by the State Council shall be filed with the Ministry of Foreign Economic Relations and Trade within 15 days after approval. (The Ministry of Foreign Economic Relations and Trade and the people's governments in the provinces, autonomous regions, municipalities directly under the central government, special cities with independent plans and Special Economic Zones shall be hereinafter referred to as ``the examination and approval authority".)
　
Article 9 A wholly foreign-owned enterprise applying for establishment shall, according to the authorization for approval, obtain the consent of the department of foreign economic relations and trade in advance, if the products of such enterprise involve export licenses, export quotas, import licenses or are restricted for import by the State.
　
Article 10 Before applying for the establishment of a wholly foreign owned enterprise, a foreign investor shall submit to the local people's government (at county level or above) where the enterprise will be located, a report covering the following items: objective of the wholly foreign-owned enterprise to be established; scope and scale of operation; products; technology and equipment to be used; the anticipated ratio of product sales in domestic and international market; acreage and requirement of the land; conditions and quantity of required water, electric power, coal , gas or other energy resources; requirements for public facilities, etc .
The local people's government (at county level or above) shall answer the foreign investor in written form within 30 days from the date of receiving the report submitted by the foreign investor.
　
Article 11 A foreign investor shall through the local people's government (at county level or above) where the wholly foreign-owned enterprise will be established submit the application for establishing the wholly foreign-owned enterprise with the following documents to the examination and approval authority;
1. Application for establishing a wholly foreign-owned enterprise;
2. Feasibility study report ;
3. Articles of association of the enterprise.
4. List of legal representatives of the enterprise (or the candidates for the board of directors);
5. Documents of testimonial and financial credit of the foreign investors;
6. Written reply of the local people's government at county level or above where the wholly foreign-owned enterprise will be established;
7. List of goods and materials which have to be imported;
8. Other documents needing to be submitted.
The documents in the preceding items (1) and (3) shall be written in Chinese, while documents in items (2) , (4) and (5) may be written in foreign language with Chinese translation attached to.
Where two or more foreign investors apply jointly to establish a wholly foreign-owned enterprise, they shall submit the duplicate of the contract signed between them to the examination and approval authority for the record.
　
Article 12 The examination and approval authority shall decide whether to approve or disapprove the application for the establishment of a wholly foreign owned enterprise within 90 days from the date of receiving all the documents. Should anything imperfect or inappropriate be found in the aforementioned documents, the examination and approval authority may demand a supplement or amendment to them within a limited period of time.
　
Article 13 After the application for establishing a wholly foreign-owned enterprise is approved by the examination and approval authority, the foreign investor shall, within 30 days from the date of receiving the certificate of approval, apply to the administrative authority for industry and commerce for registration and a business license.
The date of issuance of the business license for a wholly foreign-owned enterprise shall be the date of its establishment. If the foreign investor fails to apply to the administrative authority for industry and commerce for registration after 30 days from the date of receiving the certificate of approval, the certificate of approval shall automatically become invalid.
The enterprise shall go through the formalities for tax registration with the tax authority within 30 days of its establishment.
　
Article 14 A foreign investor may entrust organizations serving enterprises with foreign investment in China or other economic organizations to handle the matters stipulated in Article 9 , Paragraph 1 of Article 10 and Article 11.
　　......