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CIRCULAR OF THE GENERAL OFFICE OF THE STATE COUNCIL CONCERNING THE OFFICES OF FOREIGN ENTERPRISES

    The clarification submitted by the Commission for the Administration of
Foreign Investments on several questions on the implementation of "Interim
Provisions of the State Council of the People's Republic of China Governing
Resident Representative Offices of Foreign Enterprises", has been approved by
the State Council and is hereby transmitted to you, and you are requested to
implement it accordingly.
Appendix: A CLARIFICATION OF THE COMMISSION FOR THE ADMINISTRATION OF
FOREIGN INVESTMENTS ON SEVERAL QUESTIONS ON THE IMPLEMENTATION OF INTERIM
PROVISIONS OF THE STATE COUNCIL OF THE PEOPLE'S REPUBLIC OF CHINA ON THE
ADMINISTRATION OF RESIDENT REPRESENTATIVE OFFICES OF FOREIGN ENTERPRISES

    Since the promulgation of the "Interim Provisions of the State Council of
the People's Republic of China Governing Resident Representative Offices of
Foreign Enterprises" (hereinafter referred to as the "Interim Provisions"), the
various examining and approving units have, in accordance with the "Interim
Provisions", examined and approved, the applications filed by foreign
businessmen for the establishment of resident representative offices, the
departments for the administration of industry and commerce have approved their
registration, and the organs of public security have the performed residence
procedures; work in this respect has made very good progress, and the
administrative work concerning the resident representative offices of foreign
enterprises has been strengthened to some extent. However, in the course of
implementing the "Interim Provisions", there still exist some questions which
need to be defined more sharply or clarified. Now, several questions concerning
the implementation of the "Interim Provisions" are hereby clarified as follows:

    (1) "Other economic organizations", as mentioned in Article 1 of the
"Interim Provisions", refer to those organizations which are engaged in
economic, trade, technological or finance business activities but are not
called companies or enterprises as such, and which also include such non-profit
economic organizations as the Japanese-Chinese Economic Association, the
Japanese Association for the Promotion of International Trade, the National
Council for American-Chinese Trade Relations, and Council for Canadian-Chinese
Trade Relations.

    (2) Article 2 of the "Interim Provisions", which reads: "Those who have not
obtained approval or have not gone through the procedures for registration
shall not be permitted to undertake business operations of resident offices",
means that those who have not obtained approval or have not gone through the
procedures for registration shall not be permitted to undertake business
operations in the capacity of the staff of resident (representative) offices,
and neither shall they be permitted to put up any sign at their residences that
represents foreign companies or enterprises.

    With respect to those who undertake unauthorized business operations in the
capacity of the staff of resident (representative) offices without going
through the proper approval registration procedures for setting up resident
representative offices, the departments for the administration of industry and
commerce shall notify the persons concerned to close down their resident
offices and to stop their business operations forthwith.

    (3) With respect to the certifying documents and relevant materials to be
presented by foreign enterprises when applying for the permission to set up
resident representative offices as provided for in Article 3 of the "Interim
Provisions", the written application and the vesting instrument must be
presented in the original and the other certifying documents may be presented
in duplicate or photo copies. As regards "the certificates of creditworthiness
issued by a financial institution", if a foreign businessman has difficulty
providing one, flexibility may be exercised by requiring the foreign
businessman concerned to present certifying documents indicating business
transactions concluded between the foreign businessman and a bank within the
preceding year instead.

    When a non-profit foreign economic organization applies for the permission
to set up its resident representative office, it may be exempt from presenting
the certificate of creditworthiness required in Article 3 of the "Interim
Provisions".

    (4) "The other trades", as mentioned in Article 4 of the "Interim
Provisions", refer to those trades such as cooperative exploitation of oil and
coal resources and etc. which are beyond the approving authority of the
Ministry of Foreign Trade, the People's Bank of China, the Ministry of
Communications, and the Civil Aviation Administration of China, and the parties
concerned shall submit their applications to the competent departments
concerned under the State Council for approval in light of the nature of their
businesses.

    With respect to those non-profit foreign economic organizations, which are
the counterparts of the China Council for the Promotion of International Trade,
their applications for the permission to set up resident representative
offices shall, for the time being, be submitted to the Ministry of Foreign
Trade for examination and approval. In the course of examination and approval,
the Ministry of Foreign Trade shall consult China Council for the Promotion of
International Trade.

    With respect to foreign businessmen in the trust and investment trade,
their applications for the permission to set up resident representative offices
shall, for the time being, be submitted to the People's Bank of China for
examination and approval. In the course of examination and approval, the
People's Bank of China shall consult the China International Trust and
Investment Corporation.

    (5) In the event that several foreign enterprises of different trades
jointly apply for the permission to set up a comprehensive resident
representative office, they shall submit their application to the Commission
for the Administration of Foreign Investments of the People's Republic of
China, and the latter shall examine and approve the application in consultation
with the relevant units.

    (6) Owing to the serious shortage of housing at present, a strict control
shall be exercised, by the examining and approving organ in accordance with the
specific conditions, over the number of staff of the proposed resident
representative offices of foreign enterprises and over the duration of
residence. An application for the setting up of a resident representative
office shall not be approved if the problem of housing has not been solved. The
maximum duration of residence, approved on each occasion, shall not exceed 3
years. On the expiration of this prescribed period, if it is necessary to have
an extension, the foreign enterprise concerned shall submit anew its
application to the examining and approving organ 3 months before the expiration
of the original prescribed duration of residence. And, after obtaining the
approval, the foreign enterprise concerned shall apply to the department for
the administration of industry and commerce for registration. If resident
representative offices are to be set up in China in accordance with agreement
between the Chinese government and foreign governments, the foreign enterprises
concerned shall go through the procedures for registration in accordance with
the "Interim Provisions", and the number of staff of the proposed resident
representative office, the duration of residence, the registration fees, etc.,
shall be handled according to the principle of reciprocity.

