Laws of the People's Republic of China

Ministry of Commerce

Ministry of Commerce Circular on Printing and Distributing the System of Reporting Country Investment and Operation Obstacles

The competent commercial departments of all provinces, autonomous regions or municipalities directly under the Central Government and all specifically designated cities in the state plan, all central enterprises and all economic and commercial agencies in foreign countries;

For the purpose of having a good grasp of the overall situation of and problems encountered in the overseas investment and operations by Chinese enterprises, handling well the work of follow-up administration of overseas investment, strengthening the macro coordination and guidance, protecting the lawful rights and interests of investors and promoting the development of overseas investment, we hereby print and distribute the System of Reporting Country Investment and Operation Obstacles to you, please implement it accordingly.

Ministry of Commerce

November 11, 2004

System of Reporting Country Investment and Operation Obstacles

Chapter I Goal of Establishment of the System

Article 1

For the purpose of accelerating the implementation of the "going abroad" strategy, handling well the work of follow-up administration of and service for overseas investment and operations, protecting the lawful rights and interests of investors, building a good environment and promoting the development of overseas investment, this System is formulated in accordance with the Foreign Trade Law, the Interim Rules for Foreign Trade Barriers Investigation and other relevant provisions.

Article 2

The system of reporting country investment and operation obstacles means that the Chinese economic and commercial agencies, chambers of commerce and enterprises in foreign countries shall, on an annual basis or irregular basis, report various obstacles, barriers and related problems encountered by the Chinese-capital enterprises in their investment and operations in the host countries (regions), and these reports shall serve as one of the bases for the annual Foreign Market Access Reports as issued by the Ministry of Commerce and are for the domestic administrative departments' and other relevant departments' reference; the domestic departments concerned shall, on the basis of the overall follow-up and understanding of the various problems encountered by the Chinese enterprises in their overseas investment and operations, safeguard the lawful rights and interests of Chinese enterprises through multilateral or bilateral mechanisms.

Chapter II Reporting Subjects

Article 3

The reporting subjects shall be all economic and commercial agencies in foreign countries, chambers of commerce and associations of overseas Chinese-capital enterprises, overseas Chinese-capital enterprises and their branches (hereinafter referred to as "Chinese-capital enterprises") and their domestic investors, who shall submit reports to the Ministry of Commerce as required.

Article 4

Each economic and commercial agency in foreign countries and each chamber of commerce or association of overseas Chinese-capital enterprises shall regularly organize the Chinese-capital enterprises to make exchanges and discussions with regard to the particulars required to be reported, solicit opinions from the Chinese-capital enterprises in full swing, and seriously implement the reporting system by submitting to the Ministry of Commerce reports as required on the problems encountered by the Chinese enterprises in their overseas investment and operations in the current year prior to December 31 of each year. In the case of any serious circumstance, the report thereon shall be submitted immediately (for the format of such report, have reference to Attachment 1).

Article 5

The overseas Chinese-capital enterprises and their domestic investors may, in combination with the problems encountered in their overseas investment and operations, submit reports with regard to any or some items as required to be reported at any time or irregularly (for the format of such report, have reference to Attachment 2).

Article 6

The reports shall be prepared and issued with signatures.

Chapter III Main Particulars to Be Reported

Article 7

The reports shall exactly reflect the actual situation of and problems encountered in the investment and operations and trade in service (including project contracting, service cooperation and designing consultancy) by the Chinese enterprises in the host countries (regions).

(1)

Overall situation of the investment and operations of Chinese-capital enterprises

(a)

overall information about the number, investment scale, sectoral distribution, operation results and other overall situations of and problems generally encountered by Chinese-capital enterprises; and

(b)

brief account of major investment projects of Chinese-capital enterprises, including the names of the enterprises and of the domestic investors of such enterprises (in the case of reinvestment via a third country or region, a note shall be stated), investment scale and type, principal business and products, operation performance and major difficulties and problems.

