CIRCULAR OF THE STATE COUNCIL CONCERNING THE APPROVAL AND TRANS-MISSION OF THE SUGGESTIONS OF THE MINISTRY OF COMMERCE, THE MINISTRY OFFOREIGN ECONOMIC RELATIONS AND TRADE, AND THE MINISTRY OF MATERIALSUPPLIES REGARDING THE FUR

CIRCULAR OF THE STATE COUNCIL CONCERNING THE APPROVAL AND TRANS-MISSION OF THE SUGGESTIONS OF THE MINISTRY OF COMMERCE, THE MINISTRY OFFOREIGN ECONOMIC RELATIONS AND TRADE, AND THE MINISTRY OF MATERIALSUPPLIES REGARDING THE FUR THER CHECKING UP AND RECTIFICATION OF VARIOUSTYPES OF COM Important Notice: 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(·¨¹æÈ«ÎÄ) CIRCULAR OF THE STATE COUNCIL CONCERNING THE APPROVAL AND TRANS- MISSION OF THE SUGGESTIONS OF THE MINISTRY OF COMMERCE, THE MINISTRY OF FOREIGN ECONOMIC RELATIONS AND TRADE, AND THE MINISTRY OF MATERIAL SUPPLIES REGARDING THE FURTHER CHECKING UP AND RECTIFICATION OF VARIOUS TYPES OF COMMERCIAL WHOLESALE COMPANIES, FOREIGN ECONOMIC RELATIONS AND TRADE COMPANIES, AND MATERIAL SUPPLY COMPANIES (October 18, 1989) In accordance with the requirements of the "Decision Concerning the Further Checking Up and Rectification of Companies" of the Central Committee of the Communist Party of China and the State Council, the suggestions of the Ministry of Commerce, the Ministry of Foreign Economic Relations and Trade, and the Ministry of Material Supplies Regarding the Further Checking Up and Rectification of Various Types of Wholesale Commercial Companies, Foreign Economic Relations and Trade Companies, and Material Supply Companies, are hereby transmitted to you, and you are requested to implement accordingly.

SUGGESTIONS OF THE MINISTRY OF COMMERCE CONCERNING THE FURTHER CHECKING UP AND RECTIFICATION OF VARIOUS TYPES OF WHOLESALE COMMERCIAL COMPANIES (Omitted) SUGGESTIONS OF THE MINISTRY OF FOREIGN ECONOMIC RELATIONS AND TRADE CONCERNING THE FURTHER CHECKING UP AND RECTIFICATION OF VARIOUS TYPES OF FOREIGN ECONOMIC RELATIONS AND TRADE COMPANIES In accordance with the "Decision of the Central Committee of the Communist Party of China and the State Council Concerning the Further Checking Up and Rectification of Companies", and on the basis of the "Circular of the State Council Concerning the Further Checking Up and Rectification of Various Foreign Economic Relations and Trade Companies", suggestions are hereby put forward concerning the further checking up and rectification of various foreign economic relations and trade companies (hereinafter referred to as "the foreign trade companies"): 1. Foreign trade companies at various levels and of various types attached to the provinces, autonomous regions, municipalities directly under the Central Government, and municipalities under separate planning (hereinafter referred to as "the various localities), as well as those attached to the various departments under the Central Government, must all conduct the checking up and rectification strictly. Those foreign trade companies at various levels and of various types that are not in conformity with the prescribed requirements shall resolutely be abolished or merged, or their right to handle import and export trade shall be revoked, strictly in accordance with the provisions of "the Suggestions Concerning the Abolition or Merger of Companies Attached to the Various Departments Under the Central Government" put forward by the National Leading Group for the Checking up and Rectification of Companies. The emphasis of the checking up and rectification is laid on the foreign trade companies at various levels and of various types that have been established since 1988; after the checking up and rectification, if it is really necessary to retain one or two of them, the case shall be submitted to the Ministry of Foreign Economic Relations and Trade for reexamination and confirmation strictly in accordance with the six prerequisites for the establishment of foreign trade enterprises, as prescribed by the aforesaid Ministry.

