Laws of the People's Republic of China

the Ministry of Commerce

Circular of the Ministry of Commerce on the Administration according to Law to Conduct Well the Examination and Approval Work of Foreign-funded Enterprises

Shang Zi Han [2005] No. 3

The commerce administrative departments of all provinces, autonomous regions, municipalities directly under the Central Government and cities under separate state planning, the Shanghai Foreign Investment Committee and all the national economic and technological development zones:

In order to carry out the instructions on "strictly implementing the Administrative License Law and taking the implementation of this Law as a turning point to progressively boost the reform and innovation of administrative management system and to improve the level of administration according to law" that are made by Premier Wen Jiabao at the National Videophone Conference on the Administration according to Law and the spirit of the said Conference, the Ministry of Commerce has, after the Conference, delivered an official document to notify all local foreign economic and trade (commerce) administrative departments to earnestly study them and put forward specific requirements on the strict administration according to law to attract foreign investments. For the purpose of further intensifying the administration according to law and guiding the national economic and trade (commerce) system to conduct well the foreign investment work, the Circular on some issues is hereby given as follows:

I.

Since the promulgation and implementation of the Law on Chinese-foreign Equity Joint Ventures in 1979, upon the efforts of 25 years a perfect legal system regarding the foreign investment absorption has come into being in our country. The Law on Chinese-foreign Equity Joint Ventures, the Law on Chinese-foreign Contractual Joint Ventures and the Law on Wholly Foreign-funded Enterprises as promulgated/amended by the National People's Congress, and the Regulation for the Implementation of the Law on Chinese-foreign Equity Joint Ventures, the Detailed Rules for the Implementation of the Law on Chinese-foreign Contractual Joint Ventures and the Detailed Rules for the Implementation of the Law on Wholly Foreign-funded Enterprises as promulgated/amended by the State Council are the foundation of the legal system of our country on the foreign investment absorption, and are the upper level laws for all provisions on the examination and approval of investments by foreign businessmen and compatriots in Hong Kong, Macao and Taiwan. Therefore, any rule or regulation enacted by any department or local government shall comply with the said laws and regulations.

II.

The three laws on the foreign investment and their implementation regulations (detailed rules) have specifically prescribed the legal examination and approval procedures and the corresponding registration procedures (including the examination and approval of alteration and the registration of alteration) as well as the relevant requirements for the establishment of foreign-funded enterprises and enterprises funded by compatriots in Hong Kong, Macao and Taiwan. Therefore, the competent departments of foreign economic and trade (commerce) departments at all levels shall strictly abide by and implement them, closely cooperate with all departments involved pursuant to the specific operational procedures for the administration according to law that are formed through the legal practice for more than 20 years, and do all kinds of work well according to law.

III.

In accordance with the Three Decision Scheme of the Ministry of Commerce delivered by the State Council in 2003, the Ministry of Commerce shall be the administrative department for the foreign investment absorption of the whole country, and be responsible for guiding foreign investment affairs of the whole country on a macro basis; analyze and study the foreign investment conditions of the whole country, regularly submit the relevant trends and suggestions to the State Council, draw up policies on foreign investment, draft and enforce the reform schemes, participate in drafting medium and long-term development plans on foreign investment utilization; approve the establishment and alteration of foreign-funded enterprises whose investment amount exceeds the upper limit as prescribed by the State, whose investments are restricted by the State and which involve the quota and licensing administration; examine and approve the contracts, articles of association and other significant alterations (the increase and decrease of capital, share transfer and merger) of large-scaled foreign-funded projects; supervise the implementation of laws, regulations, rules, contracts and articles of association by foreign-funded enterprises; give guidance to and administrate the attraction and promotion of foreign investment and the examination and approval of foreign-funded enterprises as well as the import and export affairs of the whole country; carry out comprehensive coordination and guidance to the relevant specific work of national economic and technological development zones, guide and coordinate the work in the Suzhou Industrial Park; and be responsible for the statistical work of foreign investments. The Guiding Directory on Industries Open to Foreign Investment shall be worked out by the National Development and Reform Commission in collaboration with the Ministry of Commerce and other departments involved, and jointly promulgated by the National Development and Reform Commission and the Ministry of Commerce.

IV.

