Law of the People's Republic of China on
Wholly Foreign-Owned Enterprises

(Adopted by the Fourth Session of the Sixth National People's Congress on April 12, 1986,and amended by by the 18th Session of the Standing Committee of the 9th National People's Congress on October 31, 2000)

Article 1. In order to expand international economic cooperation and technological exchange and to promote the development of China's national economy, the People's Republic of China permits foreign enterprises and other economic entities or individuals (hereinafter referred to as foreign investors) to establish wholly foreign-owned enterprises within the territory of China and will protect the lawful rights and interests of such enterprises.

Article 2. Wholly foreign-owned enterprises referred to in this Law mean enterprises established within the territory of China in accordance with the relevant laws of China, the entire capital of which is invested by foreign investors. Such enterprises do not include branch offices established by foreign enterprises and other economic entities within the territory of China.

Article 3. The establishment of wholly foreign-owned enterprises must be beneficial to the development of China's national economy. The state encourages to establish such enterprises as shall export all or most of their products or adopt advanced technology.
Industries in which the establishment of wholly foreign-owned enterprises is forbidden or restricted by the state shall be stipulated by the State Council.

Article 4. The investment of, the profits obtained by and other lawful rights and interests of foreign investors within the territory of China shall be protected by the laws of China.

Wholly foreign-owned enterprises must observe China's laws and regulations and shall not harm the social and public interests of China.

Article 5. The state will not nationalize or expropriate wholly foreign-owned enterprises. Under special circumstances, the state, based on the need of social and public interests, may expropriate wholly foreign-owned enterprises pursuant to legal procedures and give commensurate compensation.

Article 6. Applications for the establishment of wholly foreign-owned enterprises shall be examined and approved by the department under the State Council in charge of foreign economic relations and trade or the authorities authorized by the State Council. The examination and approval authorities shall decide to approve or disapprove within ninety days from the date of receiving the application.

Article 7. After the application for establishing a wholly foreign-owned enterprise has been approved, the foreign investor shall, within thirty days from the date of receiving the approval certificate, apply for registration with the administrative authorities for industry and commerce and obtain a business license. The date on which the business license of a wholly foreign-owned enterprise is issued shall be the date such enterprise is established.

Article 8. A wholly foreign-owned enterprise that meets the requirements regarding legal persons as stipulated by the laws of China shall obtain the status of a Chinese legal person according to law.

Article 9. A wholly foreign-owned enterprise shall make the investment within the territory of China within the period approved by the examination and approval authorities. If no investment has been made at the end of the period, the administrative authorities for industry and commerce shall have the right to revoke its business license.
The administrative authorities for industry and commerce shall examine and supervise the investments of wholly foreign-owned enterprises.

Article 10. Reorganization, merger or other important changes of a wholly foreign-owned enterprise shall be submitted to the examination and approval authorities for approval and shall go through the procedures of the administrative authorities for industry and commerce for changes in the registration.

Article 11. No interference shall be allowed in the operation and management activities of a wholly foreign-owned enterprise conducted according to its approved articles of association.

Article 12. A wholly foreign-owned enterprise employing Chinese staff and workers shall enter into contracts according to law and shall specify in the contracts provisions relating to matters of employment, dismissal, remuneration, benefits, labour protection and labour insurance.

Article 13. The staff and workers of a wholly foreign-owned enterprise shall establish a trade union according to law, carry on trade union activities and protect the lawful rights and interests of the staff and workers.

A wholly foreign-owned enterprise shall provide the necessary facilities for the activities of its trade union.

Article 14. A wholly foreign-owned enterprise must keep account books within the territory of China, carry out independent accounting, submit accounting statements according to regulations and accept supervision by the finance and tax authorities.

If a wholly foreign-owned enterprise refuses to keep account books within the territory of China, the finance and tax authorities may impose a fine on the enterprise and the administrative authorities for industry and commerce may order it to stop its business operations or revoke its business license.

Article 15. Supplies such as raw materials and fuel needed by a wholly foreign-owned enterprise within the approved scope of business may be purchased in China or on the international market.

Article 16. All items of insurance of a wholly foreign-owned enterprise shall be insured with insurance companies within the territory of China.

Article 17. A wholly foreign-owned enterprise shall pay taxes in accordance with the relevant tax regulations of the state and may enjoy preferential treatment in tax reductions and exemptions.

If a wholly foreign-owned enterprise reinvests its after-tax profits within the territory of China, it may apply for a refund of part of the income tax already paid on the reinvested amount in accordance with the regulations of the state.

Article 18. The foreign exchange matters of wholly foreign-owned enterprises shall be handled in accordance with the foreign exchange control regulations of the state.

A wholly foreign-owned enterprise shall open an account with the Bank of China or another bank designated by state foreign exchange control authorities. A wholly foreign-owned enterprise shall resolve the balance between its foreign exchange income and expenditure by itself.

Article 19. The lawful profits and other lawful income obtained by foreign investors from wholly foreign-owned enterprises and the funds they receive after liquidation may be remitted abroad.

Salaries and other lawful income of foreign staff and workers of wholly foreign-owned enterprises may be remitted abroad after payment of individual income tax according to law.

Article 20. The term of operation of a wholly foreign-owned enterprise shall be submitted by the foreign investors and approved by the examination and approval authorities. If an extension is needed upon the expiration of the term, an application shall be filed 180 days prior to the expiration of the term with the examination and approval authorities, which shall decide to approve or disapprove within 30 days from the date of receiving the application.

Article 21. When a wholly foreign-owned enterprise terminates, a prompt public announcement shall be made and liquidation shall be conducted in accordance with legal procedures.

Prior to the completion of the liquidation, the foreign investors shall not dispose of the assets of the enterprise except for carrying out the liquidation.

Article 22. When a wholly foreign-owned enterprise terminates, it shall go through the procedures for cancelling its registration with the administrative authorities for industry and commerce and return its business license.

Article 23. The department under the State Council in charge of foreign economic relations and trade shall, on the basis of this Law, formulate detailed rules for implementation which shall come into force after being submitted to and approved by the State Council.

Article 24. This Law shall come into force on the date of promulgation.

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