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CIRCULAR OF THE STATE COUNCIL CONCERNING PROMOTING SELF-OPERATED IMPORT AND EXPORT OF THE PRODUCTION ENTERPRISES

    To authorize the large- and medium-size production enterprises to operate
import and export so as to enable them to participate directly in competition
in the international market is one of the important measures of deepening
enterprise reform and vitalizing the large- and medium-size state-owned
enterprises, which is of great importance to quicken the pace of reform and
opening to the outside world and develop foreign trade in this country. Since
issuing of Circular of the State Council Concerning Vitalizing the Large- and
Medium-Size State-Owned Enterprises and Circular of the State Council
Concerning Approval and Transmitting of Suggestions by the Ministry of Foreign
Economic Relations and Trade and the Production Office of the State Council on
Authorizing the Production Enterprises to Operate Import and Export, the
production enterprises which are authorized to operate import and export have
amounted to more than one thousand due to the effort made by the relevant
departments. The growth rate of the aggregate export value and self-operated
expert value of these enterprises are higher than the average growth level of
export throughout the country, they have obviously become one of the important
sources of foreign currency.

    With a view of implementing in an all-round way the Regulations on
Transformation of Operational Mechanism of the State-Owned Enterprises,
keeping abreast of the socialist market economy regime and giving full play to
the superiority of the production enterprises in self-operated import and
export, the measure on the relevant matters are hereunder provided for:

    1. The production enterprises which are authorized to operate import and
export (hereinafter referred to as "the self-operated enterprises"), after
going through the formalities of registration with the industry and commerce
administration, are to qualify as external legal person. The self-operated
enterprises may establish organization for import and export internally when
necessary. Qualified large-scale enterprise group(s) may establish a wholly
owned subsidiary company for import and export subject to approval. The
self-operated enterprises may export their products and relative technology
and import technology, equipment, spare parts and accessories, raw materials
needed in their production. Eligible self-operated enterprises may be granted
contractual management right for construction projects abroad.

    The self-operated enterprises are obligated to fulfill the tasks of
export and earning foreign exchange assigned by the state, subordinate
themselves to the management and coordination by the local competent economic
and trade departments and submit information on their business operation and
statistics to the competent foreign economic and trade departments as required.

    2. The local people's governments and the departments concerned of the
State Council shall give support to the self-operated enterprises in every
respect. With a view to promoting the import and export of the self-operated
enterprises, the rights and the preferential policies to which the
self-operated enterprises are entitled shall be positively granted, timely
guidance and assistance shall be rendered and personnel training for the
self-operated enterprises shall be given importance to. To the enterprises
which shoulder heavier task of earning foreign exchange by export, necessary
assistance and guarantee shall be provided in respect of raw material supply,
power supply, transportation arrangement, loans for circulating funds, etc.
so as to help them solve the difficulties in production and operation.

    The State Economic and Trade Commission and the Ministry of Foreign Trade
and Economic Co-operation shall strengthen the coordination and administration
in self-operated import and export, resolve the problems and difficulties
in time and help the enterprises to enhance their ability to participate in
the competition on the world market. The competent authorities of foreign
trade at all levels shall incorporate the self-operated enterprises into
uniform administration and statistics at the state or local level, assign
annual export task and formulate tax refund plan in the light of actual
conditions prevailing in the self-operated enterprises and give necessary
guidance in respect of foreign trade policy and business.

    3. The self-operated enterprises shall be treated equally with the foreign
trade enterprises in respect of the preferential import and export policy of
the state. The self-operated enterprises should apply for quota and licence
according to the relevant regulations of the state in their import and export
business involving commodities covered by the quota and licence control.

    The self-operated enterprises may participate in bid on an equal basis
with the foreign trade enterprises for the export quota and licence
distributed through tendering or auction. The tax refund on export for the
foreign trade enterprises shall be uniformly practised for the self-operated
enterprises and timely, adequate refund shall be made to them based on the
principle of "refund to the full amount of export".

    4. The self-operated enterprises, after fulfilling the task of handing
over the required amount of foreign exchange earnings to the state, are
entitled to use the foreign exchange self-retained and to make adjustment, no
department or unit is allowed to appropriate or withhold the foreign exchange
retained by the enterprises, to withhold the RMB repayable to the enterprises
after handing over the reimbursable foreign exchange earnings or to attach any
condition to the use of the foreign exchange earnings retained. The qualified
self-operated enterprises may open cash account in foreign currency with the
bank(s) authorized to handle foreign exchange business subject to approval by
the competent authorities. The self-operated enterprises are encouraged to
develop the business of import for the expansion of export, for the foreign
exchange earnings from it, within the amount and turnover approved, the amount
handing over to the state treasury shall be calculated in terms of net foreign
exchange earnings on the scale stipulated by the state.

