CIRCULAR OF THE GENERAL OFFICE OF THE STATE COUNCIL CONCERNING THETRANSMISSION OF A CLARIFICATION SUBMITTED BY THE COMMISSION FOR THE ADMI-NISTRATION OF FOREIGN INVESTMENTS ON SEVERAL QUESTIONS ON THE IMPLEMENTA-TION OF INTERIM PROVISIONS

CIRCULAR OF THE GENERAL OFFICE OF THE STATE COUNCIL CONCERNING THETRANSMISSION OF A CLARIFICATION SUBMITTED BY THE COMMISSION FOR THE ADMI-NISTRATION OF FOREIGN INVESTMENTS ON SEVERAL QUESTIONS ON THE IMPLEMENTA-TION OF INTERIM PROVISIONS OF THE STATE COUNCIL OF THE PEOPLE'S REPUBLICOF CHINA ON This English document is coming from "LAWS AND REGULATIONS OF THE PEOPLE'S REPUBLIC OF CHINA GOVERNING FOREIGN-RELATED MATTERS" (1991.7) which is compiled by the Brueau of Legislative Affairs of the State Council of the People's Republic of China, and is published by the China Legal System Publishing House.

In case of discrepancy, the original version in Chinese shall prevail.

Whole Document CIRCULAR OF THE GENERAL OFFICE OF THE STATE COUNCIL CONCERNING THE TRANSMISSION OF A CLARIFICATION SUBMITTED BY THE COMMISSION FOR THE ADMI- NISTRATION OF FOREIGN INVESTMENTS ON SEVERAL QUESTIONS ON THE IMPLEMENTA- TION OF INTERIM PROVISIONS OF THE STATE COUNCIL OF THE PEOPLE'S REPUBLIC OF CHINA ON THE ADMINISTRATION OF RESIDENT REPRESENTATIVE OFFICES OF FOREIGN ENTERPRISES (August 3, 1981) The clarification submitted by the Commission for the Administration of Foreign Investments on several questions on the implementation of "Interim Provisions of the State Council of the People's Republic of China Governing Resident Representative Offices of Foreign Enterprises", has been approved by the State Council and is hereby transmitted to you, and you are requested to implement it accordingly.

A CLARIFICATION OF THE COMMISSION FOR THE ADMINISTRATION OF FOREIGN INVESTMENTS ON SEVERAL QUESTIONS ON THE IMPLEMENTATION OF INTERIM PROVISIONS OF THE STATE COUNCIL OF THE PEOPLE'S REPUBLIC OF CHINA ON THE ADMINISTRATION OF RESIDENT REPRESENTATIVE OFFICES OF FOREIGN ENTERPRISES Since the promulgation of the "Interim Provisions of the State Council of the People's Republic of China Governing Resident Representative Offices of Foreign Enterprises" (hereinafter referred to as the "Interim Provisions"), the various examining and approving units have, in accordance with the "Interim Provisions", examined and approved, the applications filed by foreign businessmen for the establishment of resident representative offices, the departments for the administration of industry and commerce have approved their registration, and the organs of public security have the performed residence procedures; work in this respect has made very good progress, and the administrative work concerning the resident representative offices of foreign enterprises has been strengthened to some extent. However, in the course of implementing the "Interim Provisions", there still exist some questions which need to be defined more sharply or clarified. Now, several questions concerning the implementation of the "Interim Provisions" are hereby clarified as follows: (1) "Other economic organizations", as mentioned in Article 1 of the "Interim Provisions", refer to those organizations which are engaged in economic, trade, technological or finance business activities but are not called companies or enterprises as such, and which also include such nonprofit economic organizations as the Japanese-Chinese Economic Association, the Japanese Association for the Promotion of International Trade, the National Council for American-Chinese Trade Relations, and Council for Canadian-Chinese Trade Relations.

(2) Article 2 of the "Interim Provisions", which reads: "Those who have not obtained approval or have not gone through the procedures for registration shall not be permitted to undertake business operations of resident offices", means that those who have not obtained approval or have not gone through the procedures for registration shall not be permitted to undertake business operations in the capacity of the staff of resident (representative) offices, and neither shall they be permitted to put up any sign at their residences that represents foreign companies or enterprises.