2. Foreign trade companies that fall under one of the following circumstances shall resolutely be abolished or merged, or their right to handle import and export trade shall be revoked: (1) companies that do not settle their foreign exchange with the Bank of China or with other banks designated by the State Administration for Foreign Exchange Control, and have evaded foreign exchange control seriously; (2) companies that have colluded with external businessmen and helped them purchase export goods directly from the inland or handle export business, thereby helping them evade foreign exchange control; (3) companies that have been established in the same department or in the same region, handling the same or similar business, so they are just reduplicate setups; (4) companies that do not have the necessary conditions for handling foreign trade, or lack external marketing channels for handling export trade but do so chiefly by entrusting other companies; (5) the branch offices set up by local foreign trade companies outside the provinces (autonomous regions, or municipalities directly under the Central Government) for handling import and export business.

(6) subcompanies of the second or third rank with the right to handle import and export trade, established by comprehensive foreign trade companies attached to various local governments.

3. After the completion of the strict checking up and rectification, foreign trade companies at various levels and of various types shall be established in accordance with the following provisions: (1) With the exception of the Ministry of Foreign Economic Relations and Trade, from among the foreign trade companies attached to the various departments under the Central Government, one company for each of the aforesaid departments may be retained, depending on their respective needs; where one or two departments really need(s) to set up companies for specialized products, the case shall be examined and confirmed by the Ministry of Foreign Economic Relations and Trade separately; as to the other companies, they shall all be abolished or merged, or their right to handle import and export business shall be revoked.

(2) From among the comprehensive foreign trade companies attached to provinces (autonomous regions, or municipalities directly under the Central Government), only one or two shall be retained; as to the other companies, they shall all be abolished or merged, or their right to handle import and export business shall be revoked.

(3) For those localities (including the municipalities at the prefectural level, the same below) that have already been vested with the right to handle import and export, business, only one or two companies shall be retained with their right to handle import and export, on condition that they meet the actual needs and the prescribed requirements; as to the other companies, they shall all be abolished or merged, or their right to handle import and export business shall be revoked (with the exception of those companies in Guangdong and Fujian Provinces which were established before the end of 1987).

(4) For those economic and technological development zones that have been approved by the State Council, only one foreign trade company with the right to handle import and export business shall be retained; as to the other companies, they shall all be abolished or merged, or their right to handle import and export business shall be revoked.

(5) The right to handle import and export trade of those foreign trade companies attached to the counties (including municipalities at the county level, the same below) shall be revoked (with the exception of those companies in Guangdong and Fujian Provinces which were established before the end of 1987). As to one or two special cases where the foreign trade companies meet the prescribed requirements and handle only the local specialties of their counties, that is, the third category of export commodities promising a bright prospect of export sales, and thus it is necessary to retain their right to handle import and export business, such cases shall be submitted to the Ministry of Foreign Economic Relations and Trade for approval.

(6) From among the foreign trade companies, attached to various provinces, autonomous regions, municipalities directly under the Central Government, municipalities under separate planning, and special economic zones that handle barter transactions with the Soviet Union and the East European countries, only one or two companies shall be retained; as to the other companies, they shall all be abolished or merged, or their right to handle import or export business shall be revoked.

(7) From among the trading companies, attached to counties adjacent to border ports which are established with the approval of the State Council and handle petty barter trade in the border areas, only one company shall be retained for each of the aforesaid counties; where a port county does not meet the prescribed requirements, a trading company at the region (or prefecture, municipality) level, over the port may be retained; as to the other companies, they shall all be abolished or merged, or their right to handle petty barter trade in the border areas shall be revoked.

4. All international economic and technological cooperation companies established without the approval by the State Council or by the Ministry of Foreign Economic Relations and Trade shall all be abolished. With respect to those international economic and technological cooperation companies (including those companies which handle economic and technological cooperation business with the Soviet Union and the East European countries that have been approved by the State Council or by the Ministry of Foreign Economic Relations and Trade, and those international economic and technological cooperation companies that engage in the expansion of business contacts for external economic and technological cooperation or in the trial management of the exportation of export commodities of the third category, all the localities and departments shall, in accordance with the seven prerequisites for the establishment of companies of the aforesaid type as formulated by the Ministry of Foreign Economic Relations and Trade, carry out a strict checking up and rectification on the aforesaid companies, and then submit the cases to the Ministry of Foreign Economic Relations and Trade for re-examination and confirmation.

5. It is necessary to re-verify and confirm the business scope of foreign trade companies at various levels and of various types.

