(1986)
CHINA / Policies
Law of the People's Republic of China on Foreign Capital Enterprises
(1986)
Updated: 2006-04-20 09:41
(Adopted at the Fourth Session of the Sixth National People's Congress on
April 12, 1986, 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 relations and
trade, 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 approved, 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 licence. The date of issue of the
business licence 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 licence. 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 seperation, merger or other major changes, 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 industry and commerce administration authorities.
Article 11 The production and operating plans of enterprises with foreign
capital shall be reported to the competent authorities for the record.
Enterprises 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, labour protection and labour 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 operations or may revoke its business licence.
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 to 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 reevant state provisions for tax payment, and may enjoy preferential
treatment for reduction 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.
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