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(Adopted
at the Fourth Session of the Sixth National People's congress, promulgated
by Order No. 39 of the President of the People's Republic of China
and effective as of April 12. 1986)
Article
1
With
a view to expanding economic cooperation and technical exchange
with foreign countries and promoting the development of China's
national economy, the People's Republic of China permits foreign
enterprises, other foreign economic organizations and individuals
(hereinafter collectively referred to as "foreign investors")
to set up enterprises with foreign capital in China and protects
the lawful rights and interests of such enterprises.
Article
2
As
mentioned in this Law, 'enterprises with foreign capital' refers
to those enterprises established in China by foreign investors,
exclusively with their own capital, in accordance with relevant
Chinese laws. The term does not include branches set up in China
by foreign enterprises and other foreign economic organizations.
Article
3
Enterprises
with foreign capital shall be established in such a manner as to
help the development of China's national economy; they shall use
advanced technology and equipment or market all or most of their
products outside China. Provisions shall be made by the State Council
regarding the lines of business which the state forbids enterprises
with foreign capital to engage in or on which it places certain
restrictions.
Article
4
The
investments of a foreign investor in China, the profits it earns
and its other lawful rights and interests are protected by Chinese
law. Enterprises with foreign capital must abide by Chinese laws
and regulations and must not engage in any activities detrimental
to China's public interest.
Article
5
The
state shall not nationalize or requisition any enterprise with foreign
capital. Under special circumstances, when public interest requires,
enterprises with foreign capital may be requisitioned by legal procedures
and appropriate compensation shall be made.
Article
6
The
application to establish an enterprise with foreign capital shall
be submitted for examination and approval to the department under
the State Council which is in charge of foreign economic relation
and trade, or to another agency authorized by the State council.
The authorities in charge of examination and approval shall, within
90 days from the date they receive such application, decide whether
or not to grant approval.
Article
7
After
an application for the establishment of an enterprise with foreign
capital has been approval, the foreign investor shall, within 30
days from the date of receiving a certificate of approval, apply
to the industry and commerce administration authorities for registration
and obtain a business license. The date of issue of the business
license shall be the date of the establishment of the enterprise.
Article
8
An
enterprise with foreign capital which meets the conditions for being
considered a legal person under Chinese law shall acquire the status
of a Chinese legal person, in accordance with the law.
Article
9
An
enterprise with foreign capital shall make investments in China
within the period approved by the authorities in charge of examination
and approval. If it fails to do so, the industry and commerce administration
authorities may cancel its business license. The industry and commerce
administration authorities shall inspect and supervise the investment
situation of an enterprise with foreign capital.
Article
10
In
the event of a separation, merger or other major change, an enterprise
with foreign capital shall report to and seek approval from the
authorities in charge of examination and approval, and register
the change with the industry and commerce administration authorities.
Article
11
The
production and operation plans of enterprises with foreign capital
shall be reported to the competent authorities for the record. Enterprise
with foreign capital shall conduct their operations and management
in accordance with the approved articles of association, and shall
be free from any interference.
Article
12
When
employing Chinese workers and staff, an enterprise with foreign
capital shall conclude contracts with them according to law, in
which matters concerning employment, dismissal, remuneration, welfare
benefits, labor protection and labor insurance shall be clearly
prescribed.
Article
13
Workers
and staff of enterprises with foreign capital may organize trade
unions in accordance with the law, in order to conduct trade union
activities and protect their lawful rights and interests. The enterprises
shall provide the necessary conditions for the activities of the
trade unions in their respective enterprises.
Article
14
An
enterprise with foreign capital must set up account books in China,
conduct independent accounting, submit the fiscal reports and statements
as required and accept supervision by the financial and tax authorities.
If an enterprise with foreign capital refuses to maintain account
books in China, the financial and tax authorities may impose a fine
on it, and the industry and commerce administration authorities
may order it to suspend operation or may revoke its business license.
Article
15
Within
the scope of the operations approved, enterprises with foreign capital
may purchase, either in China or from the world market, raw and
semi-processed materials, fuels and other materials they need. When
these materials are available from both sources on similar terms,
first priority should be given to purchases in China.
Article
16
Enterprises
with foreign capital shall apply for insurance companies in China
for such kinds of insurance coverage as are needed.
Article
17
Enterprises
with foreign capital shall pay taxes in accordance with relevant
state provisions for tax payment, and may enjoy preferential treatment
for reduction of or exemption from taxes. An enterprise that reinvests
its profits in China after paying the income tax, may in accordance
with relevant state provisions, apply for refund of a part of the
income tax already paid on the reinvested amount.
Article
18
Enterprises
with foreign capital shall handle their foreign exchange transactions
in accordance with the state provisions for foreign exchange control.
Enterprises with foreign capital shall open an account with the
Bank of China or with a bank designated by the state agency exercising
foreign exchange control. Enterprises with foreign capital shall
manage to balance their own foreign exchange receipts and payments.
If, with the approval of the competent authorities, the enterprises
market their products in China and consequently experience an imbalance
in foreign exchange, the said authorities shall help them correct
the imbalance.
Article
19
The
foreign investor may remit abroad profits that are lawfully earned
from an enterprise with foreign capital, as well as other lawful
earnings and any funds remaining after the enterprise is liquidated.
Wages, salaries and other legitimate, income earned by foreign employees
in an enterprise with foreign capital may be remitted abroad after
the payment of individual income tax in accordance with the law.
Article
20
With
respect to the period of operation of an enterprise with foreign
capital, the foreign investor shall report to and secure approval
from the authorities in charge if examination and approval. For
an extension of the period of operation, an application shall be
submitted to the said authorities 180 days before the expiration
of the period. The authorities in charge of examination and approval
shall, within 30 days from the date such applications is received,
decide whether or not to grant the extension.
Article
21
When
termination its operations, an enterprise with foreign capital shall
promptly issue a public notice and proceed with liquidation in accordance
with legal procedure. Pending the completion of liquidation, a foreign
investor may not dispose of the assets of the enterprise except
for the purpose of liquidation.
Article
22
At
the termination of operations, the enterprise with foreign capital
shall nullify its registration with the industry and commerce administration
authorities and hand in its business license for cancellation.
Article
23
The
department under the State Council which is in charge of foreign
economic relations and trade shall, in accordance with this Law,
formulate rules for its implementation, which shall go into effect
after being submitted to and approved by the State Council.
Article
24
This
Law shall go into effect on the day of its promulgation.
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