On
Feb. 21, 2002, Zhu Rongji, Chinese Premier inked his signature on No. 346
Decree of the State Council, the People's Republic of China, which enacted
the Regulations on Foreign Investment Orientation that would become effective
on April 1st, 2002.
Article
1
Pursuant
to the provisions on foreign investment defined by relevant Chinese laws
and requirements of industrial policies, this Regulations is enacted for
the purpose of providing guidance for foreign investment orientation so
as to make such investment in line with China's national economic and social
development and protect investors' legitimate interests.
Article
2
This
by-law is applicable to the projects sponsored by Chinese-foreign joint
ventures, Chinese-foreign cooperation businesses, and foreign invested businesses
(hereinafter referred to as foreign invested businesses) on Chinese territories
or foreign invested projects in others forms (hereinafter referred to as
foreign invested projects).
Article
3
Guidance
Catalog on Industries for Foreign Investment and Catalog on Priority Industries
for Foreign Investment in Middle and West Regions shall be jointly formulated
by the State Development Planning Commission, the State Economic and Trade
Commission and the Ministry of Foreign Trade and Economic Co-operation in
collaboration with competent agencies under the State Council, and be published
upon the approval of the State Council. Pursuant to actual needs, the said catalog can be revised when necessary
for further publication jointly by the State Development Planning Commission,
the State Economic and Trade Commission and the Ministry of Foreign Trade
and Economic Co-operation in collaboration with competent agencies under
the State Council.
Both
Guidance Catalog on Industries for Foreign Investment and Catalog on Priority
Industries for Foreign Investment in Middle and Western Regions are policy
basis for approving the establishment of foreign invested projects and foreign
invested businesses.
Article
4
Foreign
invested projects are classified into four categories: encouraged, allowed,
restricted and prohibited. Foreign invested projects that fall into the
categories of encouraged, restricted and prohibited are listed in the Guidance
Catalog on Industries for Foreign Investment. Foreign invested projects
that are not classified as encouraged, restricted and prohibited are the
ones rated as allowed shall not be listed in the Guidance Catalog on Industries
for Foreign Investment.
Article
5
A
project that serves for one of the following purposes shall be classified
as encouraged foreign investment projects.
1)New
agricultural technologies, integrated agricultural development, industries
related to energy, transport and major raw materials;
2)
High technologies, advanced proven technologies, new equipment and materials
able to improve products' performance and enterprises' technical and economic
benefits or those that domestic manufacturers cannot have sufficient supply;
3)
Meeting market demands, upgrading products, creating new market or enhancing
international competitiveness;
4)
New technologies, new equipment, energy and raw material saving, integrated
utilization of resources and renewable resources, and environmental pollution
prevention;
5)
Taking advantage of manpower and resources strength of the middle and the
western regions in line with the state industrial policies;
6)
Other provisions defined by laws or administrative by-laws.
Article
6
A
project featured with one of the following conditions shall be classified
as restricted foreign investment projects.
1)
Using outdated technologies;
2)
Unfavorable for resources efficiency and ecological environment improvement;
3)
Prospecting and mining of special minerals under the state protection;
4)
Belonging to industries scheduled for step-by-step opening;
5)
Other provisions defined by laws and administrative by-laws.
Article
7
A
project featured with one of the following aspects shall be classified as
prohibited foreign investment projects.
1)
Endangering national security or harmful to public interests;
2)
Causing pollution to environment, damaging natural resources or harmful
to human health;
3)
Occupying extensive arable land, or unfavorable for land resources protection
and development;
4)
Endangering military facilities' security and effective applications;
5)
Manufacturing products with China's unique techniques or technologies;
6)
Related to other provisions defined by laws and administrative by-laws.
Article
8
The
Guidance Catalog on Industries for Foreign Investment can make such provisions
as “only limited to joint ventures or cooperation businesses”, “Chinese
partner shall take a majority equity” or “Chinese partner may take a relative
majority equity” for foreign invested projects.
