SHANGHAI LOCAL LAWS, RULES AND REGULATIONS

Regulations of Shanghai on
the Economic and Technological Development Zones

(Passed on November10, 1988 at the 4th meeting of the Standing Committee of the 9th National People’s Congress of Shanghai)

Chapter 1 General Provisions

Article 1 To further improve Shanghai’s opening-up, develop the foreign economic & technological cooperation and international trade and quicken the construction of Shanghai’s economic and technological zones, the present regulations are formulated, with the relevant laws and regulations of the People’s Republic of China observed and the actual circumstances of Shanghai respected.

Article 2 The present regulations are applicable to all economic & technological zones (hereinafter referred to as the zones) established upon the approval of the State Council in Shanghai.

Article 3 The zones shall, according to the economic development strategies of Shanghai and the general urban construction program, concentrate on the absorption of foreign investment in newly emerging technologies and industries and establishment of high technology and export-oriented enterprises. Where necessary, the projects in the tertiary industry such as projects in international trade, international banking, places for foreign affairs activities, tourism and housing can be launched.

Article 4 The relative and competent agencies and units of Shanghai shall provide investors in the zones with good production and operation conditions and relentlessly improve the basic infrastructure and catering facilities covering water, electricity, gas supply, sewage discharge, telecommunications, road, warehousing & transportation and non-production services.

Article 5 The capital contribution, assets, profits and other lawful rights of the investors in the zones shall be protected by the laws of the People’s Republic of China. All enterprises, units and individuals in the zones shall obey the laws and regulations of the People’s Republic of China and shall not damage the public interests.

Chapter 2 Organizations and Administration

Article 6 The agency of Shanghai Municipal Government in charge of foreign investment acts as the administrative agency over the zones, which is authorized the following powers: 1) Organizing the draft and revision of the development programs of the relevant zones and, upon the approval of Shanghai Municipal Government, carrying them out; 2) Framing and publicizing the detailed management rules of the relevant zones; 3) Examining and approving the investment projects in the zones within the scope of its authorized powers; 4) Examining, urging and coordinating the construction of basic infrastructure in the zones and the supply of water, electricity, gas and telecommunications; 5) Examining, supervising and coordinating the work of the branches of other municipal agencies and relative units in the zones; 6) Coordinating and helping to solve the problems occurring during the construction and operation of the projects. 7) Performing other powers granted by Shanghai Municipal Government.

Article 7 The matters that were dealt with by relative competent municipal or district agencies concerning basic infrastructure, land and houses, public security, communications, fire protection, culture, education, public healthcare, afforestation and family planning shall still fall within the responsibilities of the relevant original agencies. The powers granted to the managing institutes of the zones by Article 6 of the present regulations shall be followed as stipulated.

Article 8 The development companies in the zones shall, according to the developing plans approved by the Shanghai Municipal Government, undertake the construction of basic infrastructure in the zones and management of the land and real estate and render the investors the assistance in the establishment of enterprises and acquirement of water, electricity, natural gas and telecommunications.

Chapter 3 Investment and Operation

Article 9 Foreign companies, enterprises and other forms of economic organizations or individuals are encouraged to invest in the zones, launching foreign invested enterprises or operating in other economic forms permitted by the laws of the State. Domestic enterprises or other forms of economic organizations can establish independently run enterprises or jointly operated enterprise in the zones.

Article 10 Investors shall go through the application and examining procedures stipulated by the State and Shanghai Municipal Government before they can invest in the zones.

Article 11 The acquirement of land use right in the zones by foreign invested enterprises shall be governed by the relative regulations of the State and Shanghai concerning the administration over the use of land.

Article 12 Foreign invested enterprises shall open accounts with financial institutions that are designated by the People’s Bank of China. Should it be necessary for the enterprises to open accounts with financial institutions overseas or in Hong Kong & Macao, they shall obtain the approval from the State’s foreign currency supervision agency in advance.

Article 13 Foreign invested enterprises shall furnish a complete set of accounting books within the border of Shanghai, keep separate accounting, report to the relative authorities the required accounting statements and operate under the supervision of finance and taxation authorities.

Article 14 Enterprises in the zones shall operate within the scope reviewed and approved by the competent enterprise registration agencies.

Article 15 Foreign invested enterprises in the zones can decide on their own on the production and business plans, raise money and use this money raised and purchase raw materials and sell their products within the scope of the contract approved.

Article 16 Foreign invested enterprises in the zones can, based on the needs of production and business operations, decide on their own on the organizational structure, personnel structure, forms of salary, frame of rewards and allowances. The recruitment of personnel by foreign invested enterprises shall be governed by the regulations of the State and Shanghai concerning the management of labor and personnel affairs in foreign invested enterprises.

Article 17 Foreign invested enterprises in the zones shall, pursuant to the regulations of the State and Shanghai concerning environmental protection and labor safeguard, take effective measures to prevent environmental pollution and make sure that the employees are working under a secure and healthy condition.

Article 18 The employees of the foreign invested enterprises in the zones can, with the relevant laws observed, establish trade unions at the basic level, carrying out activities related to trade union and protecting the lawful rights of the employees.

Article 19 The explanations on the closing down or wind-up of the enterprises in the zones shall be reported to the original examining and approving agency and the formalities required shall be undertaken accordingly.

Chapter 4 Preferential Treatments

Article 20 Foreign-invested enterprises in the zones shall enjoy the preferential treatments stipulated by the present regulations, besides other preferential policies offered by the State and Shanghai. Domestic enterprises set up upon approval in the zones shall enjoy the preferential policies provided for by the present regulations and, if approved by the State, tax reduction and exemption.

Article 21 Foreign-invested manufacturing enterprises in the zones shall be exempt from local income tax through the end of 1995.

Article 22 Houses built in the zone by the foreign-invested enterprises themselves or newly-built houses bought by them shall be exempt from real estate tax for 5 years starting from the month of its completion or its being bought.

Article 23 Should the foreign invested enterprises in the zones have difficulties in paying the relevant taxes, they shall enjoy a reduction or exemption of the consolidated tax of industry and commerce upon their applications and the approval of the relevant taxation authorities.

Article 24 The short-term floating loan needed by the foreign invested enterprises in the zones for their productions and operations shall, if reviewed and approved by the account opening bank(s) or other financial institutions, be extended on a guaranteed basis and the priorities shall be given to other loans needed by the foreign invested enterprises in the zones.

Article 25 Foreign investors can, according to the uniform programs, invest in the zones to develop open areas and engage in the development of basic infrastructure and management of real estate. Foreign invested enterprises engaged in the construction of basic infrastructure in the zones shall enjoy the preferential treatments granted to the manufacturing enterprises in the zones.

Article 26 Bonded warehouses can be set up in the zones to provide services to enterprises inside or outside the zones. Transit bonded warehouses and bonded processing zones can also be established in the zones, upon the approval of the competent authorities of the State.

Chapter 5 Supplementary Provisions

Article 27 The present regulations are applicable to the enterprises in the zone launched by the companies, enterprises and other forms of economic entities of overseas Chinese and compatriots from Hong Kong, Macao, Taiwan or by the individuals from these areas.

Article 28 The provision of land and houses to the consular institutions or relative international organizations shall be governed by the regulations of the Ministry of Foreign Affairs and Shanghai Municipal Foreign Affairs Office.

Article 29 The development companies in the zones mentioned in the present regulations refer to the economic entities that are approved by Shanghai Municipal Government to engage in the development and management of the zones.

Article 30 The present regulations shall come into force on January 1, 1989.

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