PROVISIONS OF THE STATE COUNCIL CONCERNING THE ENCOURAGEMENT OFINVESTMENTS BY OVERSEAS CHINESE AND COMPATRIOTS FROM HONG KONG AND MACAO

PROVISIONS OF THE STATE COUNCIL CONCERNING THE ENCOURAGEMENT OFINVESTMENTS BY OVERSEAS CHINESE AND COMPATRIOTS FROM HONG KONG AND MACAO Important Notice: This English document is coming from the "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 PROVISIONS OF THE STATE COUNCIL CONCERNING THE ENCOURAGEMENT OF INVESTMENTS BY OVERSEAS CHINESE AND COMPATRIOTS FROM HONG KONG AND MACAO (Promulgated by Decree No. 64 of the State Council of the People's Republic of China on August 19, 1990, and effective as of the date of promulgation) Article 1 These Provisions are formulated with a view to promoting the economic development of our country and to encouraging overseas Chinese and compatriots from Hong Kong and Macao (hereinafter referred to as "overseas Chinese investors and those from Hong Kong and Macao") to make investments in China's inland areas.

Article 2 Overseas Chinese investors and those from Hong Kong and Macao can make investments in the various provinces, autonomous regions, municipalities directly under the Central Government, and special economic zones in China's inland areas.

Overseas Chinese investors and those from Hong Kong and Macao are encouraged to engage themselves in business operations of land development in accordance with the pertinent regulations of the state.

Article 3 The investments made by the overseas Chinese investors and those from Hong Kong and Macao may take the following forms: (1) to establish enterprises with the capital wholly owned by the overseas Chinese investors and those from Hong Kong and Macao; (2) to establish equity joint ventures and contractual joint ventures; (3) to carry out compensation trade, to process supplied materials, to assemble supplied parts, and to carry out contractual production; (4) to purchase shares and various bonds and debentures of existing enterprises; (5) to purchase real estate; (6) to obtain land use right according to law and to engage in land development operation; (7) to use other forms of investment permitted under the laws and regulations.

Article 4 Overseas Chinese investors and those from Hong Kong and Macao can make investments in various trades in China's inland areas: in industries, in agriculture, in service trades, and in other trades that are in conformity with the orientation of social and economic development. Overseas Chinese investors and compatriots from Hong Kong and Macao may select their investment projects from the lists of projects made public by the departments concerned under various local people's governments; they may also put forward, of their own accord, proposals as to their investment intent and file their applications to the departments of foreign economic relations and trade or to the examining and approving organs designated by various local people's governments located in areas where they intend to make their investments.

The State encourages overseas Chinese investors and those from Hong Kong and Macao to make investments in the establishment of export-oriented enterprises and of technologically advanced enterprises, and gives corresponding preferential treatment to such enterprises.

Article 5 With respect to the various types of enterprises established with investments by overseas Chinese investors and those from Hong Kong and Macao - enterprises with the capital wholly owned by such investors equity, joint ventures, and contractual joint ventures (hereinafter referred to as "enterprises with investments by overseas Chinese and compatriots from Hong Kong and Macao"), they shall all be operated in accordance with these Provisions; in addition, they may also enjoy the corresponding preferential treatment as enjoyed by enterprises with foreign investments, in the light of the relevant provisions in the state laws, decrees and regulations on external economic relations. Cases concerning other forms of investment made by such investors in China's inland areas, and concerning their dividends, interest, rental, royalties and other incomes that come from China's inland areas without establishing business offices here, shall be handled in accordance with these Provisions, and, if need be, with reference to foreign-related economic laws, decrees and regulations of the State.

Article 6 Overseas Chinese investors and those from Hong Kong and Macao may make their investments by using convertible currencies, machinery and equipment or other physical goods industrial property rights, and proprietary technology.

Article 7 The investment made in China's inland areas by overseas Chinese investors and those from Hong Kong and Macao, the assets they have purchased, their industrial property rights, the profits from their investments, and other lawful rights and interests shall be protected by State laws, and may be transferred or inherited according to law. Overseas Chinese investors and those from Hong Kong and Macao shall abide by State laws and regulations in their activities in inland areas.

Article 8 The State shall not nationalize the investment made by overseas Chinese investors and compatriots from Hong Kong and Macao or other assets belonging to them.

Article 9 Where the state, in accordance with the needs of social and public interest, has to requisition the enterprises with investments by overseas Chinese investors and those from Hong Kong and Macao, the state shall handle the case according to the legal procedures and the investors concerned shall be duly compensated.

Article 10 The lawful profits gained by overseas Chinese investors and those from Hong Kong and Macao from their investments, their other lawful incomes and the funds after liquidation may be remitted out of China's inland areas according to law.

Article 11 Machinery and equipment imported to meet the needs of enterprises with investments by overseas Chinese and compatriots from Hong Kong and Macao and, included in the total amount of investment, motor vehicles for use in production, office equipment, as well as articles and means of communications for personal use and within reasonable quantities, imported by overseas Chinese and compatriots from Hong Kong and Macao during the period when they work in the aforesaid enterprises shall be exempted from Customs duties and consolidated industrial and commercial tax, and also from the application for import licences.