With respect to those who undertake unauthorized business operations in the capacity of the staff of resident (representative) offices without going through the proper approval registration procedures for setting up resident representative offices, the departments for the administration of industry and commerce shall notify the persons concerned to close down their resident offices and to stop their business operations forthwith.

(3) With respect to the certifying documents and relevant materials to be presented by foreign enterprises when applying for the permission to set up resident representative offices as provided for in Article 3 of the "Interim Provisions", the written application and the vesting instrument must be presented in the original and the other certifying documents may be presented in duplicate or photo copies. As regards "the certificates of creditworthiness issued by a financial institution", if a foreign businessman has difficulty providing one, flexibility may be exercised by requiring the foreign businessman concerned to present certifying documents indicating business transactions concluded between the foreign businessman and a bank within the preceding year instead.

When a nonprofit foreign economic organization applies for the permission to set up its resident representative office, it may be exempt from presenting the certificate of creditworthiness required in Article 3 of the "Interim Provisions".

(4) "The other trades", as mentioned in Article 4 of the "Interim Provisions", refer to those trades such as cooperative exploitation of oil and coal resources and etc. which are beyond the approving authority of the Ministry of Foreign Trade, the People's Bank of China, the Ministry of Communications, and the Civil Aviation Administration of China, and the parties concerned shall submit their applications to the competent departments concerned under the State Council for approval in light of the nature of their businesses.

With respect to those nonprofit foreign economic organizations, which are the counterparts of the China Council for the Promotion of International Trade, their applications for the permission to set up resident representative offices shall, for the time being, be submitted to the Ministry of Foreign Trade for examination and approval. In the course of examination and approval, the Ministry of Foreign Trade shall consult China Council for the Promotion of International Trade.

With respect to foreign businessmen in the trust and investment trade, their applications for the permission to set up resident representative offices shall, for the time being, be submitted to the People's Bank of China for examination and approval. In the course of examination and approval, the People's Bank of China shall consult the China International Trust and Investment Corporation.

(5) In the event that several foreign enterprises of different trades jointly apply for the permission to set up a comprehensive resident representative office, they shall submit their application to the Commission for the Administration of Foreign Investments of the People's Republic of China, and the latter shall examine and approve the application in consultation with the relevant units.

(6) Owing to the serious shortage of housing at present, a strict control shall be exercised, by the examining and approving organ in accordance with the specific conditions, over the number of staff of the proposed resident representative offices of foreign enterprises and over the duration of residence. An application for the setting up of a resident representative office shall not be approved if the problem of housing has not been solved. The maximum duration of residence, approved on each occasion, shall not exceed 3 years. On the expiration of this prescribed period, if it is necessary to have an extension, the foreign enterprise concerned shall submit anew its application to the examining and approving organ 3 months before the expiration of the original prescribed duration of residence. And, after obtaining the approval, the foreign enterprise concerned shall apply to the department for the administration of industry and commerce for registration. If resident representative offices are to be set up in China in accordance with agreement between the Chinese government and foreign governments, the foreign enterprises concerned shall go through the procedures for registration in accordance with the "Interim Provisions", and the number of staff of the proposed resident representative office, the duration of residence, the registration fees, etc., shall be handled according to the principle of reciprocity.

(7) The approving organ, while issuing the certificate of approval to the applying unit, shall notify in writing the case to the General Administration for Industry and Commerce. The departments for the administration of industry and Commerce shall, after the foreign enterprise concerned has gone through the registration procedures, notify without delay the case to the State Commission for the Administration of Foreign Investments, the Ministry of Foreign Affairs, the Ministry of Public Security, the Customs General Administration, and the State Tax Bureau under the Ministry of Finance. With respect to foreign enterprises in the trust and investment trade which apply for the permission to set up their resident representative offices, after they have obtained the approval and have gone through the registration procedures, the department concerned shall at the same time notify the case to the China International Trust and Investment Corporation.

