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CIRCULAR OF THE STATE COUNCIL CONCERNING THE APPROVAL AND TRANSMISSION OF THE SUGGESTIONS OF THE MINISTRY OF COMMERCE, THE MINISTRY OF FOREIGN ECONOMIC RELATIONS AND TRADE, AND THE MINISTRY OF MATERIAL SUPPLIES REGARDING THE FURTHER CHECKING UP AND RECTIFICATION OF VARIOUS TYPES OF COMMERCIAL WHOLESALE COMPANIES, FOREIGN ECONOMIC RELATIONS AND TRADE COMPANIES, AND MATERIAL SUPPLY COMPANIES

    In accordance with the requirements of the "Decision Concerning the Further
Checking Up and Rectification of Companies" of the Central Committee of the
Communist Party of China and the State Council, the suggestions of the Ministry
of Commerce, the Ministry of Foreign Economic Relations and Trade, and the
Ministry of Material Supplies Regarding the Further Checking Up and
Rectification of Various Types of Wholesale Commercial Companies, Foreign
Economic Relations and Trade Companies, and Material Supply Companies, are
hereby transmitted to you, and you are requested to implement accordingly.
SUGGESTIONS OF THE MINISTRY OF COMMERCE CONCERNING THE FURTHER CHECKING UP
AND RECTIFICATION OF VARIOUS TYPES OF WHOLESALE COMMERCIAL COMPANIES (Omitted)
SUGGESTIONS OF THE MINISTRY OF FOREIGN ECONOMIC RELATIONS AND TRADE
CONCERNING THE FURTHER CHECKING UP AND RECTIFICATION OF VARIOUS TYPES OF
FOREIGN ECONOMIC RELATIONS AND TRADE COMPANIES

    In accordance with the "Decision of the Central Committee of the Communist
Party of China and the State Council Concerning the Further Checking Up and
Rectification of Companies", and on the basis of the "Circular of the State
Council Concerning the Further Checking Up and Rectification of Various Foreign
Economic Relations and Trade Companies", suggestions are hereby put forward
concerning the further checking up and rectification of various foreign
economic relations and trade companies (hereinafter referred to as "the foreign
trade companies"):

    1. Foreign trade companies at various levels and of various types attached
to the provinces, autonomous regions, municipalities directly under the Central
Government, and municipalities under separate planning (hereinafter referred
to as "the various localities), as well as those attached to the various
departments under the Central Government, must all conduct the checking up and
rectification strictly. Those foreign trade companies at various levels and of
various types that are not in conformity with the prescribed requirements shall
resolutely be abolished or merged, or their right to handle import and export
trade shall be revoked, strictly in accordance with the provisios of "the
Suggestions Concerning the Abolition or Merger of Companies Attached to the
Various Departments Under the Central Government" put forward by the National
Leading Group for the Checking up and Rectification of Companies. The emphasis
of the checking up and rectification is laid on the foreign trade companies at
various levels and of various types that have been established since 1988;
after the checking up and rectification, if it is really necessary to retain
one or two of them, the case shall be submitted to the Ministry of Foreign
Economic Relations and Trade for re-examination and confirmation strictly in
accordance with the six prerequisites for the establishment of foreign trade
enterprises, as prescribed by the aforesaid Ministry.

    2. Foreign trade companies that fall under one of the following
circumstances shall resolutely be abolished or merged, or their right to handle
import and export trade shall be revoked:

    (1) companies that do not settle their foreign exchange with the Bank of
China or with other banks designated by the State Administration for Foreign
Exchange Control, and have evaded foreign exchange control seriously;

    (2) companies that have colluded with external businessmen and helped them
purchase export goods directly from the inland or handle export business,
thereby helping them evade foreign exchange control;

    (3) companies that have been established in the same department or in the
same region, handling the same or similar business, so they are just
reduplicate setups;

    (4) companies that do not have the necessary conditions for handling
foreign trade, or lack external marketing channels for handling export trade
but do so chiefly by entrusting other companies;

    (5) the branch offices set up by local foreign trade companies outside the
provinces (autonomous regions, or municipalities directly under the Central
Government) for handling import and export business.

    (6) subcompanies of the second or third rank with the right to handle
import and export trade, established by comprehensive foreign trade companies
attached to various local governments.

