In order to meet the needs of our country's new situation opening to the outside world and further improve the investment environment of foreign businessman, in accordance with the Decision of the Standing Committee of the National People's Congress on Revising the Law of the People's Republic of China on Foreign-capital Enterprises, the Rules for the Implementation of the Law of the People's Republic of China on Foreign-capital Enterprises is revised as follows:

I. The Article 3 is revised as follows: "A foreign-capital enterprise to be established must benefit the development of China's national economy and be capable of gaining remarkable economic results. The state encourages foreign-capital enterprises to use advanced technology and equipment, engage in the development of new products, realize the upgrading of products and the replacement of old products with new ones, economize energy and raw materials, and it is also encouraged to establish foreign-capital enterprises which are export oriented."

II. The Articles 4 and 5 are amalgamated and revised as follows: "Trades in which the establishment of foreign-capital enterprises is forbidden or restricted shall be determined and established according to the provisions regarding state guidance for foreign investment orientation and guiding catalogue of industries for foreign investment."

III. "The selling proportion of the products in China and overseas markets" in the Article 10 is deleted.

IV. "And the selling proportion in China and overseas markets" in the Article 15 is deleted.

V. The Article 22 is revised as follows: "In its operating period, no foreign-capital enterprise may reduce their registered capital. If however, it is really needed to make such reduction due to some changes such as those in the total amount of investment or production scale, it may be reduced upon the approval by the examining and approving authority."

VI. The paragraph 1 of Article 27 is revised as follows: "Machinery and equipment to be contributed by the foreign investor as investment must be those needed for the production of the foreign-capital enterprise."
VII. The paragraph 1 of Article 28 is revised as follows: "The industry property rights and proprietary technology to be contributed as investment by the foreign investor must be owned by the foreign investor."

VIII. The Article 43 is deleted.

IX. The Article 45 is revised as follows: "Any foreign-capital enterprise may sell its products in Chinese market. The state encourages all foreign-capital enterprises to export their products."
X. The paragraph 2 of Article 46 is revised as follows: "A foreign-capital enterprise may sell their products in China either by themselves or by entrusting any commercial organization with the sale of their products."

XI. The paragraphs 2 and 3 of Article 48 are deleted.

XII. "The tariff and industrial and commercial consolidated taxes on the following goods and materials imported by a foreign-capital enterprise shall be exempted." in the Article 52 is revised as follows: "Taxes on the following goods and materials imported by a foreign-capital enterprise shall be exempted or reduced in accordance with Chinese tax law."

XIII. The Article 53 is revised as follows: "The export commodities produced by the foreign-capital enterprises may enjoy tax reduction, exemption or refund according to the relevant provisions of Chinese tax law, except those whose export is restricted by China."

XIV. The Article 56 is deleted.

XV. The Article 84 is revised as follows: "All contracts between a foreign-capital enterprise and other company, enterprise or economic organization and individual shall be governed by the Contract Law of the People's Republic of China."

XVI. The Article 87 is deleted.

In addition, the states of some articles and paragraphs are revised and the order of the clauses is adjusted correspondingly.
The Decision shall enter into force as of the date of promulgation and the Rules for the Implementation of the Law of the People's Republic of China on Foreign-capital Enterprises is made corresponding modification according to this decision to announce again.

Attachment:

Rules for the Implementation of the Law of the People's Republic of China on Foreign-capital Enterprises

Approved on October 28, 1990 by the State Council

Issued on December 12, 1990 by the Ministry of Foreign Economic Relations and Trade

Revised according to the Decision of the State Council Regarding the Revision of Rules for the Implementation of the Law of the People's Republic of China on Foreign-capital enterprises on April 12, 2001

Chapter I General Provisions

Article 1 These Rules are formulated according to the Law of the People's Republic of China on Foreign-capital enterprises.

Article 2 Foreign-capital enterprises shall be subject to and under the protection of Chinese Law.

Foreign-capital enterprises engaging in business in the People's Republic of China must abide by Chinese laws and regulations and must not harm the social and public interests of China.

