Laws of the People's Republic of China

   Article 1. These Measures are formulated in accordance with the provisions of the Law of the People's Republic of China on Sino-foreign Joint Equity Enterprises, the Law of the People's Republic of China on Sino-foreign Co-operative Enterprises, the Law of the People's Republic of China on Enterprises with Sole Foreign Investment and other relevant administrative laws and decrees, while taking into account the specific circumstances of the city.

   Article 2. These Measures shall apply to the purchase of commodities and sale of products by Sino-foreign joint equity enterprises, Sino-foreign co-operative enterprises and sole foreign investment enterprises (hereinafter referred to as foreign investment enterprises) established within the administrative district of Shanghai Municipality.

   Article 3. A foreign investment enterprise shall have the right to import commodities required for its own use and to export its own products independently within the approved scope of its contract, but any goods subject to State import or export licence control shall be handled in accordance with the relevant provisions of the Ministry of Foreign Economic Relation and Trade governing the application for import and export licences by foreign investment enterprises.

An import or export licence application which comes within the authorised scope of approval of the Shanghai Municipal Commission of Foreign Economic Relations and Trade (hereinafter referred to as the Shanghai COFERT) shall be examined, verified and, where appropriate, an import or export licence issued within five working days of receiving the application.

   Article 4. Before endorsing the establishment of a foreign investment enterprise which proposes to manufacture products subject to State export licence control, the local municipal examining and approval organ shall consult the Shanghai COFERT or, through it, the higher authorities in charge of foreign economic relations and trade, and shall urge the applicant to undertake and supervise its completion of all necessary formalities.

   Article 5. Commodities required by a foreign investment enterprise for its production and business operations may be purchased on the international marker or from local Shanghai markets or other domestic Chinese markets.

A foreign investment enterprise may purchase commodities from local Shanghai markets through the following channels:

(1) local municipal foreign investment enterprise commodity service companies;

(2) commodity dealers;

(3) foreign trade corporations;

(4) commodity producers;

(5) bonded warehouses;

(6) commodity fairs and trade centres.

Units or enterprises dealing in commodities shall give priority to meeting the needs of exporting enterprises and technologically advanced enterprises, providing the same conditions prevail.

   Article 6. A foreign investment enterprise may purchase without restriction on local Shanghai markets any amount of office supplies and domestic consumer goods that it may require.

   Article 7. The supply of materials needed by a foreign investment enterprise to manufacture products listed in State or local municipal production plans or purchasing contracts shall be assured by the department which organised the production plan or allocated the contract.

Materials required by a foreign investment enterprise for a capital construction project which is included in the city's commodity distribution plans shall be supplied by the relevant units or enterprises dealing in those materials, in accordance with the plans.

   Article 8. In the case of a Chinese investor which, together with a foreign partner, invests all or part of its assets in the establishment of a foreign investment enterprise, unless the approval documents specifically exclude materials from inclusion in the commodity distribution plan, the relevant departments shall ensure that, in accordance with its investment status, the Chinese investor's original commodity supply channels are maintained and commodity dealers shall continue to provide materials pursuant to the original supply plans.

   Article 9. A foreign investment enterprise may use its profits as investment to form affiliated enterprises with other enterprises in China and to establish commodity supply bases relevant to its production needs. These affiliated enterprises may enjoy preferential treatment in accordance with the relevant provisions of the State and local municipal authorities regarding the development of horizontal integration.

Before an affiliated enterprise may be established, a foreign investment enterprise shall be required to submit documents clarifying the source of investment funds and investment projects to the original examining and approval organ and the local municipal administration for industry and commerce and, after these documents have been examined and approved, it shall complete formalities for the registration of affiliated enterprises in accordance with the relevant provisions.

   Article 10. In addition to a foreign investment enterprise itself importing required commodities, it may also engage as an import agent a municipal foreign investment enterprise commodity service company, a commodity dealer authorised to conduct import operations or a State or local municipal foreign trade corporation.

All units and enterprises dealing in commodities shall be required to provide good service to foreign investment enterprises.

   Article 11. Foreign investment enterprises shall strive to sell their products on the international market. Products manufactured by a foreign investment enterprise which are urgently required by the State or Shanghai Municipality or which are currently imported may be sold primarily on the local market, subject to approval.

The provisions of the Ministry of Foreign Economic Relations and Trade Measures for Foreign Investment Enterprises Purchasing Domestic Products for Export to Achieve a Balance of Foreign Exchange Income and Expenditure shall be implemented if a foreign investment enterprise needs to purchase domestic products for export in order to remedy its foreign exchange shortfall.

   Article 12. In addition to exporting its products itself, a foreign investment enterprise may also sell its products on a commission or agency basis through the following channels:

(1) the foreign partner's sales outlets;

(2) State foreign trade organs based in Shanghai;

(3) local foreign trade corporations and enterprises with import/ export rights;

(4) State or local export commodity fairs and trade conferences.

   Article 13. Those products of a foreign investment enterprise which are classified as planned distribution commodities shall be included in the distribution plan of the commodity control department and sold to the designated users. In the case of production material for key industrial goods, sales shall be conducted at the producer goods markets of large or medium size cities or through designated sales agents in accordance with State regulations.

   Article 14. A foreign investment enterprise may establish commodity purchasing and product sales agents abroad, subject to approval from relevant examining and approval organs.

   Article 15. Administration of enterprises invested in and established in Shanghai Municipality by Overseas Chinese, Hong Kong, Macao or Taiwanese businesspeople shall be handled in accordance with the provisions of these Measures.

   Article 16. The Shanghai Municipal Foreign Investment Commission and the Municipal Material and Equipment Bureau shall be jointly responsible for the interpretation of these Measures.

   Article 17. These Measures shall take effect from 1 July 1989. The Regulations on Commodity Supply and Marketing and Price Control for Sino-foreign Joint Equity Ventures in Shanghai Municipality (Trial Implementation), promulgated 5 December 1984 by the Shanghai Municipal People's Government, shall be abrogated simultaneously.