The raw and processed materials, fuels, bulk parts, spare and component parts, primary parts, and fittings, which are imported by enterprises with investments by overseas Chinese and compatriots from Hong Kong and Macao for the production of export commodities, shall all be exempt from Customs duties and consolidated industrial and commercial tax and also from the application for import licences and placed under the supervision of the Customs. In case that the aforesaid imported materials and parts are used for the production of commodities to be sold on China's inland markets, it is imperative to make up the procedures for importation and to pay taxes and duties according to the regulations.

The export commodities produced by the enterprises with investments by overseas Chinese and compatriots from Hong Kong and Macao shall, with the exception of those commodities the exportation of which is under restriction by the State, be exempt from Customs duties on export goods and consolidated industrial and commercial tax.

Article 12 Enterprises with investments by overseas Chinese and compatriots from Hong Kong and Macao may obtain loans from financial institutions in China's inland areas; they may also obtain loans from financial institutions outside China's inland areas, and may use their assets as well as their rights and interests as mortgage or security.

Article 13 With respect to enterprises with the capital wholly owned by overseas Chinese investors and compatriots from Hong Kong and Macao, their period of operation shall be determined by the investors themselves; as to equity joint ventures and contractual joint ventures, their period of operation shall be determined, through consultation, by the various parties to the above-said joint ventures; they may also set no limit to the period of operation.

Article 14 The composition of the board of directors of joint ventures and the appointment of the chairman of the board of directors, the composition of the board of directors or of the joint management organs of contractual joint ventures and the appointment of the chairman or the appointment of the director of the joint management organs, shall be determined, through consultation, by the various parties to the equity joint ventures or to the contractual joint ventures in the light of the proportion of investments or the terms of contract.

Article 15 Enterprises with investments by overseas Chinese and compatriots from Hong Kong and Macao shall conduct their operational and management activities in accordance with the approved contract or articles of association. The enterprises' decision-making power for business operations and management shall not be interfered with.

Article 16 Overseas Chinese and compatriots from Hong Kong and Macao who have made investments in China's inland areas, and the technical and managerial personnel engaged from outside the boundaries of China's inland areas by enterprises with investments by overseas Chinese and compatriots from Hong Kong and Macao, may apply for multi-journey travel documents.

Article 17 Overseas Chinese investors and those from Hong Kong and Macao who make investments in China's inland areas may appoint their relatives or friends residing in the inland areas as their agents. The agents should hold legally effective letters of authority.

Article 18 In areas where enterprises with investments by overseas Chinese and compatriots from Hong Kong and Macao are concentrated, overseas Chinese investors and those from Hong Kong and Macao may apply to the local people's government for the establishment of the association of overseas Chinese investors and investors from Hong Kong and Macao.

Article 19 With respect to equity joint ventures and contractual joint ventures to be established in China's inland areas, with the investments by overseas Chinese investors and those from Hong Kong and Macao, the application for the establishment of the aforesaid enterprises shall be filed by the inland party; as to the enterprises to be established with capital wholly owned by overseas Chinese investors and those from Hong Kong and Macao, the application shall be filed directly by such investors themselves, or they may entrust their relatives or friends residing in China's inland areas, or entrust the institution providing consultancy services, with the application. Applications for the establishment of enterprises with investments by overseas Chinese and compatriots from Hong Kong and Macao shall be accepted and handled exclusively by the local department for foreign economic relations and trade, or by the examining and approving organs designated by the local people's government.

The examination and approval of the applications for the establishment of enterprises with investments from overseas Chinese and compatriots from Hong Kong and Macao shall be handled in accordance with the authorization by the State Council. Departments for foreign economic relations and trade at the various levels or the examining and approving organs designated by the local people's government shall, within forty-five days of receipt of complete application documents, make the decision on whether the said application is approved or disapproved.

The applicant shall, within thirty days of receipt of the written approval, file an application to the department for the administration of industry and commerce, and, in accordance with the relevant procedures for registration and administration, go through the procedures for registration and obtain the business licence.

Article 20 With respect to overseas Chinese investors and those from Hong Kong and Macao who have made investments in China's inland areas, in case that a dispute arises during the execution of or in relation to a contract, the parties concerned shall try their best to settle the dispute through consultation or mediation.

In case that the parties concerned are unwilling to settle the dispute through consultation or mediation, or the dispute cannot be settled through consultation or mediation, the parties concerned may, in accordance with the stipulations of the arbitration articles in the contract, or in accordance with the written arbitration agreement reached by the parties concerned after the dispute has arisen, submit their dispute to the arbitration authorities in China's inland areas or elsewhere for settlement.

In the event that the parties concerned did not specify an arbitration article in their contract, and no written arbitration agreement has been reached after the dispute occurs, then the dispute may be brought before the people's court.

Article 21 The right to interpret these Provisions rests with the Ministry of Foreign Economic Relations and Trade.

Article 22 These Provisions shall go into effect as of the date of promulgation.