Chapter V Use of Site and the Site Use Fees

　　Article 34 With expect to the site to be used by a foreign-capital enterprise， the local people's government at or above the county level in the place where the enterprise is to be located， shall make arrangements after examination and verification in the light of the local conditions.

　　Article 35 A foreign-capital enterprise shall， within 30 days from the day the business licence is issued， go through the procedure for the use of land and obtain the land certificate by presenting the certificate of approval and the business licence to the land administration department under the local people's government at or above the county level in the place where the enterprise is to be located.

　　Article 36 The land certificate shall be the legal instrument for the foreign-capital enterprise to use land. The foreign-capital enterprise within its term of operations， may not assign its land-use right without permission.

　　Article 37 A foreign-capital enterprise shall， when obtaining the land certificate， pay its land use fee to the land administrative¹ department in the place where the enterprise is located.

　　Article 38 In case that a foreign-capital enterprise uses land that has already been developed， it shall pay the land development fee.

　　The land development fee， as mentioned in the preceding paragraph， includes the expense for the requisition of land， the expense for the pulling down of houses and the settlement allowance， and the expense for the construction of basic installations that match the foreign-capital enterprise. The land development fee may be calculated and collected by the land development unit in a lump-sum， or by yearly instalments.

　　Article 39 In case that a foreign-capital uses land that has not been developed， it may develop the land by itself， or it may entrust² a department concerned in China to develop the land. The infrastructure³ construction shall be carried out under the unified⁴ arrangement of the local people's government at or above the county level in the place where the enterprise is to be located.

　　Article 40 The standard for the calculation and collection of land use fee and land development fee shall be handled in accordance with the pertinent⁵ provisions of China.

　　Article 41 The term for the use of land by a foreign-capital enterprise shall be the same as the approved operation period of the said enterprise.

　　Article 42 A foreign-capital enterprise， besides obtaining the land-use right in accordance with the provisions of this Chapter， may also obtain the same right in accordance with the pertinent provisions of other Chinese laws and regulations.

　　Chapter VI Purchasing and Marketing⁶

　　Article 43 A foreign-capital enterprise shall formulate⁷ and execute its production and operation plans on its own； the said production and operation plans shall be submitted to the competent department in charge of the trade， in the place where the said enterprise is located， for the record.

　　Article 44 A foreign-capital enterprise is entitled to make decisions for itself on the purchase， for its own use， of machinery⁸ and equipment， raw and processed materials， fuels， parts and components⁹， fittings， primary parts， means of transport， and articles for office use （hereinafter uniformly called “goods and materials”）。A foreign-capital enterprise shall， when purchasing goods and materials in China under the same conditions， enjoy the same treatment as enjoyed by the Chinese enterprises.

　　Article 45 In case that a foreign-capital enterprise sells its products on the Chinese market， it shall conduct its sales in accordance with the approved sales proportion. In the event that sales of products on the Chinese market by a foreign-capital enterprise exceed the approved sales proportion， the case shall be subjected to the approval by the examining and approving organ.

　　Article 46 A foreign-capital enterprise is entitled to export of its own accord， goods produced by itself； it may also appoint a Chinese foreign trade company or a company outside the territory of China to sell its goods on a commission basis. A foreign-capital enterprise is entitled to sell， of its own accord， the products produced by itself on the Chinese market in accordance with the approved sales proportion； it may also appoint a Chinese Commercial agency to sell its products on a commission basis.

　　Article 47 Where machinery and equipment being assigned a fixed¹⁰ price and used by foreign investors¹² as contributing investment require， according to the pertinent provisions of China， import licences， the foreign investors shall， on the strength of the approved inventory¹³ of equipment and goods and materials of the said enterprise to be imported， file an application directly， or through an agency entrusted¹⁴ by them， with the licence-issuing organ for obtaining due import licences.

　　Where a foreign-capital enterprise has to import， in accordance with the approved scope of business， goods and materials for its own use and needed by its production and if， according to the pertinent provisions of China， it is necessary for the said enterprise to obtain import licences， it shall work out an annual plan for importation， and apply， every six months， to the licence-issuing organ for the licences. With respect to products to be exported by a foreign-capital enterprise， if， according to the pertinent provisions of China， it is necessary for the said enterprise to obtain an export licence， it shall work out an annual plan for exportation， and apply， every six months， to the licence-issuing organ for the licence.