Article 3 A foreign-capital enterprise to be established must benefit the development of China's national economy and be capable of gaining remarkable economic results. The state encourages foreign-capital enterprises to use advanced technology and equipment, engage in the development of new products, realize the upgrading of products and the replacement of old products with new ones, economize energy and raw materials, and it is also encouraged to establish foreign-capital enterprises which are export oriented.

Article 4 Trades in which the establishment of foreign-capital enterprises is forbidden or restricted shall be determined and established according to the provisions regarding state guidance for foreign investment orientation and guiding catalogue of industries for foreign investment.

Article 5 No application for the establishment of a foreign-capital enterprise shall be approved if the proposed enterprise is under any of the following circumstances:

(1) injuring China's sovereignty or social and public interests;
(2) endangering China's national security;
(3) in violation of Chinese laws and regulations;
(4) not in keeping with the requirements of China's national economic development;
(5) may result in environmental pollution.
Article 6 A foreign-capital enterprise shall, within the approved scope of business, have its autonomy in operation and management, and be free from any interference.

Chapter II Establishment Procedures

Article 7 The application for the establishment of a foreign-capital enterprise shall be subject to the examination and approval by the Ministry of Foreign Trade and Economic Cooperation of the People's Republic of China (hereinafter referred to as the MFTEC), which shall issue a certificate of approval to those approved.

If any applications for the establishment of a foreign-capital enterprise is under any 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, city directly under State planning or special economic zone to conduct the examination and approval and issue a certificate of approval to those approved:

(1) the total amount of investment is within the limits of power for the examination and approval of investment stipulated by the State Council;
(2) the enterprise shall not need any raw materials to be allocated by the state, and not influence unfavorably the national comprehensive balance of energy resources, communications and transportation and export quotas for foreign trade.

The people's government of the relevant province, autonomous region, municipality directly under the Central Government, municipality separately listed on the State plan or special economic zone that has, within the authorization by the State Council, approved any application for the establishment of a foreign-capital enterprise shall, within 15 days since the approval has been issued, report to the MFTEC for record (hereinafter the Ministry of Foreign Trade and Economic Cooperation and the people's government of the relevant province, autonomous region, municipality directly under the Central Government, municipality separately listed on the State plan and special economic zone shall be, in general, referred to as the examining and approving authority).

Article 8 With regard to any foreign-capital enterprise that applies for establishment, if its products shall involve export license, export quota, import license or the import of which is restricted by the state, a prior consent shall be obtained from the competent authority of foreign economic relations and trade in accordance with the relevant administrative power.

Article 9 Before submitting any application for the establishment of a foreign-capital enterprise, the foreign investor shall submit to the local people's government at or above the county level at the place where the foreign-capital enterprise is to be established a report regarding matters such as the purpose of the enterprise, its scope and scale of business, products, technology and equipment, land area to be needed and related requirements, conditions and quantities of water, electricity, coal, coal gas or other energy resources required, and requirements to public facilities.

The relevant local people's government at or above the county level shall, within 30 days from the date of receiving the report submitted by the foreign investor, give him a reply in writing.

Article 10 Any foreign investor who wishes to establish a foreign-capital enterprise shall submit an application to the examining and approving authority through the relevant local people's government at or above the county level at the place where the foreign-capital enterprise is to be established, together with the following documents:

(1) a written application for the establishment of the foreign-capital enterprise;
(2) a feasibility study report;
(3) the articles of association of the foreign-capital enterprise;
(4) a list of legal representative (candidates for the future board of directors) of the foreign-capital enterprise;
(5) the legal documentation and credit certificate of the foreign investor;
(6) the written reply given by the relevant local people's government at or above the county level at the place where the foreign-capital enterprise is to be established;
(7) an inventory of goods and materials that shall be imported;
(8) other documents as may be required.

Documents of (1) and (3) of the preceding paragraph must be prepared in Chinese, while those of (2), (4) and (5) of the same paragraph may be written in a foreign language but the corresponding Chinese translations should be attached.