Laws of the People's Republic of China

    Article 1  This Law is formulated for the purpose of supporting and
guiding township enterprises to develop steadily and healthily, protecting
the legal rights and interests of township enterprises, standardizing their
behaviors, promoting the rural economy and the construction of socialist
modernization.

    Article 2  Township enterprises as referred to in the this Law mean
various enterprises invested in mainly by rural collective economic
organizations or peasants and established in townships or towns (including
villages under their jurisdiction), which bear the duty of supporting
agriculture.

    "Invested in mainly by rural collective economic organizations or
peasants" mentioned in the preceding paragraph means that investment made by
rural collective economic organizations or peasants exceeds 50% of the total,
or the investment can play a holding role or actually has a dominant effect.

    Any township enterprise that meets the requirements of corporation can
be possessed of the qualification.

    Article 3  Township enterprises constitute an important pillar supporting
rural economy and are an important component of the national economy.

    The main task for township enterprises shall be to develop production of
goods in accordance with market demand, provide social services and
substantial social supply, absorb rural surplus labor, increase peasants'
income, support agriculture, give rise to agriculture and rural
modernization and promote the development of the national economy and public
undertakings.

    Article 4  The development of township enterprises shall conform with the
principle that rural collective economy plays a leading role while diverse
economic components are developing in common.

    Article 5  The state shall actively support township enterprises, make
rational plans for their development, direct them in sorts and control them
in accordance with laws.

    Article 6  The state shall encourage and particularly support township
enterprises in economically less developed regions or in regions where
national minorities live, encourage township enterprises and other economic
organizations in economically developed regions to support the development of
township enterprises in economically less developed regions and in regions
where national minorities live.

    Article 7  The department of township enterprise administration under the
State Council and other departments concerned under the State Council shall,
in accordance with their respective responsibility, be held responsible for
planning, coordination, supervision and supplying of service for township
enterprises of the whole countries. The department of township enterprise
administration and other departments concerned under local governments at the
county level and above shall, in accordance with their respective
responsibility, be responsible for planning, coordination, supervision and
supplying of service for the development of township enterprises within their
respective regions.

    Article 8  Township enterprises set up and registered in accordance with
the law shall go through the procedure of registration for record with the
local department of township enterprise administration.

    Township enterprises having changes in its name or domicile or because of
division, merger, suspension or closing of business, etc. shall, after going
through the procedure of change registration, establishment registration or
cancellation, report the matter for record to the department of township
enterprise administration.

    Article 9  Branches set up in cities by township enterprises, or
enterprises set up in cities by rural economic organizations with the task of
supporting agriculture, shall be treated as township enterprises.

    Article 10  For township enterprises established with investment made by
rural collective economic organizations, the property shall belong to the
whole body of peasants who have set up the enterprises.

    For township enterprises established with joint investment made by rural
collective economic organizations and other enterprises, organizations or
individuals, the property shall belong to every investor in a proportion of
the investment made by each of them.

    For township enterprises established with investment made by peasants-in-
partnership or by individuals, the property shall belong to the investors.

    Article 11  Township enterprises shall practice independent accounting,
autonomous business operation and self-responsibility for profits and losses.

    Township enterprises possessing the status of enterprise legal person
shall enjoy the right to the property of the legal person.

    Article 12  The state shall protect legal rights and interests of
township enterprises with their legal property subject to no encroachment.

    No organization or individual may violate laws or administrative
regulations by interfering in the production or management of township
enterprises, changing the person in charge or illegally encroaching upon or
using without compensation their property.

    Article 13  Township enterprises shall be established in a form allowed
for by laws or administrative regulations; the investors shall, in accordance
with relevant laws and administrative regulations, decide on important
affairs of the enterprise, set up managerial and administrative system and
enjoy rights and bear liabilities.

    Article 14  Township enterprises shall practice democratic management
according to law. When deciding on the managerial and administrative system
or the person in charge of the enterprise, making important policies for
running business or setting standards for wages, welfare, labor protection or
labor security, etc., the investors shall heed the opinions of the trade union
and employees of the enterprise, and make public regularly the implementation
thereof to the employees and subject them to supervision of the employees.

    Article 15  The state shall encourage the establishment of social
security system for employees in township enterprises in regions where
conditions permit.

    Article 16  In the case of suspension or termination of business,
township enterprises already establishing the social security system shall
make arrangement for the employees in accordance with relevant stipulations;
those with legal labor contracts shall handle the case by following the
contracts. The employees who came from rural collective economic
organizations shall have the right to return to their original posts and
engage in agricultural production, or they can seek jobs by themselves.

    Article 17  Township enterprises shall take a certain proportion of
after-tax profit as fund to be used for supporting agriculture and rural
social expenses. The actual proportion and measures for managing and using
the fund shall be prescribed by the governments of province, autonomous
region or municipality directly under the central government.

    Except as otherwise stipulated by laws or administrative regulations,
no government department, organization or individual may charge any fees or
assess any expenses in any form from township enterprises.