(2)

Investment environment obstacles and risks

(a)

any law or regulation of the host country unfavorable to Chinese investment;

(b)

non-operational obstacles and risks in the host country, which cause cost burden to the operation of the enterprises, such as problems in the public security and safety, enterprises' credit, trade union, strike, government honesty, the public attitude toward foreign-capital enterprises, and public holidays; and

(c)

any shortcoming or deficiency of the host country in supply or pricing of transport, water, electricity, gas or communications that may adversely affect the investment and operations of the enterprises.

(3)

Barriers to investment and trade in service

The following measures that the host country implements or permits to be implemented in violation of any of the relevant multilateral or bilateral agreements and that will or are likely to be inequitable obstacles or damage to or restriction of the investment and operations or trade in service by Chinese enterprises:

(a)

barriers to access, such as any inequitable restriction of the inflow of Chinese investment, failure of any WTO member to fulfill its commitment to open certain sectors to Chinese investment; or in the case of bidding for an engineering project, the government's requiring that a Chinese company must make a joint bid with a local enterprise or commit to have a local company as its subcontractor;

(b)

barriers to operations, such as any inequitable restriction on the operating activities of the Chinese-capital enterprises in terms of production, supply, sale, human resources, finance and materials etc, reluctance to give employment visa and non-transparency or overelaborate formalities in the government's working procedure; and

(c)

barriers to withdrawal, such as restrictions on withdrawal of Chinese investment or remittance-out of profits of the Chinese-capital enterprises.

(4)

Proposals on corresponding measures

Proposals of the reporting subjects on measures for dealing with the above-mentioned problems, obstacles and investment barriers.

Chapter IV Submission and Publication of the Reports

Article 8

The reports shall be submitted to the Ministry of Commerce (the Cooperation Department, departments of the relevant regions and the Bureau of Fair Trade) in written form or through the Internet.

The institutions with necessary conditions shall submit their reports by making use of administrative affairs information communication processing system of the Ministry of Commerce, or directly fill out and send the forms of Reports on Country Investment and Operation Obstacles on the sub-website of cooperation guidance of the website of the Ministry of Commerce (www.mofcom.gov.cn), or submit their reports by e-mailing (Processing Division of the Cooperation Department: hzjg@mofcom.gov.cn; Barriers Investigation Division of the Bureau of Fair Trade: boft_tbi@mofcom.gov.cn).

Article 9

On the premise that the interests and trade secrets of the relevant enterprises shall be protected, the Ministry of Commerce shall regularly publish the relevant particulars of the reports in the form of Country Trade Investment Environment Reports or in other forms, pay close attention to the investment environment of the host countries and call the potential investing enterprises' attention to the avoidance of risks.

Chapter V Problem-resolving Mechanism

Article 10

Ministry of Commerce shall, after receipt of the reports, based on the reports and in conjunction with the relevant departments, exchange information and make consultations and set forth comments and resolving measures.

Article 11

The reported problems shall be negotiated through exchange of visits by high-level personnel, bilateral mixed commissions of economic relations of trade or any other diplomatic channel so as to help the enterprises resolve the problems in a quick manner.

Article 12

If any reported problem involves any barrier to investment or trade in service, the Ministry of Commerce may conduct investigations thereon in accordance with the Interim Rules for Foreign Trade Barriers Investigation.

Chapter VI Supplementary Provisions

Article 13

The right to interpret this System shall reside in the Ministry of Commerce.

Article 14

This System shall be implemented as of the date of promulgation.

Attachments:

1.

Form of Reports by Economic and Commercial Agencies and Chambers of Commerce and Associations of Chinese-capital Enterprises in Foreign Countries on Country (Region) Investment and Operation Obstacles (omitted)

2.

Form of Reports by Chinese-capital Enterprises and Their Domestic Investors on Country (Region) Investment and Operation Obstacles (omitted)