Experimental Measures
for Commercial Enterprises with Foreign Investment
Decree[1999] No.12 of the State Economic and Trade Commission and the
Ministry of Foreign Trade and Economic Cooperation
"Experimental Measures for Commercial Enterprises with Foreign
Investment" is approved by the State Council of the People's Republic
of China on June 17, 1999, and is promulgated now. This law is effective
since promulgation.
Director of the State Economic and Trade Commission: Sheng Huaren
Minister of the Ministry of Foreign Trade and Economic Cooperation:
Shi Gangsheng
June 25,1999
Article 1 These Measure are formulated in accordance with such laws
and regulations as the Law of the People's Republic of China's on Chinese
and Foreign Equity Joint ventures and the Law of the People's Republic
of China on Chinese and Foreign Cooperative Joint Ventures in order
to deepen the opening-up policy, promote the revolution and development
of commercial enterprises, propel the building of domestic market and
ensure the healthy and orderly implementation of pilots that widen commercial
field and employ foreign investment.
Article 2 These Measures apply to equity or cooperative commercial enterprises
established by foreign and Chinese companies, enterprises within China
(hereinafter referred to as jointly-operated commercial enterprises).
The establishment of commercial enterprises wholly funded by foreigners
is not allowed temporarily.
Article 3 The jointly-operated commercial enterprises must adapt to
the commercial development plans of the cities where they are located,
be able to introduce the advanced marketing and managing experience
in the globe, stimulate the modernization of domestic commerce, propel
the export of domestic products, and bring economic and social benefits.
Article 4 The areas in which jointly-operated commercial enterprises
may be established shall be prescribed by the State Council, presently
they are confined to provincial capitals, capitals of autonomous regions,
municipalities directly under the Central Government, municipalities
separately listed on the State plan and special economic zone (hereinafter
referred to as pilot areas).
Article 5 The investors of jointly-operated commercial enterprises must
conform to the following conditions:
(1) Foreign operators or the major ones of foreign operators in the
jointly-operated commercial enterprises (hereinafter referred to as
foreign operators) shall be enterprises that possess comparatively strong
economic power, advanced marketing skills and managing experiences,
wide international marketing network, good reputation and remarkable
operating achievement and the capability of propelling the export of
China's products through the established jointly-operated commercial
enterprises. Foreign operators who apply to establish retail-oriented
jointly operated commercial enterprises shall possess an average sale
of more than 2 billion US Dollars three years before application and
asset of more than 0.2 billion US Dollars one year before application.
Foreign operators who apply to establish wholesale-oriented jointly-operated
commercial enterprises shall possess an average wholesale volume of
more than 2.5 billion US Dollars 3 years before application and asset
of more than 0.3 billion US Dollars one year before application.
(2) The Chinese operators or the major ones of Chinese operators (hereinafter
referred to as Chinese operators) shall be current enterprises that
possess comparatively strong economic power and operating capacity.
Their asset shall be more than 50 million RMB (30 million RMB in the
middle and western areas) one year before application. If Chinese operators
are commercial enterprises, the average sale of the three years before
application shall be more than 0.3 billion RMB (0.2 billion in the middle
and western areas); if they are foreign trade enterprises, the average
self-operated import and export volume three years before application
shall be more than 50 million US Dollars (the export volume shall be
no less than 30 million US Dollars).
Article 6 Jointly-operated commercial enterprises must conform to the
following conditions:
(1) conforming to the relevant Chinese laws, regulations and provisions;
(2) conforming to commercial development plans of the cities where they
are located;
(3) The registered asset of retail-oriented jointly-operated commercial
enterprises shall not be less than 50 million RMB, that of those in
middle and western areas shall not be less than 30 million RMB; the
registered asset of wholesale-oriented commercial enterprises shall
not be less than 80 million RMB, that of those in middle and western
areas shall not be less than 60 million RMB.
(4) If the jointly-operated commercial enterprises have the operation
of more than 3 chain stores (except the grocery store for people's convenience,
professional stores and exclusive stores), Chinese operators shall offer
a proportion of more than 51% of the total capital; if the jointly-operated
commercial enterprises are in good operating condition, the foreign
operators have purchased a large quantity of domestic products and there
is a possibility to take the advantage of foreign operators' international
marketing network to promote the export of domestic products, foreign
operators can hold the share after the approval of the State Council.
Chinese operators shall provide no less than 35% of the total capital
in the jointly-operated commercial enterprises with no more than three
branch stores (including three) as well as in grocery store for people's
convenience, professional stores and exclusive stores which are in chain
operation. In the wholesale oriented jointly-operated commercial enterprises
(including retail enterprises engaged in wholesale business simultaneously),
Chinese operators must offer a proportion of more than 51% of the total
capital.
(5) The branch store of the jointly-operated commercial enterprises
are confined to the concatenate form that foreign and Chinese operators
both invest and operate directly. Other concatenate forms such as free
chains or concessionary chains are prohibited temporarily.
(6) The operating period shall not exceed 10 years, 40 years for the
middle and western areas.
Article 7 Under the condition that foreign operators contract with jointly-operated
commercial enterprises concerning the use of trademark and trade name
and technological transfer, the related expenses that foreign operators
collect shall not exceed 0.3% of the enterprise's sale volume of the
year and the limited period for collection is 10 years.