    5. The self-operated enterprises may open a circulating fund account of
RMB and foreign exchange with the bank(s) handling business of foreign
exchange settlement. The foreign trade circulating fund loan application filed
by the self-operated enterprises shall be considered by the bank on the
merits of their performance in production and operation, and requirements for
import and export, and the preferential interest rate for foreign trade shall
be applied. The self-operated enterprises may apply for export credit with the
relevant banks of the state in accordance with relevant regulations. The
self-operated enterprises are entitled to decide on the use of fund retained
upon entry into force of the General Rules Governing Enterprise Financial
Affairs and the Accounting Criteria for Enterprises. The self-operated
enterprises may establish an export risk fund, withdrawal, utilization and
management of which shall be done as provided for by the Ministry of Finance.

    6. The self-operated enterprises are entitled to decide on theirown the
number and list of business personnel of the enterprises going abroad
frequently, and one-time approval for multiple trips within one year shall be
followed subject to approval by the competent authorities. Political scrutiny
in the case of director(general manager)of the enterprise going abroad shall
be carried out by the personnel department at a higher level, and in the case
of other persons of the enterprise going abroad shall be conducted by the said
enterprise's personnel department. The enterprise may submit an application to
its responsible department for its persons going abroad with the letter(cable)
of invitation by a foreign firm, and the visa application and other procedures
in relation to departure shall be handled by the department in charge of
foreign affairs after approval.

    The self-operated enterprises which are authorized by the State Council
to approve temporary business trips abroad (out of the territory) and
invitation to China may within their scope of business approve in their power
temporary business trips abroad (out of the territory) of the personnel from
their enterprises and invitation to foreign businessmen to China, and may
accomplish the formalities of departure from and entry into the country as
stipulated. In the case of directors(general managers), approval shall be
given by competent departments.

    the self-operated enterprises may use their own foreign exchange earnings
to finance business trips abroad of their personnel out of the need of
developing their foreign business; in case of shortage in their own foreign
exchange earnings, they may apply to competent authorities for adjustment.
The relevant departments shall provide necessary assistance and facilities
for the self-operated enterprises to participate in or hold exhibitions,
business talks or trade fairs both at home or abroad.

    7. The self-operated enterprises are encouraged to establish maintenance
and repair service network out of the territory (excluding Hongkong and
Macao), for this purpose the approval procedures shall be further simplified.
The establishment of the service network to meet the needs of their business
operations out of the territory (excluding Hongkong and Macao) for which the
investment by the Chinese side is less than one million US dollars may be
approved by the enterprises themselves, in the case of more than one million
US dollars (including one million US dollars), it shall be submitted for
approval as stipulated by the state. The maintenance and repair network so
established out of the territory shall strictly abide by the state regulations
on assets, finance, taxation and foreign exchange, etc. as well as the regime
and provisions for investment out of the territory provided for by the state.

    8. The self-operated enterprises shall build up a reputation for their
brands in the market both at home and abroad. In the case of one trade mark,
the registration of which at home is by a production enterprise and by a
foreign trade enterprise abroad, the production enterprise after being
authorized to operate import and export business itself may become transferee
of the trade mark registered abroad by the foreign trade enterprise on the
basis of reimbursement; if the self-operated enterprise intends to use a
trade mark which has been registered by a foreign trade enterprise in china,
it shall sign a licencing agreement with the foreign trade enterprise in
accordance with the relevant law and guarantee the quality of the products
bearing the trade mark.

    9. The self-operated enterprises of machinery and electronic products
shall be encouraged to expand their export for increasing foreign exchange
earnings while improving their economic efficiency. For the self-operated
enterprises of machinery and electronic products with linkage of the
aggregate salary with its economic performance, one more scale factor linking
the aggregate salary to the increase of their export value (or the foreign
exchange earnings received) may be added apart from the fixed coefficient
between total wage quota and the profits and taxes realized in pursuance of
the Circular of the State Council on Approval and Transmitting of the
Suggestions by the Machinery and Electronic Products Export Office of the
State Council on Further Promoting Export of Machinery and Electronic
Products, with the factors not exceeding 1 accumulatively. The calculation
therefor shall be governed by the Circular on the Calculation of Wage
Increases on the Basis of the Increased Floating Ratio of the Foreign
Exchange Earned by Export for the Production Enterprises of Machinery and
Electronic Products for Export by the former Machinery and Electronic
Products Export Office of the State Council, the Ministry of Labour and the
Ministry of Finance.

    10. the self-operated enterprises must strictly abide by the policies,
laws and regulations on foreign trade by the state and operate under the
guidance and supervision of the competent authorities for foreign trade at
all levels. They must be oriented towards both the domestic and international
markets, aggressively develop new products, improve product quality, upgrade
their products and enhance the ability of competition in the international
market. They shall transform their operational mechanism, streamline internal
management, reduce cost and raise economic efficiency. They should positively
join the relevant chamber of commerce of importers and exporters, and be
subordinate to the guidance and coordination of the chamber in consideration
of the state interest. To keep a breast of the healthy development of
internationalized operation, the leading cadres and foreign trade personnel
of the enterprises shall enhance their political and business quality.

    Reference shall be made to the above measures for the scientific and
research institutions which are authorized to manage import and export
business.