With respect to those nonprofit foreign economic organizations, which are the counterparts of the China Council for the Promotion of International Trade and apply for the permission to set up their resident representative offices, after they have obtained approval and have gone through the registration procedures, the department concerned shall at the same time notify the case to the China Council for the Promotion of International Trade.

(8) Article 5 of the "Interim Provisions" reads: "Those who have failed to go through the procedures for registration within the prescribed time limit, shall return the original certificate of approval". An applicant shall go through the procedures for registration with the department for the administration of industry and commerce within 30 days from the day he/she has received the certificate; if he/she has failed to do so within prescribed time limit, he/she shall be considered to have withdrawn automatically the original application, and the certificate of approval already issued to him/her shall become invalid automatically, and he/she shall be required to return the certificate of approval to the original approving organ.

(9) The change of "the location of resident office", as mentioned in Article 7 of the "Interim Provisions", refers to the change effected within the same city. However, the change of room number within the same building shall not be considered as a change of the location of resident office. The resident representative office concerned is required to notify, without delay, the case of change of the location of resident office to the local competent department concerned and also to the department for registration. In case that the resident representative office of a foreign enterprise has to change its location at the request of the competent department concerned of China, the foreign enterprise concerned shall be required to go through the procedures for the registration of the change without paying any registration fees.

(10) If the resident representative office of a foreign enterprise wishes to employ staff members, the case shall be handled in accordance with the provisions in Document No. 48, signed and issued jointly, in 1981, by the Ministry of Public Security, the Ministry of Foreign Affairs, the General Administration for Industry and Commerce, the Commission for the Administration of Imports and Exports, and the Ministry of Foreign Trade; and, in principle, no individual of a third country or Chinese without regular registered residence in China shall be hired. However, in special cases, citizens of a third country or individuals from the areas of Hong Kong and Macao may be engaged with the approval of the local department of service for foreign affairs and of the labour department.

(11) Article 4 of "Circular Concerning Registration of Resident Representative Offices of Foreign Enterprises" promulgated by the General Administration for Industry and Commerce of the People's Republic of China on December 8, 1980, provides: "the resident representative offices, or the resident representatives, of foreign enterprises approved by the competent departments of the people's governments of the province, municipality directly under the Central Government, and autonomous region" refer to the resident representative offices of foreign enterprises approved before the promulgation of the "Interim Provisions" by the State Council on October 30, 1980. Applications for the setting up of resident representative offices submitted by foreign enterprises after the promulgation of the "Interim Provisions" shall be handled in accordance with the "Interim Provisions".

(12) In the event that foreign businessmen apply for permission to set up resident representative offices in cities other than Beijing, with the exception of such trades as banking or air transportation - the applications shall be submitted directly to the competent departments listed in Article 4 of the "Interim Provisions", all other trades shall, in light of the nature of their respective businesses, apply accordingly to the local bureau of foreign trade or bureau of communications of the province, municipality directly under the Central Government, or autonomous region, or to the departments or bureaus in the localities, which have a direct business relationship with the ministries, commissions or bureaus under the State Council; and the aforesaid departments shall, in turn, write their comments on the written applications and forward same, for examination and approval, to the competent departments concerned listed in Article 4 of the "Interim Provisions".

(13) With the exception of such trades as banking and air transportation, in case that foreign businessmen apply for the permission to set up resident representative offices in the two provinces of Guangdong and Fujian, their applications shall be submitted to the provincial governments for examination and approval. In case that resident representative offices are to be set up in the Shenzhen, Zhuhai and Xiamen Special Economic Zones, the applications shall be submitted for examination and approval to the provincial committee for the administration of special economic zones.

(14) If enterprises established and run abroad by overseas Chinese, by compatriots from Hong Kong, Macao and Taiwan, wish to set up resident representative offices in China (including Guangdong and Fujian Provinces and the special economic zones), their applications shall be dealt with reference to the "Interim Provisions" and this Clarification.

(15) Should problems arise in the course of the execution of the "Interim Provisions" and of this Clarification, and that explanation and solutions are called for, they shall be handled through coordination and consultation by the State Commission for the Administration of Foreign Investments.