Law of the People’s Republic of China on Foreign Capital Enterprises

 Article 2 As mentioned in this Law, "foreign capital enterprises" refer to those enterprises established in China by foreign investors, exclusively with their own capital, in accordance with relevant Chinese laws. The term does not include branches set up in China by foreign enterprises and other foreign economic organizations. 

Article 3 Foreign capital enterprises shall be established in such a manner as to help the development of the national economy of China, to use advanced technology and equipment or to market all or most of their products outside China. 

 Provisions shall be made by the State Council regarding the lines of business which the state forbids foreign capital enterprises to engage in or on which it places certain restrictions.

Article 4 The investment of a foreign investor in China, the profit it earns and its other lawful rights and interests shall be protected by the Chinese law. 

 Foreign capital enterprises must abide by the Chinese laws and regulations and must not engage in activities detrimental to China's public interest. 

Article 5 The state shall not nationalize or requisition any foreign capital enterprise. Under special circumstances, when public interests require, foreign capital enterprises may be requisitioned by legal procedures and appropriate compensation shall be made. 

Article 6 The application to establish a foreign capital enterprise shall be submitted for examination and approval to the department in charge of foreign economic relations and trade under the State Council, or to any other agency authorized by the State Council. 

The authorities in charge of examination and approval shall, within 90 days from the date they receive such application, decide whether or not to grant approval. 

Article 7 After an application for the establishment of a foreign capital enterprise has been approved, the foreign investor shall, within 30 days from the date of receiving a certificate of approval, apply to the industry and commerce administration authorities for registration and obtain a business licence. The date of issuance of the business licence shall be the date of the establishment of the foreign capital enterprise.

Article 8 A foreign capital enterprise which meets the conditions for being considered as a legal person under the Chinese law shall acquire the status of a Chinese legal person, in accordance with law. 

Article 9  A foreign capital enterprise shall make investments in China within the period approved by the authorities in charge of examination and approval. If it fails to do so, the industry and commerce administration authorities may cancel its business licence.

 The industry and commerce administration authorities shall inspect and supervise the investment situation of a foreign capital enterprise. 

Article 10 In the event of a split-up, merger or other major changes, a foreign capital enterprise shall report to the authorities in charge of examination and approval for approval, and register the change with the industry and commerce administration authorities.

Article 11 The production and operation plans of a foreign capital enterprise shall be reported to its competent authority for the record. A foreign capital enterprise shall conduct its operation and management in accordance with the approved articles of association, and shall be free from any interference. 

Article 12 When employing Chinese staff and workers, a foreign capital enterprise shall conclude contracts with them according to law, in which matters concerning employment, dismissal, remuneration, welfare, labor protection and labor insurance shall be clearly prescribed. 

Article 13  Staff and workers of a foreign capital enterprise may organize a trade union in accordance with law, in order to conduct trade union activities and protect their lawful rights and interests. 

A foreign capital enterprise shall provide necessary conditions for the trade union to carry out activities.

Article 14  A foreign capital enterprise must set up account books in China, conduct independent accounting, submit the accounting reports and statements as required and accept supervision by the financial and tax authorities. 

If a foreign capital enterprise refuses to maintain account books in China, the financial and tax authorities may impose a fine on it, and the industry and commerce administration authorities may order it to suspend operations or may revoke its business licence.

Article 15 A foreign capital enterprise may purchase, either in China or from the world market, raw and semi-processed materials, fuels and other materials it needs within the scope of operations approved. When these materials are available from both sources, first priority should be given to purchases in China on similar terms. Article 16 The various kinds of insurance coverage of a foreign capital enterprise shall be furnished by insurance institutions within the territory of China. 

Article 17 A foreign capital enterprise shall pay taxes in accordance with the state’s provisions on tax payment, and may enjoy preferential treatment for reduction of or exemption from taxes. 

 An enterprise that reinvests its profit in China after paying the income tax, may, in accordance with the state’s provisions, apply for refund of part of the income tax already paid on the reinvested amount. 

Article 18 A foreign capital enterprise shall handle its foreign exchange transactions in accordance with the state’s provisions on foreign exchange control. 

A foreign capital enterprise shall open an account with the Bank of China or with a bank designated by the state agency exercising foreign exchange control.  A foreign capital enterprise shall manage to balance its own foreign exchange receipts and expenditures. If, with the approval of the competent authorities, the enterprise markets its products in China and consequently experiences an imbalance in foreign exchange, the said authorities shall help the enterprise correct the imbalance. 

Article 19  A foreign investor may remit abroad its lawfully earned profit from a foreign capital enterprise, as well as its other lawful earnings and the funds remaining after the enterprise is liquidated. 

Wages, salaries and other legitimate income earned by foreign employees in a foreign capital enterprise may be remitted abroad after the payment of individual income tax in accordance with law. 

Article 20 With respect to the period of operation of a foreign capital enterprise, the foreign investor shall report to and secure approval from the authorities in charge of examination and approval. An application for the extension of the period of operation shall be submitted to the said authorities 180 days before the expiration of the period. The authorities in charge of examination and approval shall, within 30 days from the date of receiving such application, decide whether or not to grant the extension. 

Article 21 When terminating its operation, a foreign capital enterprise shall promptly issue a public announcement and proceed with liquidation in accordance with legal procedures. Pending the completion of liquidation, a foreign investor may not dispose of the assets of the enterprise except for the purpose of liquidation.

Article 22 At the termination of operation, a foreign capital enterprise shall nullify its registration with the industry and commerce administration authority and hand in its business licence for cancellation. 

Article 23 The department in charge of foreign economic relations and trade under the State Council shall, in accordance with this Law, formulate rules for its implementation, which shall go into effect after being submitted to and approved by the State Council. 

Article 24 This Law shall go into effect on the day of its promulgation.