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Law of the People's Republic of China on Foreign-capital Enterprises
(Adopted by the 4th Session of the Sixth National People's Congress on April 12, 1986, and promulgated by Order No.39 of the President of the People's Republic of China, and effective on April 12, 1986)
Article 1
For the purposes of expanding Chinese-foreign economic co-operation
and technical exchange and advancing the growth of China's national economy,
the People's Republic of China permits foreign enterprises, and other foreign
economic organizations or individuals (hereinafter referred to as the "foreign
investor") to form foreign-capital enterprises in its territory and
protects their legitimate rights and interests.
Article 2
"Foreign-capital enterprises" as the term is used in this
Law refers to those enterprises which are formed in the territory of the
People's Republic of China in accordance with China's relevant laws and
invested solely by foreign investors, not including branches set up inside
China by foreign enterprises and other foreign economic organizations.
Article 3
Foreign-capital enterprises established must benefit the growth of the
national economy of China, and employ advanced technology and equipment
or export all or most of their products to the outside.
The State Council will stipulate the industries and sectors in which the formation of foreign-capital enterprises is forbidden or restricted by the State.
Article 4
China's laws protect foreign investors' investments, profits gained
and other legitimate rights and interests in the territory of the People's
Republic of China.
Foreign-capital enterprises must abide by Chinese laws and regulations and may not infringe upon the China's social and public interests.
Article 5
Any foreign-capital enterprise shall not be nationalized or made a requisition
for by the State. Under special circumstances and in the light of the needs
of the social and public interests, the State may make a requisition for
a foreign-capital enterprise according to legal procedures and shall compensate
correspondingly.
Article 6
The competent department of the State Council for foreign economic relations
and trade or organs authorized by the State Council shall consider and approve
the applications for setting up foreign-capital enterprises. An organ in
charge of consideration and approval shall, within 90 days following receipt
of an application, decide to approve or deny it.
Article 7
A foreign investor whose application for setting up a foreign-capital
enterprise is approved, shall petition the administrative management organ
for industry and commerce to register and obtain a business license within
30 days following receipt of the approval certificate. The date of signing
and issuing the business license of a foreign-capital enterprise shall be
the date of the formation of the said enterprise.
Article 8
A foreign-capital enterprise that satisfying the requirements for a
legal entity as provided by China's laws, may seek the status of a Chinese
legal entity according to law.
Article 9
Foreign-capital enterprises shall, within the period of time specified
by the organs in charge of consideration and approval, complete their investment
in China. The administrative management organs for industry and commerce
have the power to revoke the business licenses of those that fail to invest
within the time specified.
Administrative management organs for industry and commerce shall inspect and oversee the investment of foreign-capital enterprises.
Article 10
A foreign-capital enterprise shall, if splitting, merging or altering
other major matters, report for approval to the organ in charge of consideration
and approval and register the change with the administrative management
organ for industry and commerce.
Article 11
Foreign-capital enterprises shall submit their production and operation
plans to their respective competent departments for the record.
Foreign-capital enterprises shall, in their operations and management pursuant to their articles of association approved, be subject to no interference.
Article 12
Foreign-capital enterprises desiring to hire Chinese employees shall
enter into contracts according to law and stipulate clearly the items such
as employment, dismissal, remuneration, welfare benefits, labor protection
and labor insurance in such contracts.
Article 13
Employees of foreign-capital enterprises may organize trade unions according
to law, which carry out union activities and safeguard their legitimate
rights and interests.
Foreign-capital enterprises shall offer the necessary facilities for the trade unions.
Article 14
Foreign-capital enterprises must establish account books in the territory
of the People's Republic of China, conduct independent accounting, submit
the accounting statements according to regulations and be subject to supervision
from the fiscal and tax authorities.
The fiscal and tax authority may impose a fine on a foreign-capital enterprise that fails to establish account books in the territory of the People's Republic of China and the administrative management organ for industry and commerce may order the said enterprise to stop its operations or may revoke its business license.
Article 15
Foreign-capital enterprises may purchase inside China or from the international
market such materials as raw and semi-processed materials and fuels they
need according to their approved operational scopes. Under equal conditions,
they shall buy inside China first.
Article 16
Foreign-capital enterprises shall buy insurances from China's insurance
companies.
Article 17
Foreign-capital enterprises shall pay taxes according to China's regulations
for taxation and may enjoy a preference for tax reduction or exemption.
A foreign-capital enterprise that, after paying income tax, reinvests its profits in the territory of the People's Republic of China, may petition for refund of a part of the income tax already paid on the reinvested amount according to China's regulations.
Article 18
Foreign exchange affairs pertaining to foreign-capital enterprises shall
be governed by China's regulations on foreign exchange control.
A foreign-capital enterprise shall open its account in the Bank of China or in a bank designated by the foreign exchange control authority of the State.
Foreign-capital enterprises shall balance their own foreign exchange receipts and disbursements by themselves. If, with approval by the relevant competent organ, a foreign-capital enterprise sells its products inside China and consequently suffers an imbalance in foreign exchange receipts and disbursements, the said organ is responsible to resolve the matter.
Article 19
Foreign investors may remit abroad their lawful profits gained from
foreign-capital enterprises, other lawful income and any funds received
after liquidation.
Foreign employees of foreign-capital enterprises may, after paying the individual income tax according to law, remit abroad their wages and other lawful incomes.
Article 20
The operation period of a foreign-capital enterprise shall be applied
and reported by its foreign investor and approved by the organ in charge
of consideration and approval. Whenever the operation period needs to extend
after it expires, an application shall be filed with the said organ in charge
of consideration and approval 180 days before the expiration of the period.
The organ in charge of consideration and approval shall, within 30 days
of filing, decide to approve or deny the extension.
Article 21
In the event a foreign-capital enterprise terminates, a public notice
shall be made in time and a liquidation shall be made pursuant to legal
procedures.
Before the liquidation is finished, any foreign investor may not dispose of the enterprise's assets and properties except for the needs of liquidation.
Article 22
A foreign-capital enterprise which terminates shall go through the formalities
of cancellation registration with the administrative management organ for
industry and commerce and hand in its business license.
Article 23
The competent department of the State Council for foreign economic relations
and trade shall formulate the rules for implementation in accordance with
this Law and submit for approval to the State Council before the commencement.
Article 24
This Law shall go into effect on the day of promulgation.