The State Council, pursuant to the Administrative License Law and the relevant provisions on the reform of administrative examination and approval system, delivered an official document in 2004 to specifically check and ratify the administrative licensing (examination and approval) matters of the Ministry of Commerce concerning the foreign investment, which mainly include: the examination and approval of the establishment and alteration of foreign-funded enterprises to be examined and approved by the Ministry of Commerce and the former Ministry of Foreign Trade and Economic Cooperation, the record of the establishment and alteration of foreign-funded enterprises established upon the approval of the local government, the examination and approval and archival filing of foreign cooperative contracts for exploring petroleum, natural gas and coal bed gas, geophysical prospecting agreements, joint research agreements and their alterations; the examination and approval of operating Chinese-foreign equity joint ventures by contract and of operating and managing joint ventures on commission by enterprises in other countries (regions), the examination and approval of determining the projects of foreign-funded enterprises involving export quotas and licenses, the examination and approval of branches as no separate legal entity established by foreign-funded enterprises outside the territory of China as well as the examination and approval of quotas and licenses for part of the import goods of foreign-funded enterprises.

V.

After the establishment of the Ministry of Commerce according to the resolution of the Second Plenary Session of the 16th Central Committee of the CPC in 2003, the General Office of the State Council delivered a notice that clearly prescribes that the functions of the former competent department of foreign trade and economic cooperation as prescribed by the current administrative regulations, documents of the State Council and departmental rules and normative documents as approved by the State Council shall be performed by the newly established Ministry of Commerce.(see Annex I for the Circular of the General Office of the State Council on the Ministry of Commerce's Performance of the Corresponding Functions as Prescribed by the Current Administrative Regulations and Documents of the State Council (Guo Ban Fa [2003] No.87 )

VI.

In order to fulfill our country's commitments for the entry into WTO , our country, pursuant to three laws on the foreign investment and their implementation regulations (detailed rules), has formulated and promulgated for implementation in succession more than 40 regulations and rules (see Annex II for the details) involving the foreign investment and investment by Hong Kong, Macao and Taiwan compatriots in service trade sectors, such as finance, insurance, securities, commercial circulation, tourism, telecommunication, construction, medical treatment and sanitation, transportation, advertisement, conference and exhibition and film and movie production, and which have been reported to WTO according to the requirements. The mainland has separately signed a Closer Economic Partnership Arrangement (CEPA) with Hong Kong and Macao, which involves many service trade sectors, and the relevant commitments of CEPA have been included into the foresaid regulations and rules according to the requirements of the State Council. The establishment of foreign-funded enterprises and enterprises funded by Hong Kong, Macao and Taiwan compatriots in service trade sectors shall be examined and approved by the corresponding department of the State Council or other local organs in strict compliance with the principles of examination and approval, limit of authorities and procedures as prescribed by the regulations and rules as listed in Annex I. In regard to such fields as the establishment of investment companies, joint-stock limited companies and pioneering investment companies as funded by foreign businessmen and Hong Kong, Macao and Taiwan compatriots, the merger and split of foreign-funded enterprises and enterprises funded by Hong Kong, Macao and Taiwan compatriots, the merger of domestic enterprises by foreign capitals and the transfer of corporate shares of listed companies to foreign businessmen, the corresponding provisions have been formulated in accordance with the three laws on the foreign investment and their implementation regulations (detailed rules). The investments by foreign businessmen and Hong Kong, Macao and Taiwan compatriots in such fields shall be examined and approved in accordance with the relevant provisions currently in force (see Annex III).

VII.

The administrative departments of foreign economic and trade (commerce) at all levels shall, in strict accordance with the procedures as prescribed by laws and the limit of authorities as provided for by the State Council, examine and approve the investments by foreign businessmen and compatriots of Hong Kong, Macao and Taiwan. In principle, the alteration formalities for any established foreign-funded enterprise or enterprise funded by compatriots of Hong Kong, Macao or Taiwan shall be examined and approved by the competent department that originally examined and approved the establishment of the former enterprise. If an established foreign-funded enterprise or enterprise funded by Hong Kong, Macao or Taiwan compatriots that is classified into the encouraged category or permitted category plans to newly increase an investment of $100 million or more, or if an established foreign-funded enterprise or enterprise funded by Hong Kong, Macao or Taiwan compatriots that is classified into the restricted category plans to newly increase an investment of $50 million or more, its examination and approval formalities shall be handled by the Ministry of Commerce. If an established foreign-funded enterprise or enterprise funded by Hong Kong, Macao or Taiwan compatriots that was examined and approved by the former local administrative department of foreign economic and trade (commerce) or by a department authorized by the State Council expands the business scope and which involves the special state prescription and therefore, it shall be reported to the Ministry of Commerce for examination and approval, the Ministry of Commerce shall handle the alteration formalities.

VIII.

The administrative departments of foreign economic and trade (commerce) at all levels shall carry out the spirit of the Administrative License Law, follow the principles of legality, openness, fairness, transparency and convenience for the public, successively promote the transformation of governmental functions on the basis of the achievements already obtained and in accordance with the requirements of the State Council on reforming the administrative examination and approval system, and legally regulate their own examination and approval and licensing acts.

