Chapter I General Provisions

Article 1 These Rules are formulated according to the Law of the People's Republic of China on Foreign-funded enterprises.

Article 2 Foreign-funded enterprises shall be subject to and under the protection of Chinese Law.

Foreign-funded enterprises engaging in business in the People's Republic of China must abide by Chinese laws and regulations and must not harm the social and public interests of China.

Article 3 A foreign-funded enterprise to be established must benefit the development of China's national economy and be capable of gaining remarkable economic results. The state encourages foreign-funded enterprises to use advanced technology and equipment, engage in the development of new products, realize the upgrading of products and the replacement of old products with new ones, economize energy and raw materials, and it is also encouraged to establish foreign-funded enterprises which are export oriented.

Article 4 Trades in which the establishment of foreign-funded enterprises is forbidden or restricted shall be determined and established according to the provisions regarding state guidance for foreign investment orientation and guiding catalogue of industries for foreign investment.

Article 5 No application for the establishment of a foreign-funded enterprise shall be approved if the proposed enterprise is under any of the following circumstances:

(1) injuring China's sovereignty or social and public interests;

(2) endangering China's national security;

(3) in violation of Chinese laws and regulations;

(4) not in keeping with the requirements of China's national economic development;

(5) may result in environmental pollution.

Article 6 A foreign-funded enterprise shall, within the approved scope of business, have its autonomy in operation and management, and be free from any interference.

Chapter II Establishment Procedures

Article 7 The application for the establishment of a foreign-funded enterprise shall be subject to the examination and approval by the Ministry of Foreign Trade and Economic Cooperation of the People's Republic of China (hereinafter referred to as the MFTEC), which shall issue a certificate of approval 　to those approved.

If any applications for the establishment of a foreign-funded enterprise is under any one of the following circumstances, the State Council shall authorize the people's government of the relevant province, autonomous region, municipality directly under the Central Government, city directly under State planning or special economic zone to conduct the examination and approval and issue a certificate of approval to those approved:

(1) the total amount of investment is within the limits of power for the examination and approval of investment stipulated by the State Council;

(2) the enterprise shall not need any raw materials to be allocated by the state, and not influence unfavorably the national comprehensive balance of energy resources, communications and transportation and export quotas for foreign trade.

The people's government of the relevant province, autonomous region, municipality directly under the Central Government, city directly under State planning or special economic zone that has, within the authorization by the State Council, approved any application for the establishment of a foreign-funded enterprise shall, within 15 days since the approval has been issued, report to the MFTEC for record (hereinafter the Ministry of Foreign Trade and Economic Cooperation and the people's government of the relevant province, autonomous region, municipality directly under the Central Government, city directly under State planning and special economic zone shall be, in general, referred to as the examining and approving authority).

Article 8 With regard to any foreign-funded enterprise that applies for establishment, if its products shall involve export license, export quota, import license or the import of which is restricted by the state, a prior consent shall be obtained from the competent authority of foreign economic relations and trade in accordance with the relevant administrative power.

Article 9 Before submitting any application for the establishment of a foreign-funded enterprise, the foreign investor shall submit to the local people's government at or above the county level at the place where the foreign-funded enterprise is to be established a report regarding matters such as the purpose of the enterprise, its scope and scale of business, products, technology and equipment, land area to be needed and related requirements, conditions and quantities of water, electricity, coal, coal gas or other energy resources required, and requirements to public facilities.