DANIEL ARTHUR
LAPRES
Avocat ˆ la
Cour dÕAppel de Paris
Barrister and
Solicitor Nova Scotia Canada
Of counsel to Kunlun Law Firm Beijing
29 boulevard Raspail 75007 Paris France
Tel: 0145046252
Fax:0145446445/0142228016
www.lapres.net daniel@lapres.net
Foreign Investment in Commercial Fields
approved at the sixth excutive meeting of the Ministry
of Commerce of the People's Republic of China and shall be promulgated
on April 16, 2004 and implemented as of June 1,2004
Article 1
For the purpose of
further expanding the open-up to the outside world and improving the
construction of market circulation system, the present Measures are hereby
formulated in accordance with the Law of the People's Republic of China on Sino-foreign Equity
Joint Ventures, the Law of the People's Republic of China on Sino-foreign
Contractual Joint Ventures, Law of
the
People's Republic of China on Wholly Foreign-owned Enterprises, and the Company
Law, and other relevant laws and administrative regulations.
Article
2
Where
a foreign company, enterprise and other economic organization or individual
(hereinafter referred to as "foreign investors") establishes foreign-funded
commercial enterprises within the territory of China and engages in commercial
business, the present Measures shall be observed.
Article
3
The
"foreign-funded commercial enterprises" shall refer to the
enterprises with foreign investment which undertake the following commercial
activities:
1.
Commission agency: agents, brokers, auctioneers or other wholesalers for sale
of goods, who sell goods of someone else and provide relevant attached services
through collecting fees on the basis of contract;
2.
Wholesale: Selling goods to retailers, customers of industry, commerce and
organizations, or to other wholesalers or providing relevant attached
services;
3.
Retail: Selling goods for consumption and use of individuals or groups or
providing relevant attached services in fixed places or through television,
telephone,
mail order, internet, and automats; or
4.
Franchising: vesting other people with using its trademark, trade firm, or mode
of management by signing contract for the purpose of gaining remunerations or
franchising fees.
Foreign
companies, enterprises, and other economic organizations or individuals shall
carry out business activities as prescribed in items 1, 2, 3, and 4 of the
preceding paragraph through foreign-funded enterprises they establish in China.
Article
4
Foreign-funded
commercial enterprises shall abide by laws,
administrative
regulations and the relevant rules of the People's Republic of China. Their
legitimate business activities and legal rights and interests shall be subject
to the protection of Chinese laws.
Article
5
Competent
commerce departments of the state shall make supervision over and
administration on foreign investment in commercial fields and the business
activities of foreign-funded commercial enterprises according to
laws.
Article
6
Foreign
investors of the foreign-funded commercial enterprises shall have good credit
and no history in violation of Chinese laws, administrative regulations and
relevant rules. Foreign investors with substantial financial strength, advance
experiences, marketing techniques in business management, and broad
international marketing networks shall be encouraged to establish
foreign-funded
commercial enterprises.
Article
7
Foreign-funded
commercial enterprise shall meet the following conditions:
1.
The minimum registered capital shall accord with the relevant provisions of the
Company Law.
2.
Conforming to the relevant provisions on the registered capital and total
investment of the enterprises with foreign investment.
3. The
term of operation of a foreign-funded commercial enterprise shall not exceed 30
years in general, and the term of operation of a foreign-funded commercial
enterprise which is established in the middle and western regions shall not
exceed 40 years in general.
Article
8
Foreign-funded
commercial enterprise shall meet the following conditions when opening up a
store:
1.
Where it applies for establishing a store when applying for establishing a
commercial enterprise, it shall follow the relevant provisions on city
development and urban commercial development.
2.
Where a established foreign-funded commercial enterprise applies for
establishing additional stores, it shall meet the following conditions in
addition to meeting the requirements of item 1:
(1) Participating
in the joint annual examination on enterprises with foreign investment and
having passed the annual examination; and
(2)
The registered capital of the enterprise has been fully paid.
Article
9
Foreign-funded
enterprises may deal with the following business upon approval:
1.
For the foreign-funded commercial enterprises that undertake retailing
business:
(1)
Retailing;
(2)
Importing of self-managed goods;
(3)
Purchasing domestic products for export; and
(4)
Other relevant businesses. And
2. For
the foreign-funded commercial enterprises that undertake wholesaling business:
(1)
Wholesaling;
(2)
Commission agency (excluding auction);
(3)
Importing and exporting of goods; and
(4)
Other relevant businesses.
