Laws of the People's Republic of China

The State Administration for Industry and Commerce

Reply of the State Administration for Industry and Commerce on the Issue Whether Enterprises with Foreign Investment May Contract and Operate Domestic-funded Commercial Enterprises

GongShangQiZi [1996] No.245

July 8, 1996

Beijing Bureau for Industry and Commerce:

We have studied your Request for Instructions on Whether Enterprises with Foreign Investment May Contract and Operate Domestic-funded Commercial Enterprises (JingGongShangWenZi [1996] No.103) and now reply as follows:

I.

Registered enterprises with foreign investment should perform their duty of capital appropriation requirement and operate in accordance with the laws and regulations. Therefore, Beijing Jiachuang Business Administration Consulting Co., Ltd. (hereinafter referred to as Jiachuang) should appropriate investment fund in compliance with the above-mentioned principle and operate within the scope of business approved by the competent registration authority.

II.

The country does not provide legal reference for enterprises with foreign investment to contract domestic-funded enterprises. Therefore enterprises with foreign investment lack in sufficient legal and regulatory reference to contract domestic-funded enterprises. Before the country prescribes any clear provisions, enterprises with foreign investment contracting to operate industries where foreign investment is restricted or banned by the state, should seek approval from authorized examination and approval authorities and register with their initial registration authorities in reference to such provisions as "Interim Provisions on Guiding Direction of Foreign Investment" and "Guiding List of Industries with Foreing Investment". In the case of Jiangchuang, which contracted domestic-funded enterprises and engaged itself in commercial retailing and wholesaling activities without the approval of and registration with competent authorities, your Administration is therefore requested to order for the termination of the contract and submit a self-criticism in writing.

III.

As regards the issue of "commercial property management" in Jiachuang's scope of business, the content of commercial property management should be specific management of commercial facilities (such as renting, maintenance and security protection of commercial facilities and other relevant items) and thus does not cover commercial retailing and wholesaling.

Your administration is requested to work together with Beijing Development Planning Commission and Beijing Foreign Trade and Economic Commission and jointly order Jiangchuang to revise the inappropriate description of its scope of business in its articles of association and contract and to report the revision results to the State Administration for Industry and Commerce.