　　Article 48 The prices of the goods and materials and technological¹⁵ labour service imported by a foreign-capital enterprise shall not be higher than the normal prices of similar goods and materials and technological labour service on the international market at the time. The price of export products produced by a foreign-capital enterprise shall be fixed by the enterprise itself with reference to the international market prices at the time， but the prices must not be lower than the reasonable export prices.

　　With respect to the evasion¹⁶ of tax by using such methods as importing at high prices while exporting at low prices， the tax authorities shall have the power， in accordance with the pertinent provisions of the tax law， to investigate the legal responsibilities therefor. The pricing of products to be sold by a foreign-capital enterprise on the Chinese market in accordance with the approved sales proportion shall be governed by the pertinent provisions of China concerning the administration of prices. The pricing mentioned in the preceding paragraph shall be reported to the administrative authorities for prices and the tax authorities for the record， and shall be placed under their supervision¹⁷.

　　Article 49 A foreign-capital enterprise shall provide statistical¹⁸ data and submit statistical statements to the departments concerned in accordance with the provisions in the Statistics Law of the People's Republic of China and the relevant provisions of China concerning the statistical system for the utilization¹⁹ of foreign capital.

　　Chapter VII Taxation²⁰

　　Article 50 A foreign-capital enterprise shall pay taxes and duties in accordance with the provisions of Chinese laws and regulations.

　　Article 51 The workers and staff members of a foreign-capital enterprise shall pay individual income tax in accordance with the provisions of Chinese laws and regulations.

　　Article 52 The following goods and materials imported by a foreign-capital enterprise shall be exempted²¹ from Customs duties and consolidated²² industrial and commercial tax：

　　（1） the machinery and equipment， parts and components， building materials as well as other materials used as investment by the foreign investor¹¹ and needed for construction， as well as the installation and reinforcement of machinery；

　　（2） the machinery and equipment， parts and components， means of communications and transportation for use in production， and equipment for use in production and management， imported， for their own use， by a foreign-capital enterprise with the funds included in the total amount of investment；

　　（3） the raw materials and processed materials， auxiliary²³ materials， primary parts， parts and components， and articles and materials for packaging imported by a foreign-capital enterprise for the production of export products.

　　In the event that the imported goods and materials， as mentioned in the preceding paragraph， are resold within the territory of China， or are used in the production of products to be sold within the territory of China， the foreign-capital enterprise concerned shall pay the taxes or make up the taxes in accordance with the provisions of the tax law of China.

　　Article 53 The export commodities produced by a foreign-capital enterprise， except those whose exportation is restricted by China， shall be exempted form Customs duties and consolidated industrial and commercial tax in accordance with the tax law of China.

　　Chapter VIII Control of Foreign Exchange

　　Article 54 Foreign exchange affairs of a foreign-capital enterprise shall be handled in accordance with the pertinent laws and regulations of China concerning foreign exchange control.

　　Article 55 A foreign-capital enterprise shall， on the strength of the business licence issued by the administrative department for industry and commerce， open an account at a bank which may handle foreign exchange business within the territory of China， and its receipts and payments in foreign exchange shall be subject to the supervision by the interested bank. The foreign exchange revenue of a foreign-capital enterprise shall be deposited in the foreign exchange account of the bank where it has opened an account； and the foreign exchange expenses shall be paid from the foreign exchange account.

　　Article 56 A foreign-capital enterprise shall achieve by itself the balance of revenues and expenditures²⁵ in foreign exchange.

　　In the event that a foreign-capital enterprise is unable to strike by itself the balance between revenues and expenditure²⁴ in foreign exchange， the foreign investor shall indicate it clearly in the application for the establishment of the enterprise， and put forward a specific plan for solving the problem； the examining and approving organ shall give a reply after consultation²⁶ with departments concerned.

　　In the event that the foreign investor has indicated in the application for the establishment of the foreign-capital enterprise， that the balance of revenues and expenditure in foreign exchange would be achieved by itself， no government department shall be responsible for the solution of the balance problem of revenues and expenditure in foreign exchange for the said enterprise.