    (7) The approving organ, while issuing the certificate of approval to the
applying unit, shall notify in writing the case to the General Administration
for Industry and Commerce. The departments for the administration of industry
and Commerce shall, after the foreign enterprise concerned has gone through the
registration procedures, notify without delay the case to the State Commission
for the Administration of Foreign Investments, the Ministry of Foreign
Affairs, the Ministry of Public Security, the Customs General Administration,
and the State Tax Bureau under the Ministry of Finance.

    With respect to foreign enterprises in the trust and investment trade which
apply for the permission to set up their resident representative offices,
after they have obtained the approval and have gone through the registration
procedures, the department concerned shall at the same time notify the case to
the China International Trust and Investment Corporation.

    With respect to those non-profit foreign economic organizations, which are
the counterparts of the China Council for the Promotion of International Trade
and apply for the permission to set up their resident representative offices,
after they have obtained approval and have gone through the registration
procedures, the department concerned shall at the same time notify the case to
the China Council for the Promotion of International Trade.

    (8) Article 5 of the "Interim Provisions" reads: "Those who have failed to
go through the procedures for registration within the prescribed time limit,
shall return the original certificate of approval". An applicant shall go
through the procedures for registration with the department for the
administration of industry and commerce within 30 days from the day he/she has
received the certificate; if he/she has failed to do so within prescribed time
limit, he/she shall be considered to have withdrawn automatically the original
application, and the certificate of approval already issued to him/her shall
become invalid automatically, and he/she shall be required to return the
certificate of approval to the original approving organ.

    (9) The change of "the location of resident office", as mentioned in
Article 7 of the "Interim Provisions", refers to the change effected within the
same city. However, the change of room number within the same building shall
not be considered as a change of the location of resident office. The resident
representative office concerned is required to notify, without delay, the case
of change of the location of resident office to the local competent department
concerned and also to the department for registration.

    In case that the resident representative office of a foreign enterprise has
to change its location at the request of the competent department concerned of China, the foreign enterprise concerned shall be required to go through the
procedures for the registration of the change without paying any registration
fees.

    (10) If the resident representative office of a foreign enterprise wishes
to employ staff members, the case shall be handled in accordance with the
provisions in Document No.48, signed and issued jointly, in 1981, by the
Ministry of Public Security, the Ministry of Foreign Affairs, the General
Administration for Industry and Commerce, the Commission for the Administration
of Imports and Exports, and the Ministry of Foreign Trade; and, in principle,
no individual of a third country or Chinese without regular registered
residence in China shall be hired. However, in special cases, citizens of a
third country or individuals from the areas of Hong Kong and Macao may be
engaged with the approval of the local department of service for foreign
affairs and of the labour department.

    (11) Article 4 of "Circular Concerning Registration of Resident
Representative Offices of Foreign Enterprises" promulgated by the General
Administration for Industry and Commerce of the People's Republic of China on
December 8, 1980, provides: "the resident representative offices, or the
resident representatives, of foreign enterprises approved by the competent
departments of the people's governments of the province, municipality directly
under the Central Government, and autonomous region" refer to the resident
representative offices of foreign enterprises approved before the promulgation
of the "Interim Provisions" by the State Council on October 30, 1980.
Applications for the setting up of resident representative offices submitted by
foreign enterprises after the promulgation of the "Interim Provisions" shall
be handled in accordance with the "Interim Provisions".

    (12) In the event that foreign businessmen apply for permission to set up
resident representative offices in cities other than Beijing, with the
exception of such trades as banking or air transportation - the applications
shall be submitted directly to the competent departments listed in Article 4 of the "Interim Provisions", all other trades shall, in light of the nature of
their respective businesses, apply accordingly to the local bureau of foreign
trade or bureau of communications of the province, municipality directly under
the Central Government, or autonomous region, or to the departments or bureaus
in the localities, which have a direct business relationship with the
ministries, commissions or bureaus under the State Council; and the aforesaid
departments shall, in turn, write their comments on the written applications
and forward same, for examination and approval, to the competent departments
concerned listed in Article 4 of the "Interim Provisions".

    (13) With the exception of such trades as banking and air transportation,
in case that foreign businessmen apply for the permission to set up resident
representative offices in the two provinces of Guangdong and Fujian, their
applications shall be submitted to the provincial governments for examination
and approval. In case that resident representative offices are to be set up in
the Shenzhen, Zhuhai and Xiamen Special Economic Zones, the applications shall
be submitted for examination and approval to the provincial committee for the
administration of special economic zones.

    (14) If enterprises established and run abroad by overseas Chinese, by
compatriots from Hong Kong, Macao and Taiwan, wish to set up resident
representative offices in China (including Guangdong and Fujian Provinces and
the special economic zones), their applications shall be dealt with reterence
to the "Interim Provisions" and this Clarification.

    (15) Should problems arise in the course of tbe execution of the "interim
Provisions" and of this Clarification, and that explanation and solutions are
called for, they shall be handled through coordination and consultation by the
State Commission for the Administration of Foreign Investments.?