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Regulations on Foreign Investment Orientation(2002/2/21)
2003/11/18

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

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