　　With respect to products， manufactured by a foreign-capital enterprise， urgently needed in China， capable of replacing similar imported goods， and permitted to be sold in China， the payments may be made in foreign exchange， subject to the approval by the Chinese administrative department for foreign exchange control.

　　Article 57 In case that a foreign-capital enterprise has the necessity to open a foreign exchange account at a bank outside the territory of China to meet the needs of production and business operations， the case shall be submitted to the Chinese administrative department for foreign exchange control for approval and， in accordance with the provisions of the Chinese administrative department for foreign exchange control， regular reports on the conditions of revenues and expenditures in foreign exchange and statements of account shall be submitted.

　　Article 58 The wages and salaries as well as other rightful earnings²⁷ in foreign exchange of foreign workers and staff members and of those from Hong Kong， Macao and Taiwan working in a foreign-capital enterprise may be remitted²⁹ freely out of the country after taxes have been paid in accordance with the provisions of the Chinese tax law.

　　Chapter IX Financial Affairs and Accounting³⁰

　　Article 59 A foreign-capital enterprise shall， in accordance with Chinese laws， regulations and the provisions of financial organs， set up financial and accounting systems， which shall be reported， for the record， to the financial departments and the tax authorities at the place where the enterprise is located.

　　Article 60 The fiscal³¹ year of a foreign-capital enterprise shall begin from January 1 and end on December 31 of Gregorian calendar.

　　Article 61 Reserve funds and bonus and welfare funds for workers and staff members shall be withdrawn³² from the profits after a foreign-capital enterprise has paid income tax in accordance with the provisions of the Chinese tax law.

　　The proportion of reverse funds to be withdrawn shall not be lower than 10% of the total amount of profits after payment of tax； the withdrawal³³ of reserve funds may be stopped when the total cumulative³⁴ reserve has reached 50% of the registered capital. The proportion of bonus and welfare funds for workers and staff members to be withdrawn shall be determined³⁵ by the foreign-capital enterprise of its own accord.

　　In the event that deficits³⁶ of previous fiscal years of a foreign-capital enterprise have not been made up， it may not distribute the profits， while the undistributed profits of previous fiscal years may be distributed together with the distributable profits of the current fiscal year.

　　Article 62 Accounting vouchers³⁷， account books and accounting statements made by a foreign-capital enterprise shall be written in the Chinese language； if they are written in a foreign language， notes in the Chinese language are required.

　　Article 63 Business accounting of a foreign-capital enterprise shall be conducted independently. The annual accounting statements and liquidation³⁸ accounting statements of a foreign-capital enterprise shall be prepared in accordance with the provisions of the Chinese competent departments for financial and tax affairs. If accounting statements are prepared in foreign currencies， accounting statements in which the foreign currencies are converted into Renminbi （RMB） shall be prepared at the same time. The annual accounting statements and liquidation accounting statements of a foreign-capital enterprise shall be verified by a Chinese registered accountant， who shall submit a verification report.

　　The annual accounting statements and liquidation accounting statements of a foreign-capital enterprise， as stipulated³⁹ in the second and third paragraphs of this Article， together with the verification report prepared by a Chinese registered accountant， shall be submitted， within a prescribed time limit， to the Chinese competent departments for financial and tax affairs and also to the examining and approving organ and the administrative department for industry and commerce for the record.

　　Article 64 The foreign investor may engage Chinese or foreign accounting personnel to consult the account books of a foreign-capital enterprise， and the expenses thus entailed⁴⁰ shall be borne by the foreign investor.

　　Article 65 A foreign-capital enterprise shall submit its annual statement of assets and liabilities and annual statement of profit and loss to the competent departments for financial and tax affairs， and also to the examining and approving organ as well as the administrative department for industry and commerce for the record.

　　Article 66 A foreign-capital enterprise shall set up account books at the place where the said enterprise is located， and shall receive supervision of the competent departments for financial and tax affairs. With respect to any foreign-capital enterprise which violates the provisions in the preceding paragraph， the competent departments for financial and tax affairs may impose a fine， and the administrative department for industry and commerce may order to suspend its business operations or revoke⁴¹ its business licence.

