Laws of the People's Republic of China

Ministry of Commerce

Notice of the Ministry of Commerce on Printing and Distributing the Detailed Rules for the Examination and Approval of Investments on Opening and Operating Enterprises Abroad

Shang He Fa [2005] No. 527

To the competent departments of commerce of all provinces, autonomous regions, municipalities directly under the Central Government, cities under separate state planning, and Production and Construction Corps.,

For the purpose of further implementing the Provisions on the Examination and Approval of Investments to Open and Operate Enterprises Abroad (Order No. 16 [2004] of the Ministry of Commerce) and promoting the administrative departments of foreign trade and economic cooperation at all levels to carry out the examination and approval of investments abroad in a standardized, scientific, efficient and transparent manner, the Ministry of Commerce formulates the Detailed Rules for the Examination and Approval of Investments to Open and Operate Enterprises Abroad, which are hereby promulgated, please implement them accordingly.

It is hereby notified.

Ministry of Commerce

October 17, 2005

Detailed Rules for the Examination and Approval of Investments to Open and Operate Enterprises Abroad

Article 1

For the purpose of better implementing the Provisions on the Examination and Approval of Investments to Open and operate Enterprises Abroad (Order No. 16 [2004] of the Ministry of Commerce, hereinafter referred to as the Provisions) and promoting the examination and approval of investments abroad in a normative, scientific, efficient and transparent manner, these Detailed Rules are formulated in pursuant to the Administrative License Law of the People's Republic of China, the Decision of the State Council on Establishing Administrative Licensing on the Administrative Examination and Approval Items That Really Need to Be Preserved and the relevant laws and regulations.

Article 2

The administrative department of commerce at provincial level of all provinces are entrusted by the Ministry of Commerce, and shall carry out the examination and approval of the investments abroad of domestic enterprises according to the Provisions and these Detailed Rules.

Article 3

As to the investment environment of a host country (region), the priority of examination and approval shall be addressed to the following aspects:

(1)

The political situation or society is stable, and it is not under the state of war or social convulsions;

(2)

Its economy is normally performing and it is not under an economic crisis, and its exchange rate and tax system are stable;

(3)

Its laws and regulations are complete, and it has clear laws and policies that encourage and protect foreign investments;

(4)

It has the infrastructure like the water, power, gas, transportation and telecommunication facilities as well as the conditions for supplying energy sources; and

(5)

It has corresponding labor force.

Article 4

As to the safety situation of a host country (region), the priority of examination and approval shall be addressed to the following aspects:

(1)

No large-scale nationalization or expropriation aimed at foreign investments has ever occurred, and it is not a region with rampant terrorism, and the property and living safety of the foreign-invested enterprise and its staff members can be ensured;

(2)

Its financial and foreign exchange policies are stable, and there is legal guarantee for the foreign-invested enterprise to remit the profits;

(3)

The business operations of the enterprise are regularly disturbed by the parties, radical organizations or groups, and its social security is good; and

(4)

There is no dispute over sovereignty at the locality of investment.

Article 5

As to the political and economic relationship between the host country (region) and our country, the priority of examination and approval shall be addressed to the following aspects:

(1)

Whether it has established diplomatic relation with our country;

(2)

Whether it is a trade partner of our country, and whether it implements any trade discrimination against our country; and

(3)

Whether it implements special unfair limits to the exit and entry of our country's citizens.

Article 6

As to whether the investments comply with our country's policies for guiding investments abroad, the priority of examination and approval shall be addressed to the following aspects:

(1)

The investments comply with the direction as determined in the catalogue of industries and countries for guiding our country's investments abroad;

(2)

The investments can promote the export of products, equipment, technologies and services with comparative predominance and the export of labor force;

(3)

The investments can make use of foreign advanced technologies and management experiences to enhance the enterprise's technical research and development capacity and its international competitiveness; and

(4)

The investments are good for the enterprise to carry out the brand strategy and to establish an internationally recognized brand.

Article 7

As to the reasonable overall arrangement in a host country (region), the priority of examination and approval shall be addressed to the following aspects:

(1)

Whether the investments of our enterprises in any industry of the host country are excessively concentrated; and

(2)

Whether the production capacity of our enterprises abroad matches the market capacity of the host country, and whether the products of our enterprises belong to any field of the host country with excessive competition.

Article 8

As to the implementation of the relevant international conventions involved in investments abroad, the priority of examination and approval shall be addressed to the following aspects:

(1)

International conventions on nuclear non-proliferation;

(2)

International conventions on prohibiting the development, manufacture and selling of drugs;

(3)

International conventions on the environmental protection and the protection of endangered animals and plants;

(4)

International conventions on food safety; and

(5)

International conventions on the protection of intellectual property.

Article 9

As to the lawful rights and interests of foreign investors protected by the host country, the priority of examination and approval shall be addressed to the following aspects:

(1)

Whether the host country has concluded a bilateral convention on investment protection with our country;

(2)

Whether the host country has concluded a bilateral convention on the avoidance of double taxation with our country; and

(3)

Whether the host country has ever confiscated at will or fined the local Chinese-invested enterprises for no reason.

Article 10

As to the foreign investments conducted by way of merger, the priority shall be addressed to:

(1)

Whether sensitive industrial field or the industry restricted from investment by any law of the host country is involved;

(2)

Whether the relevant legal issue is taken into consideration;

(3)

Whether the political and safety risks as well as the enterprise' financial risks are taken into consideration; and

(4)

Whether the host country's labor union, the enterprise's social liabilities as well as the cultural integration are taken into consideration.

Article 11

The investments abroad in any of the following fields are prohibited by our country:

(1)

Those endangers the sovereignty, security or social public interests;

(2)

Those use the unique techniques or technologies of our country that are prohibited from being exported;

(3)

Any field as prohibited from being managed by any law of our country;

(4)

Any field as prohibited from being invested in by any foreign law or any international convention concluded with or acceded to by our country; or

(5)

Those constitute a transnational crime.

Article 12

For the investments abroad consistent with the guidance, the State shall grant encouragement and make policy support in the aspects of diplomacy, taxation, foreign exchange, customs, credits, insurance and etc.; and any investment abroad that is forbidden shall not be approved by the State, and shall be deterred by measures.

Article 13

The power to interpret these Detailed Rules shall remain with the Ministry of Commerce.

Article 14

These Detailed Rules shall come into force as of the date of promulgation.