Laws of the People's Republic of China

The General Administration of Civil Aviation of China, the Ministry of Foreign Trade and Economic Cooperation

Circular of the General Administration of Civil Aviation of China and the Ministry of Foreign Trade and Economic Cooperation Concerning Relevant Policies on Foreign Investment in Civil Aviation

MinHangZongJuHan [1994] No.448

May 6, 1994

The people's governments of various provinces, autonomous regions and municipalities directly under the Central Government, each ministry, commission and directly subordinate institution under the State Council:

In order to accelerate the development of civil aviation and enhance the operation and management level, it is approved by the State Council that, on the principle of taking the construction with state investment as the main sector, foreign investors may, subject to certain conditions, invest in civil aviation. Relevant policies are hereby notified as follows:

1.

Foreign investment in airport construction

(1)

Foreign investors may invest in the construction of civil airports (excluding any airports that are both civil and military, the same hereinafter), flying areas (including runways, taxiing ways and parking aprons) by means of either an equity joint venture or a contractual joint venture, within the territory of the People's republic of China, with the Chinese capital investment constituting more than fifty-one per cent of the enterprise's registered capital and the offices of chairman of the board of directors and of general manager being assumed by the Chinese side.

(2)

Preference shall be given to foreign investors who invest in the construction of the flying areas of civil airports as well as such auxiliary projects as terminal building (excluding the construction and management of VIP rooms), cargo warehouse, ground service, aeroplane repairing, air catering, airport hotel and restaurant, aviation fuel, etc. In case of the terminal building construction projects, the capital contribution from the Chinese side shall constitute more than fifty one percent and the offices of chairman of the board of directors and of general manager shall be assumed by the Chinese side.A foreign-invested enterprise investing in the construction of the flying area of a civil airport may, subject to approval, properly expand its business scope to undertake the operation of such airport auxiliary projects as terminal building, cargo warehouse, ground service, aeroplane repairing, air catering, airport hotel and restaurant, aviation fuel, etc.

(3)

Air traffic control systems shall be invested in and managed by the state only, not by foreign investors.

2.

Foreign investment in establishment of air transport enterprises

(1)

Foreign investors, and in the first place foreign air transport enterprises, may, jointly with Chinese air transport enterprises, invest in establishment of air transport enterprises by means of either an equity joint venture or a contractual joint venture.

(2)

Foreign investors, and first and foremost foreign air transport enterprises, may establish air transport enterprises by means of purchasing shares from or jointly holding shares with Chinese air transport enterprises.

(3)

Where a foreign investor invests in establishment of an air transport enterprise, the General Administration of Civil Aviation of China shall, together with the departments concerned, choose one or two air transport enterprises as experimental units. After these experimental units get ripe, their experience will be gradually spread.

(4)

Where a foreign investor invests in establishment of an air transport enterprise, the ownership of the foreign investor shall not constitute more than thirty-five per cent of the enterprise's registered capital or the paid-in capital, and the foreign deputy shall not exceed twenty-five per cent of the right to vote.

(5)

The offices of chairman of the board of directors and of general manager of an air transport enterprise established with foreign investment shall be assumed by the Chinese side. Managing staff below deputy manager (s) may be chosen or invited on the basis of competitive selection from the Chinese and sides by the general manager according to needs.

(6)

Air transport enterprises established with foreign investment shall enjoy the same treatment in all items of tax as the home enterprises of the same kind do.

(7)

No foreign airport authorities and aviation authorities shall be allowed to invest in China to establish any air transport enterprises.

3.

Foreign investors may, by means of either an equity joint venture or a contractual joint venture, invest in general-purpose aviation enterprises in agriculture and forestry the foreign investment ratio of which shall be decided through consultation by the Chinese and foreign sides.

4.

Establishment of civil aviation enterprises with foreign investment shall obtain prior permission from the General Administration of Civil Aviation of China. In examining and approving the projects above the limitation amount, the State Planning Commission should examine and approve the project report and feasibility study report, and MOFTEC should examine and approve the contract and articles of association; in examination and approval of the projects below the limitation amount, the General Administration of Civil Aviation China shall examine and approve the project report and feasibility study report, and MOFTEC shall examine and approve the contract and articles of association. Separate establishment of a foreign investment enterprise for airport projects as provided for in item 2, Article 1 shall be handled auxiliary according to these Regulations.

5.

The General Administration of Civil Aviation of China and its administrative bureaus at the local levels shall exercise administration and supervision over the business operations of the civil aviation enterprises with foreign investment according to law.

6.

If a company, enterprise, other economic organization or individuals in Hong Kong, Macao and Taiwan invests in or participates in holding shares of an aviation enterprise in the mainland, matters shall be handled with reference to this Circular.