Laws of the People's Republic of China

REGULATIONS OF THE STATE COUNCIL FOR ENCOURAGEMENT
OF INVESTMENT BY TAIWAN COMPATRIOTS

  (Promulgated by the State Council on July 3, 1988)

 

 

SUBJECT: FOREIGN TRADE & ECONOMIC RELATIONS

ISSUING-DEPT: STATE COUNCIL OF CHINA

ISSUE-DATE: 07/03/1988

IMPLEMENT-DATE: 07/03/1988

LENGTH: 1657 words

TEXT:

[Article 1] These Regulations are hereby formulated with a view to promoting economic and technological exchanges between the mainland and Taiwan Region, benefiting the joint prosperity of both sides of the Strait and encouraging Taiwan corporations, enterprises and individuals (hereinafter referred to as "Taiwan investors") to invest in the mainland.

[Article 2] Taiwan investors are allowed to invest in every province, autonomous region and municipality directly under the Central Government.

Taiwan investors are encouraged to engage in land development and operation in Hainan Province and the defined islands and areas in the coastal regions of such provinces as Fujian, Guangdong and Zhejiang.

[Article 3] Taiwan investors may invest in the mainland 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] Taiwan investors may invest in the mainland in industry, agriculture, service trade and other lines of business which accord with the direction of social and economic development.üü Taiwan 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 Taiwan investors to establish export-oriented and technologically advanced enterprises, and grants them appropriate preferential treatment.

[Article 5] When Taiwan investors establish an enterprise wholly owned by themselves and equity joint venture or cooperative (contractual) joint venture (hereinafter referred to broadly as "Taiwan investment enterprises"), Taiwan investors may enjoy, except for those preferential treatemt 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 Taiwan investors invest in other forms or earn dividends, interests, rent fees, royalties or any other income from the mainland 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] Taiwan 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] Taiwan investment in the mainland and the assets procured by Taiwan 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 Taiwan investors in the mainland 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 Taiwan investors.

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

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

[Article 11] Taiwan investment enterprises shall be exempt from the import customs duty, industrial and commercial consolidated tax, and the requirement for import license 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 Taiwan staff members for their personal use during their service period in the enterprise shall also be exempt from the above-mentioned duty and tax as well as the requirement for business license.

The raw materials, fuel, bulk parts, spare parts, machine component parts and fittings imported by Taiwan 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 the mainland 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 Taiwan investment enterprises for export shall be exempt from export customs duty, and industrial and commercial consolidated tax.

[Article 12] A Taiwan investment enterprise may borrow money from financial institutions in the mainland or outside of the mainland, 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 Taiwan 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] Taiwan 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] Taiwan investors in the mainland and the technical and managerial personnel employed from outside of the mainland by Taiwan investment enterprise may apply for a certificate for the use of multiple entry and exit.

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

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

[Article 19] When Taiwan investors wish to establish an equity joint venture or cooperative (contractual) joint venture, the application for such establishment shall be made by the mainland venturers.üü When Taiwan investors wish to establish an enterprise wholly owned by themselves, the application may be either made by themselves or made on their behalf by their relatives, friends, consulting firms and other service organs duly authorized by themselves.üü The applications for the establishment of Taiwan 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 Taiwan 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 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 Taiwan investors invest in the mainland 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 the mainland or in Hong Kong for abitration 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 abitration 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.