Laws of the People's Republic of China

REGULATIONS OF THE STATE COUNCIL FOR ENCOURAGEMENT
OF INVESTMENT BY OVERSEAS CHINESE AND
COMPATRIOTS FROM HONG KONG AND MACAO

  (Promulgated by the State Council on August 19, 1990)

 

 

 

SUBJECT: FOREIGN TRADE & ECONOMIC RELATIONS

ISSUING-DEPT: THE STATE COUNCIL

ISSUE-DATE: 08/19/1990

IMPLEMENT-DATE: 08/19/1990

LENGTH: 1607 words

TEXT:

[Article 1] These Regulations are hereby formulated with a view to promoting national economic development and encouraging overseas Chinese and compatriots from Hong Kong and Macao (hereinafter referred to as "Investors") to invest in mainland China.

[Article 2] Investors are allowed to invest in every province, autonomous region, municipality directly under the Central Government and special economic zone.üü Investors are encouraged to engage in land development and operation according to the relevant regulations of the State.

[Article 3] Investors may invest in mainland China in the following forms:

(1) An enterprise wholly owned by themselves;

(2) An equity joint venture or cooperative (contractual) joint venture;

(3) Compensation trade, processing and assembly with supplied materials or cooperative production;

(4) Purchase of stocks and bonds of enterprises;

(5) Purchase of real estate;

(6) Land development and operation, and the right to the use of land according to the law; and

(7) Other forms of investment allowed by the laws and regulations.

[Article 4] Investors may invest in mainland China in industry, agriculture, service trade and other lines of business which accord with the direction of social and economic development.üü Investors may choose investment projects from the project items published by the relevant departments of the local people's government or propose their intent of investment projects on their own initiative and apply to the foreign economic and trade departments or the examination and approval authorities designated by the local people's government in the potential investment area for examination and approval.

The State encourages investors to establish export-oriented and technologically advanced enterprises, and grants them appropriate preferential treatment.

[Article 5] When investors establish an enterprise wholly owned by themselves and equity joint venture or cooperative (contractual) joint venture (hereinafter referred to broadly as "Investment Enterprises"), investors may enjoy, except for those preferential treatment granted in the present Regulations, preferential treatment as granted to foreign investment enterprises according to the relevant foreign economic laws and regulations of the State.

When investors invest in other forms or earn dividends, interests, rent fees, royalties or any other income from mainland China where they do not have offices, the relevant foreign economic laws and regulations of the State shall be applicable except for those provisions of the present Regulations.

[Article 6] Investors may contribute convertible currencies, machinery and equipment or other in kind, industrial property rights, know-how and so forth as their investments.

[Article 7] Investment in mainland China and the assets procured by investors, the industrial property rights, the profits and their other legitimate rights and interests due to them are protected by the law of the State, and may be assigned and inherited according to the law.

Activities of investors in mainland China shall comply with the provisions of the laws and regulations the State.

[Article 8] The State shall not nationalize the investments and other assets of investors.

[Article 9] Based on the need of the social public interest, investment enterprises may be expropriated in accordance with legal procedures and appropriate compensation shall be paid.

[Article 10] The legitimate profits earned by investors from their investments, other legitimate income and funds after liquidation may be remitted outside of mainland China according to the law.

[Article 11] Investment enterprises shall be exempt from the import customs duty, industrial and commercial consolidated tax, and the requirement for import licence for the machinery, equipment and automobile for the use of production and office facilities needed by the enterprises and imported with funds which are part of their total investment.üü The daily-use articles and vehicles in a reasonable amount imported by investors for their personal use during their service period in the enterprises shall also be exempt from the above-mentioned duty and tax as well as the requirement for business licence.

The raw materials, fuel, bulk parts, spare parts, machine component parts and fittings imported by investment enterprises for the production of export products shall be exempt from import customs duty, industrial and commercial consolidated tax, and the requirement for import licence.üü Those imports shall be subject to the supervision and control of the Customs.üü If the above-mentioned duty-free imports are used for the production of products to be sold on mainland China market, import formalities shall be pursued according to the State's regulations, and duty and tax shall be levied according to the regulations.

Except for those export items restricted by the State, products made by investment enterprises for export shall be exempt from export customs duty, and industrial and commercial consolidated tax.

[Article 12] Investment enterprises may borrow money from financial institutions in mainland China or outside of mainland China, and may use its own assets and other kinds of interest as mortgage or security.

[Article 13] The term of an enterprise wholly owned by investors shall be decided by themselves; the term of an equity joint venture and cooperative (contractual) joint venture shall be decided through consultation between the parties to the venture or do not specify the term.

[Article 14] The composition of the board of directors and the appointment of Chairman of the board of directors of an equity joint venture and the composition of the board of directors and the appointment of Chairman of the board of directors or chief executive of the joint management organ of a cooperative (contractual) joint venture shall be decided by the parties to the venture on the basis of proportion of the capital contribution or the terms and conditions of cooperation, or decided by the parties through consultation.

[Article 15] Investment enterprises shall carry out their business operations and management pursuant to the approved contracts and articles of association.üü The right of autonomy of business operations and management of the enterprises shall not be interfered.

[Article 16] Investors in mainland China, and technical and managerial personnel employed from outside of mainland China by investment enterprises may apply for a certificate for the use of multiple entry and exit.

[Article 17] Investors may entrust their relatives and friends in mainland China to serve as their agents to assist their investments in mainland China.üü Such agents shall hold legalized powers of attorney.

[Article 18] In areas where investment enterprises are centered, investors may apply to the local people's government for the establishment of investors association.

[Article 19] When investors wish to establish an equity joint venture or cooperative (contractual) joint venture, the application for such establishment shall be made by venturers from mainland China.üü When an investor wish to establish an enterprise wholly owned by himself, the application may be either made by himself or made on his behalf by his relative, friend, consulting firm and other service organ duly authorized by himself.üü The applications for the establishment of investment enterprises shall be managed unifiedly by the local foreign economic and trade departments or the examination and approval authorities designated by the local people's government.

Examination and approval of investment enterprises shall be managed in accordance with the authority empowered by the State Council.üü The local foreign economic and trade departments at various levels or the examination and approval authorities designated by the local people's government shall, within 45 days of the date of their receipt of all of application documents, decide whether or not approve them.

The applicant shall, within 30 days of the date of its receipt of a certificate of approval, apply to the administrative organ for industry and commerce for registration according to the relevant procedures for the registration according to the relevant procedures for the registration and administration, and obtain a business licence.

[Article 20] Any dispute arising from the performance of the contract or in connection with the contract pursuant to which investors invest in mainland China shall be resolved by the parties, to the extent possible, through friendly consultation or mediation.

If the parties are unwilling to resolve the dispute through friendly consultation or mediation, or if such methods prove unsuccessful, the said dispute may be referred to an arbitration institution in mainland China or other arbitration institution for arbitration on the basis of the arbitration clause included in the contract or a written arbitration agreement reached between the parties subsequent to the occurrence of the dispute.

If the parties do not enter into an arbitration clause in the contract and do not reach a written arbitration agreement subsequent to the occurrence of the dispute, either party may bring suit in the people's courts.

[Article 21] These Regulations shall be interpreted by the Ministry of Foreign Economic Relations and Trade.

[Article 22] These Regulations shall come into force from the date of their promulgation.