Law of the People's Republic of China on Wholly Foreign-Owned
Enterprises
(Adopted by the Fourth Session of the Sixth National People's
Congress on April 12, 1986,and amended by by the 18th Session
of the Standing Committee of the 9th National People's Congress
on October 31, 2000)
Article 1. In order to expand international economic cooperation
and technological exchange and to promote the development
of China's national economy, the People's Republic of China
permits foreign enterprises and other economic entities or
individuals (hereinafter referred to as foreign investors)
to establish wholly foreign-owned enterprises within the territory
of China and will protect the lawful rights and interests
of such enterprises.
Article 2. Wholly foreign-owned enterprises referred to in
this Law mean enterprises established within the territory
of China in accordance with the relevant laws of China, the
entire capital of which is invested by foreign investors.
Such enterprises do not include branch offices established
by foreign enterprises and other economic entities within
the territory of China.
Article 3. The establishment of wholly foreign-owned enterprises
must be beneficial to the development of China's national
economy. The state encourages to establish such enterprises
as shall export all or most of their products or adopt advanced
technology.
Industries in which the establishment of wholly foreign-owned
enterprises is forbidden or restricted by the state shall
be stipulated by the State Council.
Article 4. The investment of, the profits obtained by and
other lawful rights and interests of foreign investors within
the territory of China shall be protected by the laws of China.
Wholly foreign-owned enterprises must observe China's laws
and regulations and shall not harm the social and public interests
of China.
Article 5. The state will not nationalize or expropriate wholly
foreign-owned enterprises. Under special circumstances, the
state, based on the need of social and public interests, may
expropriate wholly foreign-owned enterprises pursuant to legal
procedures and give commensurate compensation.
Article 6. Applications for the establishment of wholly foreign-owned
enterprises shall be examined and approved by the department
under the State Council in charge of foreign economic relations
and trade or the authorities authorized by the State Council.
The examination and approval authorities shall decide to approve
or disapprove within ninety days from the date of receiving
the application.
Article 7. After the application for establishing a wholly
foreign-owned enterprise has been approved, the foreign investor
shall, within thirty days from the date of receiving the approval
certificate, apply for registration with the administrative
authorities for industry and commerce and obtain a business
license. The date on which the business license of a wholly
foreign-owned enterprise is issued shall be the date such
enterprise is established.
Article 8. A wholly foreign-owned enterprise that meets the
requirements regarding legal persons as stipulated by the
laws of China shall obtain the status of a Chinese legal person
according to law.
Article 9. A wholly foreign-owned enterprise shall make the
investment within the territory of China within the period
approved by the examination and approval authorities. If no
investment has been made at the end of the period, the administrative
authorities for industry and commerce shall have the right
to revoke its business license.
The administrative authorities for industry and commerce shall
examine and supervise the investments of wholly foreign-owned
enterprises.
Article 10. Reorganization, merger or other important changes
of a wholly foreign-owned enterprise shall be submitted to
the examination and approval authorities for approval and
shall go through the procedures of the administrative authorities
for industry and commerce for changes in the registration.
Article 11. No interference shall be allowed in the operation
and management activities of a wholly foreign-owned enterprise
conducted according to its approved articles of association.
Article 12. A wholly foreign-owned enterprise employing Chinese
staff and workers shall enter into contracts according to
law and shall specify in the contracts provisions relating
to matters of employment, dismissal, remuneration, benefits,
labour protection and labour insurance.
Article 13. The staff and workers of a wholly foreign-owned
enterprise shall establish a trade union according to law,
carry on trade union activities and protect the lawful rights
and interests of the staff and workers.
A wholly foreign-owned enterprise shall provide the necessary
facilities for the activities of its trade union.
Article 14. A wholly foreign-owned enterprise must keep account
books within the territory of China, carry out independent
accounting, submit accounting statements according to regulations
and accept supervision by the finance and tax authorities.
If a wholly foreign-owned enterprise refuses to keep account
books within the territory of China, the finance and tax authorities
may impose a fine on the enterprise and the administrative
authorities for industry and commerce may order it to stop
its business operations or revoke its business license.
Article 15. Supplies such as raw materials and fuel needed
by a wholly foreign-owned enterprise within the approved scope
of business may be purchased in China or on the international
market.
Article 16. All items of insurance of a wholly foreign-owned
enterprise shall be insured with insurance companies within
the territory of China.
Article 17. A wholly foreign-owned enterprise shall pay taxes
in accordance with the relevant tax regulations of the state
and may enjoy preferential treatment in tax reductions and
exemptions.
If a wholly foreign-owned enterprise reinvests its after-tax
profits within the territory of China, it may apply for a
refund of part of the income tax already paid on the reinvested
amount in accordance with the regulations of the state.
Article 18. The foreign exchange matters of wholly foreign-owned
enterprises shall be handled in accordance with the foreign
exchange control regulations of the state.
A wholly foreign-owned enterprise shall open an account with
the Bank of China or another bank designated by state foreign
exchange control authorities. A wholly foreign-owned enterprise
shall resolve the balance between its foreign exchange income
and expenditure by itself.
Article 19. The lawful profits and other lawful income obtained
by foreign investors from wholly foreign-owned enterprises
and the funds they receive after liquidation may be remitted
abroad.
Salaries and other lawful income of foreign staff and workers
of wholly foreign-owned enterprises may be remitted abroad
after payment of individual income tax according to law.
Article 20. The term of operation of a wholly foreign-owned
enterprise shall be submitted by the foreign investors and
approved by the examination and approval authorities. If an
extension is needed upon the expiration of the term, an application
shall be filed 180 days prior to the expiration of the term
with the examination and approval authorities, which shall
decide to approve or disapprove within 30 days from the date
of receiving the application.
Article 21. When a wholly foreign-owned enterprise terminates,
a prompt public announcement shall be made and liquidation
shall be conducted in accordance with legal procedures.
Prior to the completion of the liquidation, the foreign investors
shall not dispose of the assets of the enterprise except for
carrying out the liquidation.
Article 22. When a wholly foreign-owned enterprise terminates,
it shall go through the procedures for cancelling its registration
with the administrative authorities for industry and commerce
and return its business license.
Article 23. The department under the State Council in charge
of foreign economic relations and trade shall, on the basis
of this Law, formulate detailed rules for implementation which
shall come into force after being submitted to and approved
by the State Council.
Article 24. This Law shall come into force on the date of
promulgation.
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