Laws of the People's Republic of China

The Ministry of Construction

Interim Provisions of the Ministry of Construction on Utilizing Foreign Capital in Municipality Public Utilities

JianZong [2000] No.118

May 27,2000

Article 1

In order to guide and standardize the work of utilizing foreign capital in municipality public utilities, expand the scope of utilizing foreign capital, and improve the level of utilizing foreign capital, these Provisions are stipulated in accordance with State laws, regulations, guidance and policies of utilizing foreign capital.

Article 2

The so-called "municipality public utilities" includes municipal supply of water, heat and gas, public transportation, drainage, disposal of filthy water, construction of roads and bridges, city appearance and environmental sanitation, training management and garden afforestation, etc.

Article 3

The so-called "utilizing foreign capital" in these Provisions includes getting foreign loans and absorbing foreign investment.

Getting foreign loans includes getting foreign government loans, international financial loans and international commercial loans;

Absorbing foreign investment includes absorbing foreign direct investment (including Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures, foreign-capital enterprises, foreign invested stock enterprises and cooperative development) and other foreign investments (including foreign businessman purchasing Chinese shares and others).

Article 4

Utilizing foreign capital in municipality public utilities must conform to the State policy of industry and the long-term and mid-term plans of construction.

Absorbing foreign investment shall abide by "Interim provisions on guiding foreign investment" and "Catalogue of guidance on foreign investment enterprises".

Article 5

Foreign capital utilized in municipality public utilities shall be mainly in the new construction, the improvement and expansion of municipality public utilities, increasing utilities supply capacity, improving the level of technology and equipment of municipality public utilities as well as the level of enterprises management. Every enterprises and projects shall combine the introduction of capital with the introduction of techniques and management. The backward or eliminated technology, skill, materials or equipment are not allowed to use.

Article 6

The Ministry of Construction is responsible for drawing up the State plan of utilizing foreign capital in municipality public utilities. The plan shall be reported and sent to relevant authorities and incorporated into the State plan of utilizing foreign capital.

The administrative authority of construction in each provincial government is responsible for drawing up the plan of utilizing foreign capital in municipality public utilities with that administrative region. The plan shall be reported and sent to the Ministry of Construction in August of each year, and be incorporated into the plan of utilizing foreign capital within that region.

The administrative authority of construction in each prefectural government is responsible for drawing up the plan of utilizing foreign capital in municipality public utilities within that administrative region.

Municipality public utility enterprises are responsible for proposing the enterprises' projects of utilizing foreign capital.

Article 7

Besides the relevant State provisions on the powers and procedures of examination and approval, following stipulations shall be abide by when examining and approving the projects of utilizing foreign capital in municipality public utilities:

For the project which shall be examined and approved by relevant authorities of the State Council, the administrative authorities of construction of provincial governments shall submit the project proposal to the Ministry of Construction; After the Ministry of Construction has written the examination and approval opinions, the project shall be examined and approved by relevant authorities of the state Council.

For the project which shall be examined and approved by relevant authorities of the provincial governments, the administrative authorities of construction of prefectural governments shall submit the project proposal to the administrative authorities of construction of provincial governments; After the administrative authorities of construction of provincial governments have written the examination and approval opinions, the project shall be examined and approved by relevant authorities of the provincial governments.

Besides the mandatory contents of a project proposal, the project proposal of utilizing foreign capital shall include: the present conditions of utilizing foreign capital within the area or the industry, the selection of the mode of utilizing foreign capital and the reasons for such selection, the amount of foreign capital being utilized, plan of utilizing foreign capital, prediction of the capacity of compensating or repaying the foreign capital, etc.

Article 8

The preparation work at former stage must be done well when applying for the projects utilizing foreign loans. The study report of feasibility of the project must be evaluated by corresponding qualified consultant agency. The domestic mating capital must be fully prepared, and the channel of collecting capital must be clear.

Article 9

For the approval of project of utilizing foreign loans, the use of foreign loans must conform to the scope and functions which are stipulated in the loan agreements signed by the two parties. Neither units nor individuals are allowed to direct the loans to other purpose or change the functions of the loans for any reasons or in any forms.