    Article 18  The state shall, in accordance with the situation of the
development of township enterprises, reduce a portion of tax levied from
township enterprises within a certain period. The categories for which, the
period within which and the proportion by which, the taxation shall be
reduced, shall be prescribed by the State Council.

    Article 19  Medium- and small-sized township enterprises that meet one of
the following requirements may, in accordance with particular situation,
enjoy preferential treatment of taxation within a certain period:

    (1) collective-owned township enterprises during their early stage,
meeting real difficulty in business;

    (2) those established in minority nationality regions, remote regions or
poverty-stricken regions;

    (3) those engaging in businesses of processing, storing, conveying or
distributing grain, feed or meat; or

    (4) those to which the state industrial policies promise to render
special support.

    The concrete measures for the preferential treatment of taxation
mentioned in the preceding paragraph shall be prescribed by the State
Council.

    Article 20  The state shall, by means of credits, encourage and support
the development of township enterprises. State financial institutions may
offer preferred loans to township enterprises which meet any of the
requirements stipulated in the preceding article and satisfy the conditions
for loans, and among said township enterprises, those with financial handicap
but promising well may enjoy loans on favorable terms.

    The concrete measures for the preferred loans and loans on favorable
terms mentioned in the preceding paragraph shall be prescribed by the State
Council.

    Article 21  Governments at and above county level may, in accordance with
relevant regulations of the state, set up development funds for township
enterprises. The funds shall comprise of the following resources:

    (1) revolving funds the state appropriates for the development of
township enterprises;

    (2) a portion of the annual increment of taxes turned over to the
localities by township enterprises;

    (3) earnings from use of the funds; and

    (4) funds voluntarily provided by rural collective organizations,
township enterprises and individual peasants, etc.

    Article 22  The development funds for township enterprises shall be used
specially for supporting the development of township enterprises, with the
scope of using as follows:

    (1) supporting the development of township enterprises in minority
nationality regions, remote regions and poverty-stricken regions;

    (2) supporting the economic and technological cooperation and the conduct
of joint venture projects by and between township enterprises in developed
regions and those in economically less developed regions or minority
nationality regions;

    (3) supporting township enterprises to adjust their setup of production
and product mix in accordance with the state industrial policies;

    (4) supporting township enterprises to make technological innovation,
develop famous products, special local products, products of good quality and
new products and produce traditional handicraft products;

    (5) developing township enterprises that produce agricultural means of
production or that directly serve agricultural production;

    (6) developing township enterprises that engage in businesses of
processing, storing, conveying or distributing grain, feed or meat;

    (7) supporting the vocational education and technical training for
employees in township enterprises; and

    (8)supporting other items in need of such support.

    Measures for the establishment, use and management of development funds
for township enterprises shall be prescribed by the State Council.

    Article 23  The state shall take active measures to train talents for
township enterprises, encourage technicians, managers and graduates from
colleges and secondary schools to work in them and serve them in various
ways.

    Township enterprises shall train technicians, managers and workers
through various channels and in different ways and adopt preferential
policies to attract talents.

    Article 24  The state shall take preferential measures to encourage
township enterprises to develop economic and technological cooperation in
various forms with research institutions, colleges and universities,
state-owned enterprises and other enterprises and organizations.

    Article 25  The state shall encourage township enterprises to develop
foreign economic and technological cooperation and exchanges, set up
production bases for export-oriented products, and earn foreign exchange
through export.

    Township enterprises that meet certain requirements can be granted with
franchise for running foreign trade, after being approved in accordance with
the law.

    Article 26  Local governments at all levels shall, in line with the
principle of unified planning and rational distribution, combine the
development of township enterprises with the construction of small-sized
towns, guide and promote township enterprises to develop in an appropriately
concentrated way and strengthen step by step the construction of
infrastructure and service facilities, to speed up the construction of
small-sized towns.

    Article 27  Township enterprises shall, in accordance with the market
demand and the state industrial policies, rationally readjust their setup of
production and product mix, strengthen technological innovation, continuously
adopt advanced techniques, production technologies and equipment, and raise
the managerial and administrative ability of the enterprises.

    Article 28  The construction of township enterprises shall conform to the
overall plan for land utilization, with land used under strict control and in
a rational and economical way. Where there is wasteland or inferior land
available for use, no farmland or fertile land shall be used.

    When township enterprises use land which is under the possession of rural
collective bodies, corresponding procedures for approval and registration
shall be followed in accordance with relevant laws and regulations.

    The land used by township enterprises shall be retrieved by the original
owner and put into new use when the land has been set idle for more than two
years or for more than one year as a result of business being stopped.

    Article 29  Township enterprises shall explore and use natural resources
in a lawful and rational manner.

    Township enterprises wishing to engage in mineral resources exploitation
must subject to approval by departments concerned according to stipulations
of relevant laws, and obtain the mining license and production license. They
must conduct regular operation, try to prevent waste of resources and any
damage to resources shall be strictly prohibited.

    Article 30  Township enterprises shall, in accordance with relevant
stipulations of the state, institute financial and accounting rules,
strengthen financial control, set up account books in accordance with the
law and keep a true record of financial activities.