　　Chapter X Workers and Staff Members

　　Article 67 In case that a foreign-capital enterprise employs workers and staff members within the territory of China， both the enterprise and the workers and staff members shall， in accordance with the Chinese laws and regulations， conclude and sign a labour contract. Matters as employment， dismissal， salaries and wages， welfare， labour protection and labour insurance shall be clearly stipulated in the contract. Foreign-capital enterprises may not hire child labourers.

　　Article 68 A foreign-capital enterprise shall be responsible for the vocational and technical training of its workers and staff members， and shall set up a check-up and appraisal⁴² system， so that workers and staff members are capable of meeting the needs of the enterprise's production and development in terms of production and managerial skills.

　　Chapter XI Trade Union

　　Article 69 The workers and staff members of a foreign-capital enterprise shall have the right to set up a grass-roots trade union organization and carry out trade union activities in accordance with the provisions of the Trade Union Law of the People's Republic of China.

　　Article 70 The trade union in a foreign-capital enterprise shall represent the interests of workers and staff members， and have the right to conclude labour contracts with the enterprise on their behalf， and to supervise the execution of the labour contracts.

　　Article 71 The basic tasks of the trade union in a foreign-capital enterprise shall be as follows： to safeguard the lawful⁴³ rights and interests of workers and staff members in accordance with the provisions of Chinese laws and regulations， and to assist the enterprise in the rational arrangements and use of welfare and bonus funds for the workers and staff members； to organize workers and staff members in carrying on political study， in learning scientific， technical and professional knowledge， in carrying out cultural， artistic⁴⁴ and sports activities； to educate workers and staff members in complying with labour discipline and in striving to fulfil various economic tasks of the enterprise. When a foreign-capital enterprise holds discussions on problems concerning the commendation and punishment of workers and staff members， the wage system， welfare benefits， labour protection and labour insurance， representatives of the trade union shall have the right to attend the discussions as nonvoting attendants. A foreign-capital enterprise shall listen to the opinions of the trade union， and win its cooperation.

　　Article 72 A foreign-capital enterprise shall give an active support to the work of the trade union of the enterprise， and， in accordance with the provisions of the Trade Union Law of the People's Republic of China， provide the trade union organization with the necessary houses and equipment for handling trade union work， holding meetings， and conducting such collective undertakings⁴⁵ as welfare benefits， and sports activities for workers and staff members. Every month， the enterprise shall appropriate a sum equal to 2% of the actual total amount of wages and salaries of workers and staff members to the trade union as outlay⁴⁶， and the trade union of the enterprise shall use this sum of money in accordance with the measures for the administration of trade union outlay， as formulated⁴⁷ by the All-China Federation⁴⁸ of Trade Unions.

　　Chapter XII Term of Operations， Termination and Liquidation

　　Article 73 The term of operations of a foreign-capital enterprise shall be proposed by the foreign investor in the written application for the establishment of the enterprise in the light of the specific conditions of different enterprises， and shall be subjected to the approval by the examining and approving organ.

　　Article 74 The term of operations of a foreign-capital enterprise shall be calculated from the day when the business licence is issued.

　　In the event that the term of operations of a foreign-capital enterprise has to be extended upon its expiration⁴⁹， the enterprise shall， 180 days before the expiration of the term of operations， file an application for the extension of the term of operations with the examining and approving organ. The examining and approving organ shall， within 30 days from the day of receiving the application， determine whether to approve or disapprove⁵⁰ the extension.

　　The foreign-capital enterprise shall， after obtaining the approval for an extension of its term of operations and within 30 days of receiving the approval for the extension， go through the procedure for the change of registration⁵¹ with the administrative department for industry and commerce.

　　Article 75 A foreign-capital enterprise that falls under one of the Following circumstances shall terminate its business operations：

　　（1） the term of operations expires；

　　（2） the foreign investor decides to dissolve it because of poor operation and management resulting in serious losses；

　　（3） business cannot be carried on because of heavy losses as a result of natural disasters， wars or other force majeure；

　　（4） bankruptcy⁵²；

　　（5） disbanded by law because it has violated Chinese laws and regulations or jeopardized⁵³ social and public interests；

　　（6） other causes for dissolution， as stipulated in the enterprise's articles of association， have occurred.

