Laws of the People's Republic of China

    Article 1  With a view to expanding economic cooperation and technical
exchange with foreign countries and promoting the development of China's
national economy, the People's Republic of China permits foreign enterprises,
other foreign economic organizations and individuals (hereinafter collectively
referred to as "foreign investors") to set up enterprises with foreign capital
in China and protects the lawful rights and interests of such enterprises.

    Article 2  As mentioned in this Law, "enterprises with foreign capital"
refers to those enterprises established in China by foreign investors,
exclusively with their own capital, in accordance with relevant Chinese laws.
The term does not include branches set up in China by foreign enterprises and
other foreign economic organizations.

    Article 3  Enterprises with foreign capital shall be established in such a
manner as to help the development of China's national economy; they shall use
advanced technology and equipment or market all or most of their products
outside China.

    Provisions shall be made by the State Council regarding the lines of
business which the state forbids enterprises with foreign capital to engage in
or on which it places certain restrictions.

    Article 4  The investments of a foreign investor in China, the profits it
earns and its other lawful rights and interests are protected by Chinese law.

    Enterprises with foreign capital must abide by Chinese laws and regulations
and must not engage in any activities detrimental to China's public interest.

    Article 5  The state shall not nationalize or requisition any enterprise
with foreign capital. Under special circumstances, when public interest
requires, enterprises with foreign capital may be requisitioned by legal
procedures and appropriate compensation shall be made.

    Article 6  The application to establish an enterprise with foreign capital
shall be submitted for examination and approval to the department under the
State Council which is in charge of foreign economic relations and trade, or to
another agency authorized by the State Council. The authorities in charge of
examination and approval shall, within 90 days from the date they receive such
application, decide whether or not to grant approval.

    Article 7  After an application for the establishment of an enterprise with
foreign capital has been approved, the foreign investor shall, within 30 days
from the date of receiving a certificate of approval, apply to the industry and
commerce administration authorities for registration and obtain a business
licence. The date of issue of the business licence shall be the date of the
establishment of the enterprise.

    Article 8  An enterprise with foreign capital which meets the conditions
for being considered a legal person under Chinese law shall acquire the status
of a Chinese legal person, in accordance with the law.

    Article 9  An enterprise with foreign capital shall make investments in
China within the period approved by the authorities in charge of examination
and approval. If it fails to do so. the industry and commerce administration
authorities may cancel its business licence.

    The industry and commerce administration authorities shall inspect and
supervise the investment situation of an enterprise with foreign capital.

    Article 10  In the event of a separation, merger or other major change, an
enterprise with foreign capital shall report to and seek approval from the
authorities in charge of examination and approval, and register the change with
the industry and commerce administration authorities.

    Article 11  The production and operating plans of enterprises with foreign
capital shall be reported to the competent authorities for the record.

    Enterprises with foreign capital shall conduct their operations and
management in accordance with the approved articles of association, and shall
be free from any interference.

    Article 12  When employing Chinese workers and staff, an enterprise with
foreign capital shall conclude contracts with them according to law, in which
matters concerning employment, dismissal, remuneration, welfare benefits,
labour protection and labour insurance shall be clearly prescribed.

    Article 13  Workers and staff of enterprises with foreign capital may
organize trade unions in accordance with the law, in order to conduct trade
union activities and protect their lawful rights and interests.

    The enterprises shall provide the necessary conditions for the activities
of the trade unions in their respective enterprises.

    Article 14  An enterprise with foreign capital must set up account books in
China, conduct independent accounting, submit the fiscal reports and
statements as required and accept supervision by the financial and tax
authorities.

    If an enterprise with foreign capital refuses to maintain account books in
China, the financial and tax authorities may impose a fine on it, and the
industry and commerce administration authorities may order it to suspend
operations or may revoke its business licence.

    Article 15  Within the scope of the operations approved, enterprises with
foreign capital may purchase, either in China or from the world market, raw and
semi-processed materials, fuels and other materials they need. When these
materials are available from both sources on similar terms. first priority
should be given to purchases in China.

    Article 16  Enterprises with foreign capital shall apply to insurance
companies in China for such kinds of insurance coverage as are needed.

    Article 17  Enterprises with foreign capital shall pay taxes in accordance
with relevant state provisions for tax payment, and may enjoy preferential
treatment for reduction of or exemption from taxes.

    An enterprise that reinvests its profits in China after paying the income
tax, may, in accordance with relevant state provisions, apply for refund of a
part of the income tax already paid on the reinvested amount.

    Article 18  Enterprises with foreign capital shall handle their foreign
exchange transactions in accordance with the state provisions for foreign
exchange control.

    Enterprises with foreign capital shall open an account with the Bank of
China or with a bank designated by the state agency exercising foreign exchange
control.

    Enterprises with foreign capital shall manage to balance their own foreign
exchange receipts and payments. If, with the approval of the competent
authorities, the enterprises market their products in China and consequently
experience an imbalance in foreign exchange, the said authorities shall help
them correct the imbalance.

    Article 19  The foreign investor may remit abroad profits that are lawfully
earned from an enterprise with foreign capital, as well as other lawful
earnings and any funds remaining after the enterprise is liquidated.

    Wages, salaries and other legitimate income earned by foreign employees in
an enterprise with foreign capital may be remitted abroad after the payment of
individual income tax in accordance with the law.

    Article 20  With respect to the period of operations of an enterprise with
foreign capital, the foreign investor shall report to and secure approval from
the authorities in charge of examination and approval. For an extension of the
period of operations, an application shall be submitted to the said authorities
180 days before the expiration of the period. The authorities in charge of
examination and approval shall, within 30 days from the date such application
is received, decide whether or not to grant the extension.

    Article 21  When terminating its operations, an enterprise with foreign
capital shall promptly issue a public notice and proceed with liquidation in
accordance with legal procedure.

    Pending the completion of liquidation, a foreign investor may not dispose
of the assets of the enterprise except for the purpose of liquidation.

    Article 22  At the termination of operations, the enterprise with foreign
capital shall nullify its registration with the industry and commerce
administration authorities and hand in its business licence for cancellation.

    Article 23  The department under the State Council which is in charge of
foreign economic relations and trade shall, in accordance with this Law,
formulate rules for its implementation, which shall go into effect after being
submitted to and approved by the State Council.

    Article 24  This Law shall go into effect on the day of its promulgation.?