A
foreign-funded commercial enterprise may authorize others to open stores by
franchising.
A
foreign-funded commercial enterprise may, upon approval, undertake one kind or
several kinds of sales businesses. The kinds of goods it manages shall be
specified in the contents regarding business scope as prescribed in the
contract or articles of association.
Article
10
The
following procedures shall be followed when a foreign-funded commercial
enterprise is to be established or opens up stores:
1.
One-off application and approval of the start-up, feasibility study report and
establishment of foreign-funded commercial enterprises.
2.
Except the provisions in items (3) and (4) of Article one of the present
Article, the investors of the foreign-funded commercial enterprises to be
established and the established foreign-funded commercial enterprises that
apply
for opening up stores shall submit respectively the application documents as
prescribed in Article 12 and Article 13 to the competent commerce department at
the provincial level where the foreign-funded commercial
enterprise makes registration. The said competent commerce department at the provincial level shall, after making preliminary examination on the documents submitted, report to the Ministry of Commerce within one month after the date of receiving all the application documents. The Ministry of Commerce shall make decision on whether to approve the application within three months after the date of receiving all the application documents. If it approves the establishment, the Certificate of Approval for Foreign-funded Enterprises shall be issued; otherwise, the reasons thereof shall be explained.
The
Ministry of Commerce may authorize the competent commerce departments at the
provincial level to examine and approve the foregoing applications in accordance
with the present Measures.
3.
Where a foreign-funded commercial enterprise which undertakes the retail
business opens up stores within the administrative region at the provincial
level of its locality, and meets the following conditions and its business
scope does not relate the sale of television, telephone, mail order, internet,
or automats, and the goods as enumerated in Articles 17 and 18 of the present
Measures,
the said competent commerce department of the province shall examine and
approve it within the purview of examination and approval and report it to and
put it on records at the Ministry of Commerce.
(1)
The business area of a single store does not exceed 3,000 square meters, and
the number of stores is no more than three, and the total number of the similar
stores established by foreign investors of the stores within China through the
foreign-funded commercial enterprises they have established is no more than
thirty; and
(2)
The business area of a single store does not exceed 300 square meters, and the
number of stores is no more than thirty, the total number of similar stores
opened in China by foreign investors of these stores through the
oreign-funded
commercial enterprises they have established is no more than three hundred.
4.
Where the owners of the trademark or business name of a sino-foreign equity
joint venture or cooperative commercial enterprise are Chinese-funded
enterprises or Chinese natural persons, and the Chinese investors have the
controlling shares in the foreign-funded commercial enterprise, and the
business scope of the foreign-funded commercial enterprise does not relate the
goods as enumerated in Articles 17 and 18 of the present Measures, its
applications for establishment and opening stores shall be examined and approved
by the competent commerce department at the provincial level where the
enterprise is located. If a store is opened in a different province, the
opinions
of the competent commerce department at the level of the province where the
store is to be located shall also be consulted.
The
competent commerce department at the provincial level shall not transfer the
power for examination and approval as prescribed in items (3) and (4) of
paragraph 1 of the present Article by itself to a lower level without
the authorization
of the Ministry of Commerce.
Article
11
The
investors shall, within one month after receiving the certificate of approval,
go through the registration formalities at the administrative department of
industry and commerce together with the Certificate of Approval for
Foreign-funded Enterprises.
Article
12
The
following documents shall be submitted when applying for establishing a
foreign-funded commercial enterprise:
1.
Application letter;
2.
Feasibility study report signed by all the investors together;
3.
Contract, articles of association (for a foreign-funded commercial enterprise,
only the articles of association should be submitted) and the attachment;
4.
Bank credit certificates of all investors, registration certificate
(photocopy), certificate of the legal representative (photocopy), if the
foreign investor is an individual, his/her identity certificate shall be
provided;
5.
The audit report of all investors in the recent year, which is audited by
accountant firms;
6.
The evaluation report on state-owned assets invested into the sino-foreign
equity joint venture or contractual joint venture commercial enterprises by
Chinese investors;
7.