    3. After the completion of the strict checking up and rectification,
foreign trade companies at various levels and of various types shall be
established in accordance with the following provisions:

    (1) With the exception or the Ministry of Foreign Economic Relations and
Trade, from among the foreign trade companies attached to the various
departments under the Central Government, one company for each of the aforesaid
departments may be retained, depending on their respective needs; where one or
two departments really need(s) to set up companies for specialized products,
the case shall be examined and confirmed by the Ministry of Foreign Economic
Relations and Trade separately; as to the other companies, they shall all be
abolished or merged, or their right to handle import and export business shall
be revoked.

    (2) From among the comprehensive foreign trade companies attached to
provinces (autonomous regions, or municipalities directly under the Central
Government), only one or two shall be retained; as to the other companies, they
shall all be abolished or merged, or their right to handle import and export
business shall be revoked.

    (3) For those localities (including the municipalities at the prefectural
level, the same below) that have already been vested with the right to handle
import and export business, only one or two companies shall be retained with
their right to handle import and export, on condition that they meet the actual
needs and the prescribed requirements; as to the other companies, they shall
all be abolished or merged, or their right to handle import and export business
shall be revoked (with the exception of those companies in Guangdong and
Fujian Provinces which were established before the end of 1987).

    (4) For those economic and technological development zones that have been
approved by the State Council, only one foreign trade company with the right to
handle import and export business shall be retained; as to the other
companies, they shall all be abolished or merged, or their right to handle
import and export business shall be revoked.

    (5) The right to handle import and export trade of those foreign trade
companies attached to the counties (including municipalities at the county
level, the same below) shall be revoked (with the exception of those companies
in Guangdong and Fujian Provinces which were established before the end of
1987). As to one or two special cases where the foreign trade companies meet
the prescribed requirements and handle only the local specialties of their
counties, that is, the third category of export commodities promising a bright
prospect of export sales, and thus it is necessary to retain their right to
handle import and export business, such cases shall be submitted to the
Ministry of Foreign Economic Relations and Trade for approval.

    (6) From among the foreign trade companies, attached to various provinces,
autonomous regions, municipalities directly under the Central Government,
municipalities under separate planning, and special economic zones that handle
barter transactions with the Soviet Union and the East European countries, only
one or two companies shall be retained; as to the other companies, they shall
all be abolished or merged, or their right to handle import or export business
shall be revoked.

    (7) From among the trading companies, attached to counties adjacent to
border ports which are established with the approval of the State Council and
handle petty barter trade in the border areas, only one company shall be
retained for each of the aforesaid counties; where a port county does not meet
the prescribed requirements, a tradeing company at the region (or prefecture,
municipality) level, over the port may be retained; as to the other companies,
they shall all be abolished or merged, or their right to handle petty barter
trade in the border areas shall be revoked.

    4. All international economic and technological cooperation companies
established without the approval by the State Council or by the Ministry of
Foreign Economic Relations and Trade shall all be abolished. With respect to
those international economic and technological cooperation companies (including
those companies which handle economic and technological cooperation business
with the Soviet Union and the East European countries that have been approved
by the State Council or by the Ministry of Foreign Economic Relations and
Trade, and those international economic and technological cooperation companies
that engage in the expansion of business contacts for external economic and
technological cooperation or in the trial management of the exportation of
export commodities of the third category, all the localities and departments
shall, in accordance with the seven prerequisites for the establishment of
companies of the aforesaid type as formulated by the Ministry of Foreign
Economic Relations and Trade, carry out a strict checking up and rectification
on the aforesaid companies, and then submit the cases to the Ministry of
Foreign Economic Relations and Trade for re-examination and confirmation.

    5. It is necessary to re-verify and confirm the business scope of foreign
trade companies at various levels and of various types.