Article 10

The administrative authorities of construction of the provincial and prefectural governments where the projects of utilizing foreign loans being located shall direct the construction unit to handle with the work of transferring the loan, and establish the reserves of repaying. For the foreign loans borrowed by the State untidily and returned by the locality, the repayment of the principal and interest shall be incorporated into local fiscal year budget plan .

Article 11

For the project absorbing foreign direct investment, the selection of foreign partner shall be undertaken by bidding or inviting the foreigners to compete the bids. The Chinese party shall entrust relevant consultant agency to investigate and evaluate the intended foreign partners' social reputation, legitimacy and capacity of undertaking the project, including its credit and fiscal status, financing ability, technology and management level, etc. Only after the consultant agency has provided the written evaluation report confirming the foreign partners' capacity of undertaking such project can the Chinese party determine the foreign cooperative partner.

Article 12

Based on absorbing foreign direct investment, the Chinese party shall entrust qualified asset evaluation agency to evaluate the asset provided by the two parties(including tangible asset and intangible asset); The feasibility of the cooperative conditions raised by foreign party shall be expounded and proved scientifically and reasonably, and the personality level (charging level) of the product as well as inhabitants' endurance shall be considered fully.

Article 13

The two parties must strictly abide by the state regulations when starting foreign direct investment project. The Chinese party is not permitted to break the whole project into parts or examine and approve ultra vires; In the agreement or contract signed by the two parties, the Chinese party is not allowed to ensure foreign party the fixed rate of return in any forms, set up the minimum price formula, or make account and check in foreign currency. Nor can the Chinese party allow foreigners to withdraw their capital; No units or departments are allowed to provide foreign ensure in any form; nor can they be entrusted by the joint ventures to run or manage the joint ventures. For the supply of water, gas and other public utilities in big and middle cities, the Chinese party must control more than 50% of the total supply capacity.

Article 14

For the project absorbing foreign direct investment, the main articles of the agreement or contracts signed by two parties shall conform to the State stipulations. The agreement or contract signed by the two parties must be examined by the administrative authorities of construction of provincial governments with written opinion, then submitted to competent authority of foreign economic and trade at the Central or provincial government for examination and approval.

Article 15

For the projects utilizing international financial organizations loan or foreign government loan which has signed contracts or put on production, in order to absorb foreign direct investment, it shall be approved firstly by the unit of approving the former feasibility study report of the loan project (including cleaning the claim and debts relationship of foreign loans with domestic loan transferring agency), then consented by foreign loan agency through consultation with State authorities or financial institutions,. After the examination and approval in accordance with the procedure of examining and approving foreign investment, the Chinese party can sign contracts with foreigners.

Article 16

The design of the project utilizing foreign capital must be undertaken by the designing unit which has undertaken similar special project design tasks and has corresponding designing certificates.

Article 17

The bidding system and project supervisory system must be carried out in the construction of the project of utilizing foreign capital.

Article 18

Project entity responsibility system shall be carried out in the project utilizing foreign capital. In accordance with the principle of the uniform of responsibility, authority and interest, project entity shall be responsible for the accomplishment of the project, utilizing of foreign capital, running maintenance after the accomplishment of the project, and the repay of the foreign capital.

Article 19

The administrative authorities of construction at each levels shall set up the statistics record system of utilizing foreign capital, and incorporate the statistics of utilizing foreign capital into the statistics system of city construction.

After the project contract of utilizing foreign capital has been signed, the competent authorities of the project-constructing unit shall submit the copy of the contract or agreement to the administrative authorities of construction of prefectural government for record. The administrative authorities of construction of prefectural government shall report the circumstances of contract signing to the administrative authorities of construction of provincial government.

The administrative authorities of construction of provincial government shall submit the local statistics report of utilizing foreign capital in city construction to the Ministry of Construction.

The present contract or agreement of utilizing foreign capital in the municipalities directly under the Central Government shall be submitted to the Ministry of Construction directly by the administrative authorities of construction of the municipalities' governments.

Article 20

The administrative authorities of construction of the local government at or above the county level is responsible for the supervision and management on utilizing foreign capital in local construction.

Article 21

Where foreign capital is utilized in well-known scenic spot, these Provisions may be consulted.

Article 22

The Ministry of Construction shall be responsible for the interpretation of these Provisions.

Article 23

These Provisions shall enter into force as of the date of promulgation.