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.