IX.

Miscellaneous Matters:

Within 30 days after a foreign-funded enterprise or enterprise funded by Hong Kong, Macao or Taiwan compatriots is established or altered upon the examination and approval of the foreign economic and trade (commerce) administrative department, it shall go through the establishment registration or alteration registration formalities, foreign exchange registration and customs registration formalities with the administrative department for industry and commerce, upon the strength of the Approval Certificate of Foreign-funded Enterprises or the Approval Certificate of Enterprises Funded by Hong Kong, Macao or Taiwan Compatriots as issued by the administrative department of foreign economic and trade (commerce). According to the arrangements and demands of the State Council on the administrative examination and approval reform, all regions have made active progresses in simplifying the examination and approval links, and all regions shall insist on such effective practices as One Continuous Line Service and One-window Service. The local administrative department of foreign economic and trade (commerce) shall, pursuant to the Law on Chinese-foreign Equity Joint Ventures, the Law on Chinese-foreign Contractual Joint Ventures, the Law on Wholly Foreign-funded Enterprises as well as their implementation regulations (detailed rules), report such matters as the establishment and alteration of foreign-funded enterprises and enterprises funded by Hong Kong, Macao and Taiwan compatriots to the Ministry of Commerce for archival purposes. All the examination and approval matters involving investments by foreign businessmen and compatriots of Hong Kong, Macao and Taiwan, including applications for tax exemption and tax reduction for the procurement of homemade equipment by enterprises that require confirmation letters as issued by the examining and approving organ, shall be handled according to the current measures of each province or municipality, of which, in case the exclusively foreign-owned enterprises, foreign-funded enterprises in service trade sectors and the established foreign-funded enterprises that fall into the encouraged category increase their investments, the confirmation letters therefor shall be issued according to the relevant provisions delivered from 1998 and the current practices.

In order to comprehensively promote the administration according to law and facilitate the personnel who undertake the work relating to the foreign investment of the administrative departments of commerce at all levels to study, know well and suck the knowledge of laws and regulations on the foreign investment, the Ministry of Commerce has edited the Newly Compiled Collection of Legal Documents on Foreign Investment Utilization (1979-2003), which embodies 12 categories of more than 1,000 items of laws, administrative regulations, ministerial rules and normative documents relating to the foreign investment that have been promulgated since the opening-up and reform and are still in force. Revised and enlarged editions will be compiled and printed henceforth as the circumstances may require. All regions shall reinforce the study of laws and regulations on foreign investment and progressively enhance the level of administration according to law.

The Ministry of Commerce of the People's Republic of China

January 21, 2005 Annex I:Circular of the General Office of the State Council on the Ministry of Commerce's Performance of the Corresponding Functions as Prescribed by the Current Administrative Regulations and Documents of the State Council

Guo Ban Fa [2003] No. 87

All the ministries and commissions of the State Council, all the organs directly under the State Council,

The Institution Reform Plan of the State Council ratified at the 1st Session of the Standing Committee of the Tenth National People's Congress and the Circular of the State Council on Establishment of Institutions (Guo Fa [2003] No. 8) has decided to establish the Ministry of Commerce. The provisions of "three decision scheme" of the Ministry of Commerce further specify the functions thereof, defining that the whole functions of the former Ministry of Foreign Trade and Economy Cooperation and part of the functions of the former State Economy and Trade Commission and National Development and Planning Commission shall be subject to the Ministry of Commerce. With a view of facilitating the Ministry of Commerce carrying out its functions according to law, favoring the implementation of WTO Rules, upon the approval of the State Council, the Circular is hereby given as follows;

Where the functions of the competent departments under the former Ministry of Foreign Trade and Economy Cooperation are concerned in the current administrative regulations and the State Council documents as well as the ministerial rules approved by the State Council and normative documents, they shall be performed by the newly established Ministry of Commerce, and the expression for the Ministry of Foreign Economy and Trade or the Ministry of Foreign Trade and Economy Cooperation in the concerned articles shall refer to the Ministry of Commerce. Where the functions of former State Economy and Trade Commission and former National Development and Planning Commission are concerned in the current administrative regulations and documents of the State Council as well as the ministerial rules approved by the State Council and normative documents, they shall be performed by the Ministry of Commerce in accordance with the Institution Reform Plan of the State Council ratified at the tenth National People's Congress and the Circular of the State Council on Establishment of Institutions (Guo Fa [2003] No. 8) as well as the provisions of "three decision scheme" of the Ministry of Commerce approved by the State Council.