    The first category or exptort commodities, as prescribed by the State,
shall be handled by the national foreign trade corporations, or the national
industry and trade import and export corporations as well as by their branch
offices and subsidiaries in accordance with the approved business scope, and
the aforesaid corporations shall also undertake to fulfil the export plan
transmitted by the State, and the tasks to turn over a definite amount of
foreign exchange earnings to the Central Government. All the other foreign
trade companies are not permitted to handle export commodities of the first
category; where the aforesaid provisions are violated, the foreign exchange
earnings obtained shall all be confiscated and be turned over to the Central
Government, and the responsibilities of the persons in charge shall be
investigated. A strict control should be exercised over the business scope of
foreign trade companies for handling export commodities of the second category.
The foreign trade companies attached to various departments under the Central
Government shall handle products of their own industries in accordance with the
business scope approved by the Ministry of Foreign Economic Relations and
Trade, or handle export commodities of the second or third category in
accordance with the approved business scope; the specialized foreign trade
companies attached to provinces (autonomous regions, municipalities directly
under the Central Government) shall handle export commodities of the second or
third category in accordance with the appraised and confirmed business scope;
as to those comprehensive foreign trade companies attached to provinces
(autonomous regions, or municipalities directly under the Central Government),
the foreign trade companies that are attached to prefectures and have retained
their right to handle import and export business, and the foreign trade
companies in the economic and technological development zones, they shall be
permitted to handle only export commodities of the third category. The various
categories of foreign trade companies that handle export commodities of the
second and third categories shall all undertake to fulfil the export plans and
the tasks to turn over a definite amount of foreign exchange earnings to the
Central Government or to the local governments.

    The import business of foreign trade companies at various levels and of
various types shall be handled in accordance with the business scope of import
commodities approved by the Ministry of Foreign Economic Relations and Trade
and also with the existing pertinent provisions.

    6. The foreign trade companies with their business scope, which are
attached to various localities and various government organs and have been
retained after the checking up and rectification, shall be submitted to the
Ministry of Foreign Economic Relations and Trade for examination and approval;
with respect to the foreign trade companies at various levels and of various
types in Guangdong and Fuiian Provinces that were established after examination
and approval, the framework for the abolishment and merger of these companies
formulated in the process of the checking up and rectification shall also be
submitted to the Ministry of Foreign Economic Relations and Trade for
examination and approval. The foreign trade companies that have been retained
after verification and confirmation shall present the examination and
confirmation certificate issued by the Ministry Foreign Economic Relations and
Trade to the administrative departments for industry and commerce for
examination and approval, and then go through the procedures for registration.

    The foreign trade companies at various levels and of various types located
in Hainan Province and in the special economic zones shall be checked up and
rectified in accordance with the pertinent provisions and the unified
arrangement. The foreign trade companies at various levels and of various types
have been retained after the checking up and rectification shall be submitted
by their respective competent departments for foreign economic relations and
trade to the Ministry of Foreign Economic Relations and Trade for the record.

    In the event that a company has been discovered not in conformity with the
aforesaid provisions, the Ministry of Foreign Relations and Trade has the right
to abolish it, or revoke its right to handle external business, or to readjust
its business scope.

    7. In accordance with the decision of the Central Committee of the
Communist Party of China and the State Council that henceforth government
organs from the State Council down to the people's governments at various
levels shall, in principle, not directly manage any companies, foreign trade
companies at various levels and of various types as well as companies that
chiefly handle import and export business shall all be placed under the
leadership and administration, in their line of industry and business
operations, by the Ministry of Foreign Economic Relations and Trade and by the
local competent departments for foreign economic relations and trade in
accordance with the unified policies formulated by the State.

    8. After the completion of the checking up and rectification, the import
and export business related to their own products, as conducted by large and
medium-sized technology-intensive production enterprises and conglomerates of
the closely-knit type, shall be examined and approved by the local competent
departments for foreign economic relations and trade, and then submitted to the
Ministry of Foreign Economic Relations and Trade for the record; in the event
that a production enterprise or conglomerate is discovered to be short of the
prescribed qualifications for handling import and export business, the Ministry
of Foreign Economic Relations and Trade has the right to overrule it. An
application, which is filed by a national or transprovincial conglomerate for
handling import and export business, shall be examined and approved by the
Ministry of Foreign Economic Relations and Trade.
SUGGESTIONS OF THE MINISTRY OF MATERIAL SUPPLIES CONCERNING THE FURTHER
CHECKING UP AND RECTIFICATION OF VARIOUS TYPES OF MATERIAL SUPPLY
COMPANIES (Omitted)?