Laws of the People's Republic of China

The General Office of the State Council

Circular of the General Office of the State Council on Liquidating Fixed Asset Investment Projects

Guo Ban Fa [2004] No.38

People's Governments in all provinces, autonomous regions, municipalities under direct control of the Central Government, all Ministries and Commissions under the State Council, and Organizations directly under the State Council:

At present, China's economy maintains a steady and rapid development, accompanied with a further-enhanced economic effectiveness and a good overall economic performance. However, some salient contradictions and problems during the economic development remain ineffectively relieved, some of which are still growing unchecked, mainly in the overheated and oversized investment in fixed assets, and the salient tension between demand and supply in coal, electricity, petroleum, transportation and important raw materials.

At present, efforts shall be put forth in solving the problem of overheated investment so as to promote the steady and rapid development of economy and to avoid large economic fluctuations. In order to further strengthen the macroeconomic regulation, the State decides to liquidate the fixed asset projects.

I.

Guiding Thought and Principle

1.

The liquidation work shall carry out the scientific development concept, and all are required to unify their thoughts to the decision of arrangement of the Central Government, fully aware of the problem of overheated investment and its harmful influences. All the regions and all the authorities are shall, though this liquidation, replace their attentions to the enhancement of the quality and benefit of the economic growth, and firmly surmount the phenomena of blind competition with each other, rash launching of projects and rash putting up establishments.

2.

The liquidation shall be conducted in accordance with the current laws, administrative regulations and state policies, and mainly with the national industrial policies and industrial program, the laws and regulations governing land administration, environmental protection, bank loaning, project examination and approval etc., and the circulars of the State on controlling the construction of steel, electrolytic aluminum, cement, the office buildings training centers of the Party and government authorities, city express track transportation facilities, golf course etc.. Measures shall be adopted towards a project that fails to be in line with these requirements, such a project as should be discontinued shall be discontinued, and such a project as should be redressed within a time limit shall be redressed within the time limit.

3.

The liquidation work shall be subject to the principle of giving prominence to key points, providing guidance tailored to the situation, and handling each case on its own merits. Importance shall be attached to the structural readjustment while curbing the overheated investment. Such projects as have low technological contents, exceed the demand of market, and fail to be in line with the requirements of structural readjustment, and especially those highly energy-consuming, water-consuming, material-consuming, environment-polluting projects of haphazard investment and low-level redundant construction shall be firmly contracted. The liquidation of the project promoted by governmental activities shall be strengthened, and the project that has a high technological content and is in line with the requirements of structural readjustment, and supports shall continually be granted to agriculture, forestry, water conservancy, ecological construction environmental infrastructure, social programs and other projects in weaker fields that need to be strengthened.

4.

The liquidation work shall be carried out in accordance with the affiliation of the project. The National Development and Reform Commission shall be responsible for the organization work of the liquidation, and shall, together with the Ministry of Supervision, the Ministry of Land and Resources, the Ministry of Construction, the People's Bank of China, the National Audit Office, the State Environmental Protection Administration, the China Banking Regulatory Commission etc., strengthen the supervision and examination of the liquidation in accordance with their own division of work.

II.

Liquidation Scope

All regions, all authorities and all related authorities shall conduct a comprehensive examination and liquidation of all the projects under construction and projects to be constructed. The "project under constriction" as mentioned above refers to such a project as is already started, and the "project to be constructed" as mentioned above refers to such a project as is already applied for by a project unit, as is under the handling of the governmental authorities and as is not started yet.

The key areas subject to liquidation: 1 projects of steel, electrolyte aluminum, cement, office building and training centers of the Party and government authorities, city express track transportation facilities, golf course, exhibition center, logistics park, and large-sized shopping center etc.; 2 all the projects that has been newly started since 2004.

Projects of agriculture, forestry, water conservancy (including "six small rural projects (water-efficient irrigation, potable water supplies, road building, methane production facilities, hydroelectric plants, and pasture enclosure)"), ecological construction, education (excluding university city), public health, and science (excluding scientific and technological park) shall be beyond the liquidation scope.

III.

Content of Liquidation

The projects under construction and to constructed shall be examined one by one in liquidation, which shall include:

1.

Whether being in line with the national industrial policies and programs; and

2.

Whether being in line with the general program of land utilization and integrated into the annual program of land utilization; and

3.

Whether being in line with the national provisions concerning environmental protection and passing the environmental impact assessment; and

4.

Whether being in line with the general planning of a city; and

5.

Whether being in line with the procedures governing project examination and approval and other constructions; and

6.

Whether being in line with the credit policies and the relevant provisions governing fixed asset investment; and

7.

Whether being in line with the provisions in Circular of the General Office of the State Council on Transmitting and Issuing Several Opinions of the National Development and Reform Commission and Other Authorities on Curbing Irrational Investment in Steel, Electrolytic Aluminum and Cement Industries (Guo Ban Fa [2003] No.103), Circular of the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council on Continually Tightening the Control the Construction of the Office Building and Training Center Project of the Party and Government Authorities (Zhong Ban Fa [2003] No.3), Circular of the General Office of the State Council on Strengthening the Administration of the Construction of the City Express Track Transportation Facilities (Guo Ban Fa [2003] No.81) and Circular of the General Office of the State Council on Suspending the New Construction of Golf Courses (Guo Ban Fa [2004] No.1).

