Laws of the People's Republic of China

The Ministry of Foreign Trade and Economic Cooperation

Decree of the Ministry of Foreign Trade and Economic Cooperation

No. 3

The Supplementary Regulations to the Interim Regulations of the Ministry of Foreign Trade and Economic Cooperation on the Setting up of Investment-Oriented Companies by Foreign Investors are hereby issued. The present Regulations shall come into force as of the date of promulgation.

Shi Guangsheng, Minister of the Ministry of Foreign Trade and Economic Cooperation

August 24, 1999

The Supplementary Regulations to the Interim Regulations of the Ministry of Foreign Trade and Economic Cooperation on the Setting up of Investment-Oriented Companies by Foreign Investors

For the purpose of promoting investment of transnational companies in China, introducing advanced technology and management experiences from abroad and perfecting functions of investment-oriented companies, the supplementary regulations are made to the Interim Regulations on the Setting up of Investment-Oriented Companies by Foreign Investors on April 4, 1995 by the Ministry of Foreign Trade and Economic Cooperation, which run as follows:

1.

The registered capital of an investment-oriented company shall not be below 30 million U.S dollars, its total volume of loans shall not exceed four times of its registered capital paid up. In case such a company intends, out of operation necessity, to borrow more loans which exceeds four times of its registered capital paid up, it should report to the Ministry of Foreign Trade and Economic Cooperation for approval.

2.

An investment-oriented company is encouraged to set up scientific research and development centres or departments to engage in research and development of new products and high technologies, to transfer its research and development results, and to provide correspondent technological service.

3.

An investment-oriented company may sell at home and overseas markets in the form of agency or distribution of products produced by enterprises wherein it invested.

4.

An investment-oriented company may provide comprehensive services such as transportation, storing, etc. for the enterprises wherein it invested.

5.

An investment-oriented company may purchase within the Chinese territory commodities for export, which are not involved with export quotas or control by export license.

6.

An investment-oriented company engaged in operation activities prescribed in Articles 3, 4 and 5 of the present Regulations should submit, according to the procedures, its revised contract and the articles of association and other relevant documents for application to the Ministry of Foreign Trade and Economic Cooperation for approval, and should meet the following conditions:

An investment-oriented company has paid up in time, according to the provisions of its contract and the articles of association, its registered capital, and the volume of the registered capital actually paid up is not below 30 million U.S. dollars. An investment-oriented company applying for providing for enterprises wherein it invested, operation activities as enlisted in Articles 3 and 4 of the present Regulations, its investment ratio of registered capital in the enterprises wherein it invested should not be lower to 10%, and should have written entrustment (unanimously adopted by the Board of Directors of the enterprises wherein it invested) from the enterprises wherein it invested.

7.

Where the present Regulations conflict with the Explanations to the Relevant Issues of the Interim Regulations on the Setting up of Investment-Oriented Companies by Foreign Investors issued on February 16, 1996 by the Ministry of Foreign Trade and Economic Cooperation, the present Regulations shall prevail.

8.

The present Regulations shall come into force as of the date of promulgation.