Catalogues of import and export goods of the planned foreign-funded commercial
enterprise;
8.
Name list of the members of the board of directors of the planned foreignfunded
commercial enterprise and the power of attorney for directors of each investor;
9.
Notice of pre-approval of the enterprise name as issued by the administrative
department of industry and commerce;
10.
The certificate documents (photocopy) of the usufruct of the land used for the
planned store and (or) house lease agreement (photocopy), except when the
business area of the store to be opened is less than 3,000 square meters; and
11.
The documents of statement in conformity with the requirements for city
development and urban commercial development as issued by the competent
commerce department of the government at the locality of the store.
In
case the documents are signed by a person who is not the legal representative,
the power of attorney of the legal representative shall be showed.
Article
13
Where
an already established foreign-funded commercial enterprise applies for opening
a store, it shall submit the following documents:
1.
Application letter;
2.
The revised contract or articles of association shall be submitted in case the
amendments to the contract or articles of association are involved;
3.
Feasibility study report on opening the store;
4.
Resolutions of the board of directors on opening the store;
5.
The audit report of the enterprise in the recent one year;
6.
The capital verification report of the enterprise (photocopy);
7.
Registration certificate (photocopy) of all the investors, and the certificate
of the legal representative (photocopy);
8.
Certificate documents of the usufruct of the land that is used for the store to
be opened and (or) house lease agreement (photocopy), except when the business
area of the store opened is less than 3,000 square meters; and
9. The
documents of statement in conformity with the requirements for city development
and the commercial development of the city as issued by the government where
the planned store is located.
In
the case that the document is signed by someone who is not the legal person,
the power of attorney of the legal representative shall be issued.
Article
14
The
license contract for use of a trademark or a business name, technology transfer
contract, management contract and service contract signed by a foreign-funded commercial
enterprise, and other legal documents shall be submitted as the attachment of
the contract (for a foreign-funded commercial enterprises, it shall be deemed
as the attachment of the articles of association).
Article
15
Foreign-funded
commercial enterprises shall, when opening up a store, obtain the land for
commercial use by way of public invitation of bidding, auction or listing in
accordance with the provisions of the relevant
laws
and administrative regulations of the state on land management.
Article
16
Where
a foreign-funded commercial enterprise deals with goods on which the state has
special provisions or import and export goods involving quota or license
administration, it shall go through the formalities in accordance with the
relevant state provisions.
Article
17
Foreign-funded
commercial enterprises shall, when managing the following goods, conform to the
following prescriptions in addition to the provisions of the present Measures:
Where
a foreign-funded commercial enterprise manages books, newspapers or
periodicals, it shall accord with the Measures for the Administration of
Foreign-funded Distribution Enterprises of Books, Newspapers, or Periodicals;
Where
a foreign-funded commercial enterprise manages gas station and undertakes
retail of refined oil, it shall have stable channel of supply of refined oil,
conform to the construction plan of the local oil station, with
the
business establishments thereof corresponding with the state standards and the
provisions on computation and checking procedures, and meet the requirements
for fire control and environmental protection, etc. The specific
implementation
measures shall be formulated by the Ministry of Commerce separately.
Where
a foreign-funded commercial enterprise manages drugs, it shall conform to the
relevant standards for the administration of drug sale. The specific
implementation measures shall be formulated by the Ministry of Commerce
separately.
Where
a foreign-funded commercial enterprise manages automobiles, it shall manage
within the approved business scope. The specific implementation measures shall
be formulated by the Ministry of Commerce separately.
Except
the specific provisions in Article 18 of the present Measures and the present
Article, if foreign investors establish commercial enterprises of farm products
and by-products, and agricultural production materials, they shall not be
restricted in region, proportion of share, and the amount of
investment.
No
wholesaling foreign-funded commercial enterprises may manage drugs, pesticides
and agricultural films before December 11, 2004, nor shall they manage
fertilizers, refined oil and crude oil before February 11, 2006.
No
retailing foreign-funded enterprises may manage drugs, pesticides, agricultural
films and refined oil before December 11, 2004, nor shall they manage
fertilizers before December 11, 2006.
No
wholesaling foreign-funded commercial enterprises may manage salt or tobacco,
and no retailing foreign-funded commercial enterprises may manage tobacco.