General Office of the State Council

October 20, 2003 Annex II:

1.

Regulation of the People's Republic of China on International Marine Transportation (promulgated by Order No.335 [2001] of the State Council)

Detailed Rules for the Implementation of the Regulation of the People's Republic of China on International Marine Transportation (promulgated by Order No.1 [2003] of the Ministry of Communications)

2.

Interim Measures for the Examination and Approval and Administration of Wholly Foreign-owned Shipping Companies (promulgated by Order No.1 [2000] of the Ministry of Communications and the Ministry of Foreign Trade and Economic Cooperation)

3.

Regulation of the People's Republic of China on Sino-foreign Cooperation in the Exploitation of Continental Petroleum Resources (promulgated by Order No.317 [2001] of the State Council)

4.

Regulation of the People's Republic of China on Sino-foreign Cooperation in the Exploitation of Offshore Petroleum Resources (promulgated by Order No.318 [2001] of the State Council)

5.

Provisions on the Administration of Foreign-funded Urban Planning Service Enterprises (promulgated by Order No.116 [2003] of the Ministry of Construction and the Ministry of Foreign Trade and Economic Cooperation)

6.

Regulation of the People's Republic of China on the Administration of Foreign-Funded Financial Institutions (promulgated by Order No.340 [2001] of the State Council)

7.

Regulation of the People's Republic of China on the Administration of Foreign-funded Insurance Companies (Order No. 336 [2001] of the State Council)

8.

Rules on the Establishment of Foreign-shared Securities Companies (promulgated by Order No.8 [2002] of the China Securities Regulatory Commission)

9.

Rules on the Establishment of Foreign-shared Fund Management Companies (promulgated by Order No.9 [2002] of the China Securities Regulatory Commission)

10.

Provisions on the Administration of Foreign-funded Telecommunications Enterprises (promulgated by Order No. 333 [2001] of the State Council)

11.

Interim Measures for the Examination and Approval and Administration of the Foreign-funded Railway Goods Transport Services (promulgated by Order No. 4 [2000] of the Ministry of Communications and the Ministry of Foreign Trade and Economic Cooperation)

12.

Provisions on the Administration of Foreign-funded Road Transport Services (promulgated by Order No. 9 [2001] the Ministry of Communications and the Ministry of Foreign Trade and Economic Corporation)

13.

Provisions on Foreign-funded Civil Aviation Services (promulgated by Order No.110 [2002] of the Civil Aviation Administration of China, the Ministry of Foreign Trade and Economic Cooperation and the National Development and Reform Commission)

14.

Measures for the Administration of Foreign-funded International Freight Agency Enterprises (promulgated by Order No.36 [2002] of the Ministry of Foreign Trade and Economic Cooperation)

15.

Circular on the Relevant Issues concerning the Experimental Establishment of Foreign-Funded Logistics Enterprises (Wai Jing Mao Zi Tong Yi Han Zi [2002] No.615, promulgated by the Ministry of Foreign Trade and Economic Cooperation)

16.

Measures for the Administration on Foreign Investment in Commercial Fields (promulgated by Order No.8 [2004] of the Ministry of Commerce)

17.

Measures for the Administration of Foreign-funded International Maritime Transportation Enterprises (promulgated by Order No.1 [2004] of the Ministry of Communications and the Ministry of Commerce)

18.

Interim Measures for the Administration of Sino-foreign Equity and Cooperative Joint Medical Institutions (promulgated by Order No.11 [2000] of the Ministry of Health and the Ministry of Foreign Trade and Economic Cooperation)

19.

Interim Provisions on Foreign-invested Cinemas (promulgated by Order No.21 [2003] of the State Administration of Radio, Film and Television, the Ministry of Commerce and the Ministry of Culture)

20.

Regulation on the Administration of Travel Agencies (Issued by the State Council on December 11, 2001)

21.

Interim Provisions on the Establishment of Foreign-held and Wholly Foreign-funded Travel Agencies (promulgated by Order No.19 [2003] of the National Tourism Administration and the Ministry of Commerce)

22.

Several Provisions on the Establishment of Foreign-funded Advertisement Companies (promulgated by Order No.8 [2004] of the State Administration for Industry and Commerce and the Ministry of Commerce)

23.

Interim Provisions on the Establishment of Foreign-funded Assets Appraisal Institutions (Guo Zi Ban Fa [1997] No.26, promulgated by the State-owned Assets Management Bureau and the Ministry of Foreign Trade and Economic Cooperation)

24.