Here
“only limited to joint ventures or cooperation businesses” means only Chinese-foreign
joint ventures and Chinese-foreign
cooperation businesses are allowed; referring to Chinese partner taking
majority equity, it is defined that the total investment made by the Chinese
partner in a foreign invested project shall be positioned at 51% or above;
“Chinese partner shall take a relative majority equity” means that the total
investment made by the Chinese partner in a foreign invested project shall
be larger than the proportion offered by any foreign party in the investment.
Article
9
Foreign
invested projects falling into the category of encouraged, in addition to
the preferential treatment they may enjoy according to relevant laws or
administrative by-laws, may upon the approval, expand their related business
scopes, if they are the ones featured with huge investment and long return
period such as construction activities related to energy, transportation,
urban infrastructure construction ( coal, petroleum, natural gas, electric
power, railways, highways, harbors, airports, urban roads, sewage and garbage
treatment).
Article
10
A
foreign invested project in the category of allowed, when all of its products
are exported, can be deemed as encouraged upon the approval of the people's
government at provincial, autonomous regional and municipal (the cities
under direct jurisdiction of the Central Government) level or by the competent
authorities under the State Council; a foreign invested project in the category
of restricted can be deemed as allowed when its products export volume reaches
70% or more of its total products sales.
Article
11
A
foreign invested project in the category of allowed or restricted, when
proven of its role in taking advantage of the strength of the middle and
the western regions, can be duly granted with more favorable conditions;
when it occurs in the Catalog on Priority Industries for Foreign Investment
in Middle and Western Regions, the project may enjoy the preferential treatments
entitled to the foreign invested projects in the category of encouraged.
Article
12
Under
the existing authorized power of approval, a foreign invested project shall
be subject to the approval and put on records by development planning authorities
and economic and trade authorities respectively in terms of the nature of
the project; a foreign invested business's contracts or constitutions shall
be approved by and recorded at the authorities responsible for foreign economy
and trade. Of them, the ones falling into the category of restricted and
prohibited shall be subject to the approval of competent authorities under
the people's government at provincial, autonomous regional and municipal
(the cities under direct jurisdiction of the Central Government) level before
being recorded at the upper level competent and sectional authorities. The
said approval power shall not be decentralized. Foreign invested projects
in the service and trade sectors scheduled for step-by-step opening shall
be approved under relevant state regulations.
Foreign
invested projects involving quota or licensing shall file quota or license
applications at foreign economy and trade authorities.
When
provided otherwise, the procedures and methods for approving foreign invested
projects shall observe existing laws and administrative by-laws.
Article
13
Superior
approval authorities shall revoke the approval and invalidate associated
contracts and constitutions within 30 work days from the receipt of the
project's on-record document if the said foreign invested project runs counter
against this Regulations. In the meanwhile, industry registration agency
shall nullify the project registration and the Customs shall not handle
its import and export requirements.
Article
14
When
the applicant of a foreign invested project obtains its approval by unfair
means such as fraud, it shall bear legal liabilities in terms of its violation;
the approval authorities shall invalidate its approval for the project and
the violator shall be punished by competent authorities according to the
law.
Article
15
When
abusing or neglecting his or her duties, the working staff of the approval
agency shall bear criminal liabilities in accordance with the provisions
on abusing and neglecting duties in criminal laws; when such abusing or
neglecting is not serious enough for criminal liabilities, the person who
commits such act shall be recorded with a serious administrative demerit.
Article
16
Investment
projects sponsored by overseas Chinese or by the investors from Hong Kong
Special Administrative Zone, Macao Special Administrative Zone and Taiwan
area shall be handled in accordance with this Regulations.
Article
17
The
Regulations comes into force on April 1st, 2002. The Interim Regulations on Foreign Investment Orientation approved
by the State Council on June 7, 1995 and jointly published by the State
Planning Commission, the State Economic and Trade Commission and the Ministry
of Foreign Economy and Trade Co-operation on June 20, 1995 shall be invalidated
from the same day on