Article 8 Jointly-operated commercial enterprises shall be established
according to the following procedure: Chinese operators shall submit
feasibility reports (fungible of project propositions) and relevant
documents to economic and trade commissions (economic commissions, planning
and economic commissions, the same in the following part) in the pilot
areas, which in conjunction with the competent domestic trade departments
shall report to the State Economic and Trade Commission according to
the prescribed procedures. The State Economic and Trade Commission shall
examine and approve the reports after consulting the Ministry of Foreign
Trade and Economic Cooperation. After the feasibility reports (fungible
of project propositions) have been approved, the foreign trade and economy
departments in the pilot areas shall submit the contracts and articles
of associations to the Ministry of Foreign Trade and Economic Cooperation
according to the prescribed procedures, which shall examine and approve
the contracts and articles of associations. Jointly-operated commercial
enterprises which have been approved shall, within one month since the
date of receiving the approval certificate, register with the State
Administration for Industry and Commerce on the strength of the Approval
Certificate for Enterprises with Foreign Investment issued by the State
Administration for Industry and Commerce.
Article 9 To establish jointly-operated commercial enterprises, the
following documents shall be submitted:
I. the declaring document on the study of feasibility
(1) the feasibility report compiled by all operators (fungible of project
proposition);
(2) bank's certification on property and credit, certificate of registration
(photocopy), legal representative certificate (photocopy) of all operators;
(3) all operators' annual asset and liability table, profit and loss
table of the recent three years audited by accounting agency;
(4) (if Chinese operator makes investment with State-owned property)
the confirmation document of State-owned property managing departments
on the assessing report concerning Chinese operator's investing State-owned
property;
(5) the species of merchandises that the planned jointly-operated commercial
enterprises will operate;
(6) other related documents.
II. the declaring documents concerning contract and articles of association
1. the declaring documents on the study of feasibility and the approving
documents thereof;
2. contracts and articles of association of the planned jointly-operated
commercial enterprises signed by accredited representatives of all operative
parties;
3. list of import and export merchandises;
4. the members of the board of directors of the planned jointly-operated
commercial enterprises and the accreditation of directors from all parties;
5. the notice of the approval of enterprise's appellation provided by
the State Administration for Industry and Commerce;
6. other related documents.
Article 10 If State-owned circulation enterprises invest to establish
jointly-operated commercial enterprises, the assessing setups accredited
by State-owned property management departments shall make scientific
and righteous assessment on the tangible and intangible property invested
in the light of the Measures on the Management of Assessment of State-owned
Property. The assessment result serves as the foundation for evaluating
State-owned property after the confirmation of State-owned property
management departments at or above province level.
Article 11 If the established jointly-operated commercial enterprises
expect to involve wholesale business, establish branch stores or replace
the cooperative party, the Ministry of Foreign Trade and Economic Cooperation
shall conduct examination and approval after consulting the State Economic
and Trade Commission; other changes of the established jointly-operated
commercial enterprises shall be examined and approved by the original
examining and approving organ according to the current provisions concerning
enterprises with foreign investment. Jointly operated commercial enterprises
shall submit the following documents:
(1) application report;
(2) the report on enterprise's operating situation;
(3) the report on the property evaluation;
(4) the report and certification on the enterprise's export situation;
(5) related decisions of the board of directors;
(6) agreement on the revision of contract and provision;
(7) other related documents. The enterprise shall register with the
State Administration for Industry and Commerce and undergo the procedures
of revision within one month since the date when the revised contract
and articles of association are approved.
Article 12 The operation scopes of jointly-operated commercial enterprises
are:
1. the operation scopes of retail-oriented jointly-operated commercial
enterprises are:
(1) commercial retail operation (including sell on a commission basis
or sell by mail);
(2) organize the export business of domestic products;
(3) export and import business of its own merchandises;
(4) the related matching services.
2. the operation scopes of wholesale-oriented jointly-operated commercial
enterprises are: wholesale of domestic and self-operated import merchandises
within China, organizing the export of domestic products.
Article 13 Retail-engaged jointly-operated commercial enterprises can
also operate wholesale business.
Article 14 Jointly-operated commercial enterprises are prohibited form
engaging in acting business of export and import .
Article 15 Jointly-operated commercial enterprises, operating merchandises
on which the State has special provisions as well as those export and
import merchandises with quota and license involved, shall undergo examining
and approving procedure according to related provisions of the State.
The annual import volume of the jointly operated commercial enterprise
shall not exceed 30% of its annual selling volume.
Article 16 Jointly-operated commercial enterprises shall conform to
laws and regulations of the People's Republic of China and subject themselves
to the jurisdiction of China's laws and regulations. Their normal operating
activities and lawful rights and interests are protected by China's
laws and regulations. If the activities of jointly operated commercial
enterprises violate laws or regulations of China, the enterprises shall
be punished in accordance with the relevant laws and regulations of
China.
Article 17 These Measure shall be strictly followed in the establishment
of jointly-operated commercial enterprises at all localities. The Sate
Economic and Trade Commission, the Ministry of Foreign Trade and Economic
Cooperation, the State Administration for Industry and Commerce shall
investigate and deal with those acts violating these Measure. All local
economic and trade commissions, foreign trade and economic department
and related departments shall investigate the pilots timely, summarize
experience earnestly and solve the problems appropriately.
Article 18 The State Economic and Trade Commission, the Ministry Foreign
Trade and Economic Cooperation, the State Administration for Industry
and Commerce or their authorized organs shall conduct supervision and
administration on the commercial enterprises with foreign investment
in accordance with law.
Article 19 The establishment of jointly-operated commercial enterprises
in the mainland of China by investors from Hong Kong Special Administrative
Region, Macao and Taiwan shall be deal with in accordance with these
Measures.
Article 20 The State Economic and Trade Commission and the Ministry
of Foreign Trade and Economic Cooperation are responsible for the interpretation
of these Measure.
Article 21 These Measures enter into force as of the date of promulgation.
Promulgated by The State Economic and Trade Commission, the Ministry
of Foreign Trade and Economic Cooperation on 1999-6-25