Provisions on the Examination and Approval of the Establishment of Foreign-funded Inspection and Appraisal Companies of Import and Export Commodities (promulgated by the State Administration of Import and Export Commodities Inspection and the Ministry of Foreign Trade and Economic Cooperation)

25.

Measures for the Examination and Approval, Registration, Supervision and Administration of Certification Institutions, Certification Trainings and Consultation Institutions (Guo Ren Ke Lian [2002] No.21, promulgated by the Certification and Accreditation Administration of the People's Republic of China, the General Administration of Quality Supervision, Inspection and Quarantine, the State Administration for Industry and Commerce and the Ministry of Foreign Trade and Economic Cooperation)

26.

Interim Measures for the Administration of Chinese-foreign Contractual Accounting Firms (promulgated by Order No.24 [1996] of the Ministry of Finance)

27.

Interim Measures for the Administration of Examination and Approval of Foreign-funded Lease Companies (promulgated by Order No. 3 [2001] of the Ministry of Foreign Trade and Economic Cooperation)

28.

Rules on the Administration of Foreign-funded Construction Enterprises (promulgated by Order No.113 [2002] of the Ministry of Construction and the Ministry of Foreign Trade and Economic Cooperation)

29.

Rules on the Administration of Foreign-funded Construction Engineering Design Enterprises (promulgated by Order No.114 [2002] of the Ministry of Construction and the Ministry of Foreign Trade and Economic Cooperation)

30.

Interim Provisions on the Administration of the Establishment of Sino-foreign Equity and Cooperative Joint Job Intermediary Institutions (promulgated by Order No. 14 [2001] of the Ministry of Labor and Social Security and the State Administration for Industry and Commerce)

31.

Interim Measures for the Establishment of Sino-foreign Equity Joint Foreign Trade Corporations (promulgated by Order No. 1 [2003] of the Ministry of Foreign Trade and Economic Cooperation)

32.

Interim Provisions on the Establishment of Foreign-funded Printing Enterprises (promulgated by Order No. 16 [2002] of the General Administration of Press and Publication and the Ministry of Foreign Trade and Economic Cooperation)

33.

Measures for the Administration of Chinese-foreign Cooperative Audio-video Product Distribution Enterprises (promulgated by Order No. 28 [2003] of the Ministry of Culture and the Ministry of Commerce)

34.

Measures for the Administration of Foreign-Funded Distribution Enterprises of Books, Newspapers, and Journals (promulgated by Order No.18 [2003] of the General Administration of Press and Publication and the Ministry of Foreign Trade and Economic Cooperation)

35.

Circular on Strictly Controlling Absorbing Foreign Funds to Establish Foreign-funded Funeral and Interment Service Facilities (Min Shi Fa [1995] No. 6 , promulgated by the Ministry of Civil Affairs, the State Planning Commission and the Ministry of Foreign Trade and Economic Cooperation)

36.

Interim Provisions on the Management of Chinese-foreign Joint Job Intermediary Agencies (promulgated by Order No.2 [2003] of the Ministry of Personnel, the Ministry of Commerce and the State Administration for Industry and Commerce)

37.

Administrative Measures for the Establishment of Foreign-funded Export Procurement Centers (promulgated by Order No. 3 [2003] of the Ministry of Commerce, the General Administration of Customs, the State Administration of Taxation and the State Administration of Foreign Exchange)

38.

Interim Provisions on the Establishment of Foreign-funded Convention & Exhibition Companies (promulgated by Order No.1 [2004] of the Ministry of Commerce)

39.

Interim Provisions on the Administration of Chinese-foreign Equity and Contractual Joint Ventures of Radio and Television Programs Production and Management (promulgated by Order No.44 [2004] of the State Administration of Radio, Film and Television and the Ministry of Commerce of the People's Republic of China)

40.

Interim Provisions on Operation Qualification Access for Movie Enterprises (promulgated by Order No.43 [2004] of the State Administration of Radio, Film and Television and the Ministry of Commerce)

41.

Other laws, regulations and rules regarding the foreign investments in service trade sectors

Annex III:

1.

Provisions on the Establishment of Foreign-funded Investment Companies

2.

Interim Provisions on Foreign-funded Joint-stock Limited Companies

3.

Interim Provisions for Foreign Investors to Merge Domestic Enterprises

4.

Provisions on the Merger and Split of Foreign-funded Enterprises

5.

Interim Provisions on Foreign-funded Pioneering Investment Enterprises

6.

Circular on Relevant Issues concerning Declaration Procedures for Transfer of State-owned Shares of Listed Companies to Foreign Investors and Foreign-funded Enterprises

7.

Interim Provisions on Drawing Foreign Capital into the Asset Restructuring and Disposal by Financial Asset Management Companies