    Article 31  Township enterprises must, in accordance with statistical
rules of the state, submit true statistical data. Township enterprises shall
have the right to reject any statistical investigation reports and forms that
are made and handed down in violation of provisions of the state.

    Article 32  Township enterprises shall, in accordance with the law, make
tax registration, submit timely tax returns and pay tax to the due amount.

    Governments at all levels shall strengthen the administration of taxation
with regard to township enterprises. Relevant departments may not give tax
reductions or exemptions to township enterprises by overstepping their
authority.

    Article 33  Township enterprises shall strengthen the quality control of
their products, make substantial efforts to improve quality of products.
Goods they produce or sell must be up to the standards set by the state and
the trade for the security of human health and personal and property safety.
No product which has lose effectiveness or has deteriorated or which the
state has declared to be obsolete may be sold or produced, and it shall be
prohibited to mix impurities or imitations into products that are produced
or sold, to pass a fake product as a genuine one or pass a defective product
as a high-quality one.

    Article 34  Township enterprises shall use trademarks in accordance with
the law and attach importance to their commercial credit. They shall make
marks for their products as required by state provisions. It is prohibited to
forge the origin of a product or to forge or use the name or address of a
factory of another producer or forge or use authentication marks or marks for
famous quality products of others.

    Article 35  Township enterprises must comply with laws and regulations
concerning environmental protection and, in accordance with the state's
industrial policies and under the unified guidance of the local people's
government, take measures to develop pollutant-free or less polluting and
less resources-consuming enterprises, substantially and practically prevent
and control environmental pollution and eco-hazards, protect and improve
environment.

    Local people's governments shall make and implement programs for
township enterprises to do environmental protection, to raise the capability
of township enterprises to prevent and control environmental pollution.

    Article 36  In constructing some projects that may affect environment,
township enterprises shall strictly follow the procedure for the assessments
of environmental impact.

    Installations for the prevention and control of pollution at a
construction project must be designed, built and put into operation
simultaneously with the principal part of the project. No permission shall be
given for a construction project to be commissioned or used, until its
installations for the prevention and control of pollution are examined and
considered up to the standard by the competent department of environmental
protection administration.

    Township enterprises may not adopt or use production technologies or
facilities which may seriously pollute the environment and are expressly
prohibited by the state, or produce or sell products which may seriously
pollute the environment and are expressly prohibited by the state. Those
discharging pollutants in excess of the state or local discharge standards
and causing serious environmental pollution shall eliminate or control the
pollution within a prescribed period of time or, in the case of failure to
do so, they shall be ordered to close down, stop production or change the
line of production.

    Article 37  Township enterprises must comply with laws and regulations
concerning labor protection and labor safety, conscientiously stick to the
principle of "putting safety first, putting prevention first", take effective
technical and managerial measures for labor hygiene to prevent accidents and
casualties and vocational diseases. In the case of hidden dangers endangering
the employees' safety, a time limit shall be set or the production shall be
suspended for removing the dangers. It is strictly prohibited for the
managerial personnel to break rules and regulation and force employees to
perform risky operations. When accident and casualties occur, they shall take
active actions to perform rescue and make proper treatment and report the
case to the departments concerned.

    Article 38  Any of the following acts that breach the stipulations of
this Law shall be corrected under the order of the department of township
enterprise administration under the governments at or below the county level:

    (1) illegally make change to the ownership of any township enterprise;

    (2) illegally seize or use without compensation property of any township
enterprise;

    (3) illegally replace the person-in-charge of any township enterprise; or

    (4) encroach upon any township enterprise's right to autonomous running
of business.

    If any act referred to in the preceding paragraph causes economic losses
the enterprise, a compensation shall be paid to the enterprise in accordance
with the law.

    Article 39  Township enterprises shall have the right to lodge complaints
with or inform the department of audit, supervision, finance or price control
or the department of township enterprise administration against any unit or
individual that illegally charge fees, assessments from or impose fines on
the township enterprise. The department concerned and the higher authorities
shall order the persons responsible to stop the illegal acts and make
restitution within a time limit. The department concerned may, in accordance
with the seriousness of the case, impose certain penalty on those directly
responsible for the illegal acts.

    Article 40  Any township enterprise violating laws or regulations
concerning product quality, environmental protection, land administration,
the exploitation of natural resources, labor safety or taxation, etc. shall,
in accordance with the seriousness of the case, cease partly or completely to
enjoy the preferential treatment stipulated by this Law until they make
corrections, in addition to being dealt with in accordance with relevant laws
and regulations.

    Article 41  If any township enterprise refuses to bear the duty to
support agriculture in violation of this Law, the department of township
enterprise administration shall order it to make corrections, and may order
that the enterprise cease partly or completely to enjoy the preferential
treatments stipulated by this Law before the corrections have been made.

    Article 42  Any party who refuses to accept penalties or decisions made
under Articles 38 to 41 of this Law may apply for administrative
reconsideration or take legal proceedings.

    Article 43  This Law shall enter into force on January 1, 1997.