　　If a foreign-capital enterprise falls under any of the circumstances as stipulated in Items （2）， （3） and （4） of the preceding paragraph， it shall submit， of its own accord， an application for the termination of business operations to the examining and approving organ for verification and approval. The date of approval after verification by the examining and approving organ shall be the date of the said enterprise's termination.

　　Article 76 In case that a foreign-capital enterprise terminates its business operations in accordance with the provisions in Items （1）， （2）， （3） and （6） of Article 75， the enterprise shall， make a public announcement and notify the creditors⁵⁴； and， it shall， within 15 days from the day of the public termination announcement for liquidation， the principles of liquidation， and the candidates for the liquidation committee to the examining and approving organ for verification and approval before liquidation is carried out.

　　Article 77 The liquidation committee shall be composed of the legal representatives of the foreign-capital enterprise， the representatives of the creditors， the representatives from the competent authorities concerned； Chinese registered accountants and lawyers shall be engaged in the liquidation. Priority shall be given to the payment of expenses for liquidation made from the existing property of the foreign-capital enterprise.

　　Article 78 The liquidation committee shall execute the following functions and powers：

　　（1） to convene⁵⁵ a meeting of creditors；

　　（2） to take over and liquidate⁵⁶ the property of the enterprise in question， and to prepare the statement of assets and liabilities and the inventory of property；

　　（3） to propose a basis for the valuation and computation of the property of the enterprise in question；

　　（4） to work out a liquidation plan；

　　（5） to recover creditors' rights and to pay the debts；

　　（6） to receive the payments from shareholders⁵⁷ which have not yet been made；

　　（7） to distribute the remaining property；

　　（8） to represent the foreign-capital enterprise in bringing a suit or responding to a suit.

　　Article 79 Prior to the conclusion of the liquidation of foreign-capital enterprise， the foreign investor shall not remit²⁸ or carry the said enterprise's unds out of the territory of China， nor dispose of the enterprise's property privately⁵⁸. If， upon the conclusion of the liquidation of a foreign-capital enterprise， its net assets and remaining property exceed its registered capital， the excess portion shall be regarded as profit on which income tax shall be imposed in accordance with the Chinese tax law.

　　Article 80 Upon the conclusion of the liquidation of a foreign-capital enterprise， it shall go through the procedures for the cancellation⁵⁹ of registration with the administrative department for industry and commerce， and to hand in the business licence for cancellation.

　　Article 81 While disposing of the assets and properties of a foreign-capital enterprise， Chinese enterprises or other economic organizations shall， under equal conditions， have the priority in purchasing the aforesaid assets and properties.

　　Article 82 In case that a foreign-capital enterprise terminates its business operations in accordance with the provisions in Item （4） of Article 75， its liquidation shall be carried out with reference to the pertinent laws and regulations of China. In case that a foreign-capital enterprise terminates its business operations in accordance with the provisions in Item （5） of Article 75， its liquidation shall be carried out in accordance with the pertinent provisions of China.

　　Chapter XIII Supplementary⁶⁰ Provisions

　　Article 83 With respect to the various categories of insurance for a foreign-capital enterprise， it shall take out insurance from insurance companies within the territory of China.

　　Article 84 If a foreign-capital enterprise concludes economic contracts with any other Chinese enterprise or economic organization， the Economic Contract Law of the People's Republic of China shall be applied⁶¹.

　　If a foreign-capital enterprise concludes economic contracts with any foreign company， enterprise or individual， the Law of the People's Republic of China on Economic Contracts Involving Foreign Interests shall be applied.

　　Article 85 Cases concerning the establishment， in China's mainland， of enterprises， the capital of which is owned solely⁶² by the companies， enterprises， and other economic organizations or individuals in the regions of Hong Kong， Macao or Taiwan， or by Chinese citizens residing in foreign countries， shall be handled with reference to these Rules.

　　Article 86 Foreign workers and staff members， and workers and staff members from Hong Kong， Macao and Taiwan， who are working in a foreign-capital enterprise， may carry into the country means of transport and articles for daily use that are within reasonable quantities and for their own use， and they shall go through the import procedures in accordance with pertinent provisions of China.

　　Article 87 The right to interpret these Rules shall reside in the Ministry⁶³ of Foreign Economic Relations and Trade.

　　Article 88 These Rules shall go into effect as of the date of promulgation

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