8.

Whether falling within the items stipulated in Circular of the General Office of the State Council on Strictly Prohibiting the Illegal Construction of the Thermal Power Generating Units of Equivalent to or Less than 1.35 Million Kilowatts (Guo Ban Fa Ming Dian [2002] No.6), and the Catalogue of Outdated Production Capacities, Techniques and Products to Be Eliminated (Batch I, Batch II and Batch III) (Decree of the State Economic and Trade Commission No.6, No.16, and No.32) promulgated by the former State Economic and Trade Commission.

9.

Whether being in line with other laws, administrative regulations and State policies governing the project construction.

IV.

Post-liquidation Treatment

1.

Such a project under construction as is prohibited by explicit State orders, and as fails to be in line with the Land Administration Law and other laws, administrative regulations and State policies shall be discontinued.

2.

Such a project under construction as fails to be in line with the provisions for environmental protection, the city planning, project examination and approval, and other construction procedures and with the credit policies and other requirements shall be suspended, and be ordered to redress within a time limit.

3.

With regard to such a project under construction as is in line with the provisions in laws, administrative regulations and State policies, the construction scheduling shall be reasonably arranged upon the base of carrying out the construction conditions of the project hereof.

4.

Such a project to be constructed as fails to be in line with laws, administrative regulations and State policies shall be prohibited from initialization and from an unauthorized starting.

5.

A new project of steel, electrolytic aluminum and cement shall in principle not be launched in this year. And some particular major projects of structure readjustment and optimization, of which a starting is truly needed in this year, shall obtain an approval of the State.

V.

Work Style

1.

The provincial people's government shall be responsible for the liquidation of the local projects, the relevant authorities under the State Council and shall be responsible for the liquidation of projects subject to the Central Authorities, with regard to the project co-funded by the Central Authorities and the local authorities, the relevant authorities under the State Council shall be responsible for the liquidation of the one that has more funds from the Central Authorities, and the provincial people's government shall be responsible for the liquidation of the one that has more funds from the local authorities.

2.

The National Development and Reform Commission shall be concretely responsible organizing and urging the carrying-out of liquidation, and conduct supervisions and selective inspections on the liquidation work from the perspectives of the national industrial policies, industrial programs, and the procedure governing the project examination and approval etc..

3.

The Ministry of Land and Resources, the Ministry of Construction and the State Environmental Protection Administration shall conduct supervisions and selective inspections from the perspectives of land administration, city planning and environmental protection etc., the China Banking Regulatory Commission shall conduct supervisions and selective inspections from the perspectives of the credit policies and the provisions governing the fixed asset loaning, and shall be responsible for conducting selective inspections on the loans for the packed projects of city construction.

4.

A leading group led by the National Development and Reform Commission and composed of the Ministry of Supervision, the Ministry of Land and Resources, the Ministry of Construction, the People's Bank of China, the National Audit Office, the State Environmental Protection Administration, the China Banking Regulatory Commission and other authorities, shall be concretely responsible for the liquidation work.

VI.

Work Schedule

1.

Great importance shall be attached to by all the regions and all the authorities, and the leadership shall be strengthened; the major persons in charge shall themselves assume leadership, transfer personnel to constitute interim agencies, clearly define the duties, formulate well-conceived work programs, and organize and carry out the liquidation work as soon as possible.

2.

The liquidation work of all the regions and all the authorities shall be finished within one and half months as the date of the promulgation of this Circular, and report their liquidation results and treatment measures to the National Development and Reform Commission.

(1)

The liquidation results and treatment measures for all the projects under construction and to be constructed within the liquidation scope; and

(2)

The per-project treatment opinions of construction discontinuance, construction suspension for redressment within a time limit, abolition of project initialization and being in line with the requirements for a project with a gross investment of equivalent to or more than RMB 10 million Yuan in the key liquidation area, and for a project with a gross investment of equivalent to or more than RMB 30 million Yuan in other liquidation areas.

3.

After all the regions and all the authorities finish their liquidation works, the National Development and Reform Commission, the Ministry of Supervision, the Ministry of Land and Resources, the Ministry of Construction, the People's Bank of China, the National Audit Office, the State Environmental Protection Administration, and the China Banking Regulatory Commission shall conduct selective inspections on the liquidation results. And after finishing the aforesaid selective inspections, the National Development and Reform Commission shall, together the relevant authorities, formulate liquidation reports and submit them to the State Council.

4.

All the regions and all the authorities shall keep the big pictures in mind, truly do well the liquidation work, submit the liquidation results according to fact, and avoid the occurrences of local and industrial protectionisms. And a special attention shall be paid to the problems arising possibly from the discontinuance or suspension of project construction, and preprograms shall be formulated to do well the post-liquidation work. Once those acts are found true that practicing fraudulences and intentional concealments, and new undesirable aftermaths arising after the discontinuance or suspension of project construction due to the work, the related leaders shall be investigated for liabilities.

5.

The liquidation of fixed asset investment projects has wide implications and involves policy considerations. All the authorities under the State Council shall earnestly fulfill their duties, cooperate closely and strengthen intercommunications, and timely detect and solve cooperatively the salient problems arising from the liquidation work. And major problems shall be reported to the State Council.

The General Office of the State Council

April 27, 2004