Laws of the People's Republic of China

The State Development Planning Commission, The State Economic and Trade Commission, The Ministry of Foreign Trade and Economic Cooperation

Circular on Strengthening the Administration of the Establishment of Sensitive Materials Production Enterprises in China by Foreign Investors

GuoJingMaoTingChanYe [2002] No.165

November 26, 2002

The economic and trade commissions (economic commissions), planning commissions and departments of foreign trade and economic cooperation of all provinces, autonomous regions and municipalities directly under the Central Government, municipalities separately listed on the State plan and Xinjiang Army Corps of Production and Construction:

Upon the approval of the State Council, the State Development Planning Commission, the State Economic and Trade Commission and the Ministry of Foreign Trade and Economic Cooperation distributed the Interim Provisions on Guiding the Orientation of Foreign Investment and the Catalog for the Guidance of Foreign Investment Industries in June, 1995, which provide that the production of sensitive materials belongs to the restricted category of foreign-funded projects. The relevant departments of Guangdong Province and of Zhuhai City approved the establishment of a foreign-funded sensitive materials production enterprise---- Zhuhai Zhenke Sensitive Materials Manufacturing Co., Ltd. in October 1995 without submitting the project to the industrial competent department under the State Council for examination, approval and record according to the stipulated procedures, and adjusted its proportion of domestic sale to export in violation of rules in March of 1998, and thus enabled the enterprise to be established in violation of rules and operate in excess of scope. We hereby give a circularized criticism to the relevant departments of Guangdong Province and Zhuhai City for their approving the establishment of the foreign-funded sensitive materials production enterprise in violation of rules. The economic and trade commissions (economic commissions), the planning commissions and the departments (bureaus) of foreign trade and economic cooperation of all provinces, autonomous regions and municipalities directly under the Central Government and municipalities separately listed on the State plan shall take this as a warning, and avoid the re-occurrence of similar incidents.

In order to strengthen the normative administration of foreign-funded sensitive materials production enterprises in China, and promote the healthy development of the sensitive materials industry, we hereby give our notice regarding the relevant issues as follows:

I.

Restatement on Examining and Approving Foreign-Funded Sensitive Materials Projects

According to the Stipulated Procedures It is provided in Article 12 of the Provisions on Guiding the Orientation of Foreign Investment (Decree No. 346 of the State Council) which were promulgated by the State Council on February 11, 2002 that, "Foreign-funded projects shall be examined and approved, and put on record respectively by the departments of development planning and the economic and trade departments according to the limit of authority for examination and approval; the contracts and articles of association of enterprises with foreign investment shall be examined and approved, and put on record by the departments of foreign trade and economic cooperation. The foreign-funded projects under the limit for restricted foreign-funded projects shall be subject to the examination and approval of the corresponding competent departments of the people's governments of the provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan, and shall be reported to the competent departments at the next higher level and the competent industrial departments, the power for examination and approval of this kind of projects may not be granted to the authorities at lower levels". It is provided in Article 13 that "With respect to the foreign-funded projects examined and approved in violation of the present provisions, the organ of examination and approval at the next higher level shall cancel it within 30 workdays from the day of receiving the documents for record of that project, its contract and articles of association shall be void, the department of enterprise registration shall not register it and the customs shall not handle the procedures for import and export for it." It is provided in the new Catalog for the Guidance of Foreign Investment Industries that came into force on April 1, 2002 (Decree No. 21 of the State Development Planning Commission, the State Economic and Trade Commission and the MOFTEC) that, sensitive materials production belongs to restricted foreign-funded industries. Therefore, the examination and approval of foreign-funded sensitive materials projects shall be strictly in compliance with the above relevant provisions.

II.

Checking up the Foreign-Funded Sensitive Materials Enterprises Established in Violation of Rules

Where a department in any region approves the establishment of foreign-funded sensitive materials production enterprises in violation of rules, the economic and trade commission (economic commission), the planning commission, and the department (bureau) of foreign trade and economic cooperation of the relevant province, autonomous region, municipality directly under the Central Government and municipality separately listed on the State plan shall organize the checking-up, immediately stop the establishment of such enterprises in violation of rules, sand order the enterprises concerned to go through the formalities of approval and record within a time limit.

III.

In accordance with Article 16 of the Provisions on Guiding the Orientation of Foreign Investment (Decree No. 346 of the State Council) which were promulgated by the State Council on February 11, 2002, which stipulates: "With respect to the investment projects established by overseas Chinese and the investors from Hong Kong Special Administration Region, Macao Special Administrative Region or Taiwan Area, the present provisions shall be applicable by reference in implementation", the sensitive materials production enterprises invested and established in China by overseas Chinese and investors from Hong Kong, Macao or Taiwan, shall also be in compliance with the above requirements.