The first category of export commodities, as prescribed by the State, shall be handled by the national foreign trade corporations, or the national industry and trade import and export corporations as well as by their branch offices and subsidiaries in accordance with the approved business scope, and the aforesaid corporations shall also undertake to fulfil the export plan transmitted by the State, and the tasks to turn over a definite amount of foreign exchange earnings to the Central Government. All the other foreign trade companies are not permitted to handle export commodities of the first category; where the aforesaid provisions are violated, the foreign exchange earnings obtained shall all be confiscated and be turned over to the Central Government, and the responsibilities of the persons in charge shall be investigated. A strict control should be exercised over the business scope of foreign trade companies for handling export commodities of the second category. The foreign trade companies attached to various departments under the Central Government shall handle products of their own industries in accordance with the business scope approved by the Ministry of Foreign Economic Relations and Trade, or handle export commodities of the second or third category in accordance with the approved business scope; the specialized foreign trade companies attached to provinces (autonomous regions, municipalities directly under the Central Government) shall handle export commodities of the second or third category in accordance with the appraised and confirmed business scope; as to those comprehensive foreign trade companies attached to provinces (autonomous regions, or municipalities directly under the Central Government), the foreign trade companies that are attached to prefectures and have retained their right to handle import and export business, and the foreign trade companies in the economic and technological development zones, they shall be permitted to handle only export commodities of the third category. The various categories of foreign trade companies that handle export commodities of the second and third categories shall all undertake to fulfil the export plans and the tasks to turn over a definite amount of foreign exchange earnings to the Central Government or to the local governments. The import business of foreign trade companies at various levels and of various types shall be handled in accordance with the business scope of import commodities approved by the Ministry of Foreign Economic Relations and Trade and also with the existing pertinent provisions.

6. The foreign trade companies with their business scope, which are attached to various localities and various government organs and have been retained after the checking up and rectification, shall be submitted to the Ministry of Foreign Economic Relations and Trade for examination and approval; with respect to the foreign trade companies at various levels and of various types in Guangdong and Fujian Provinces that were established after examination and approval, the framework for the abolishment and merger of these companies formulated in the process of the checking up and rectification shall also be submitted to the Ministry of Foreign Economic Relations and Trade for examination and approval. The foreign trade companies that have been retained after verification and confirmation shall present the examination and confirmation certificate issued by the Ministry of Foreign Economic Relations and Trade to the administrative departments for industry and commerce for examination and approval, and then go through the procedures for registration.

The foreign trade companies at various levels and of various types located in Hainan Province and in the special economic zones shall be checked up and rectified in accordance with the pertinent provisions and the unified arrangement. The foreign trade companies at various levels and of various types have been retained after the checking up and rectification shall be submitted by their respective competent departments for foreign economic relations and trade to the Ministry of Foreign Economic Relations and Trade for the record.

In the event that a company has been discovered not in conformity with the aforesaid provisions, the Ministry of Foreign Relations and Trade has the right to abolish it, or revoke its right to handle external business, or to readjust its business scope.

7. In accordance with the decision of the Central Committee of the Communist Party of China and the State Council that henceforth government organs from the State Council down to the people's governments at various levels shall, in principle, not directly manage any companies, foreign trade companies at various levels and of various types as well as companies that chiefly handle import and export business shall all be placed under the leadership and administration, in their line of industry and business operations, by the Ministry of Foreign Economic Relations and Trade and by the local competent departments for foreign economic relations and trade in accordance with the unified policies formulated by the State.

8. After the completion of the checking up and rectification, the import and export business related to their own products, as conducted by large- and medium-sized technology-intensive production enterprises and conglomerates of the closely-knit type, shall be examined and approved by the local competent departments for foreign economic relations and trade, and then submitted to the Ministry of Foreign Economic Relations and Trade for the record; in the event that a production enterprise or conglomerate is discovered to be short of the prescribed qualifications for handling import and export business, the Ministry of Foreign Economic Relations and Trade has the right to overrule it. An application, which is filed by a national or transprovincial conglomerate for handling import and export business, shall be examined and approved by the Ministry of Foreign Economic Relations and Trade.

SUGGESTIONS OF THE MINISTRY OF MATERIAL SUPPLIES CONCERNING THE FURTHER CHECKING UP AND RECTIFICATION OF VARIOUS TYPES OF MATERIAL SUPPLY COMPANIES (Omitted)