Article
18
Under
the circumstance that the same foreign investor opens more than thirty stores
accumulatively in China, if the goods it manages include books, newspapers,
magazines, automobiles (this restriction shall be cancelled from December 11,
2006), drugs, pesticides, agricultural films, fertilizers, refined oils, food,
vegetable oil, sugar, cotton, and etc., which are of different brands and come
from different suppliers, the proportion of capital
contribution
of the foreign investors shall not exceed 49%.
Article
19
Where
a foreign-funded commercial enterprise authorizes others to open up stores by
way of franchising, it shall, in addition to observing the provisions of the
present Measures, observe the special provisions of the
state
on franchising, if any.
Article
20
Where
a foreign-funded commercial enterprise manages auction business, it shall
accord with the Auction Law, Laws on Cultural Relics, and other relevant laws,
and shall be examined and approved by the Ministry of
Commerce.
The specific implementation measures shall be formulated separately.
Article
21
Establishment
of foreign-funded commercial enterprises shall be allowed from December 11,
2004.
Article
22
The
regions where a foreign-funded retail commercial enterprise and its stores are
to be established shall be restricted to the provincial capital cities,
metropolis of autonomous regions, municipalities directly under the
Central
Government, cities directly under state planning, and special economic zones
before December 11, 2004, and the regional restrictions shall be cancelled at
December 11, 2004.
Regional
restrictions on foreign-funded wholesaling commercial enterprises shall be
cancelled at the date of implementation of the present Measures.
Article
23
Where
an foreign-funded commercial enterprise invests in commercial fields within the
territory of China, it shall accord with the Interim Provisions on Investment
of Foreign-funded Enterprises in China, and refer to
the
present Measures.
Article
24
Foreign-funded
enterprises undertaking the business activities as enumerated in Article 3 of
the present Measures other than foreign-funded commercial enterprises, shall
conform to the provisions of the present Measures, and alter by law the
business scope accordingly.
Article
25
Investors
from Hong Kong Special Administrative Region, Macao Special Administrative
Region, and from Taiwan region, who invest to establish commercial enterprises
in other provinces, autonomous regions, and municipalities directly under the
Central Government, shall refer to the
present
Measures except for the following prescriptions:
1.
Commercial service providers of Hong Kong and Macao may establish foreignfunded
commercial enterprises in the Mainland after January 1, 2004.
2.
The regional scope of retail enterprises established in the Mainland by Hong
Kong and Macao commercial service providers shall be extended to cities at the
prefecture level, and the cities at the county level in Guangdong
province.
3.
Commercial service providers of Hong Kong and Macao may apply after January
1,
2004 to establish commercial enterprises that undertake automobile retail
business according to the relevant articles of the present Measures, but their
average sales volume per annum in the past three years before application shall
be no less than one hundred million dollars; and the amount of capital in the
previous year before application shall be no less than ten million
dollars;
the minimum registered capital of an automobile retailing enterprise, which is
established in the Mainland shall be RMB ten million Yuan, and the minimum
registered capital of an automobile retailing enterprise, which is
established
in the middle and western districts shall be RMB six million Yuan.
4.
Chinese citizens among the Hong Kong and Macao permanent residents are allowed
to establish individual business according to relevant laws, regulations and
rules to undertake commercial retail activities (excluding
franchising),
the business areas thereof shall not exceed 300 square meters.
5.
The Hong Kong/Macao commercial service providers as mentioned in this Article
shall correspond with the definitions of and the relevant requirements
for
"service providers" as prescribed in the "Mainland/Hong Kong
Closer Economic Partnership Arrangements" and the "Mainland/Macao
Closer Economic
Partnership
Arrangements".
Article
26
Foreign-funded
commercial enterprises shall be encouraged to take part in the relevant trade
associations so as to strengthen self-discipline of the enterprises.
Article
27
The
power to interpret the present Measures shall remain with the Ministry of
Commerce.
Article
28
The
present Measures shall be implemented as of June 1, 2004.
Article
29
The
Measures for Trial Implementation of the Foreign-funded Commercial Enterprises
as promulgated jointly by the former State Economic and Trade Commission and
the Ministry of Foreign Trade and Economic Cooperation
shall
be repealed as of the date of the implementation of the present Measures.