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Business law in China: evolutionary revolution.

Western investors in China are of two minds. They are at once frustrated by the lack of transparency and predictability in the Chinese legal process. Indeed they frequently see China as having no law in the Western sense, with guan xi (personal connections) taking precedence over any formal contracts and providing better (i.e. more politically sound legal protection.)(1) At the same time, Western investors often find that the Chinese laws most applicable to their projects inhibit their objectives to such an extent that they have to press their Chinese counterparts to ignore the rules, rules which stifle creativity and in themselves stall China's swift and sure rush toward a market economy. Law, in this sense, is equated with a numbing bureaucratic process, entangling sound business projects in endless review, overlapping government ministries with no evident purpose and endless opportunities for corruption and gratuities.

Like all facile observations, these insights are, at times, accurate. Certainly in the early days of foreign investment in China, and even today in smaller regional transactions, particularly those of the slash-and-burn variety, relationships did and still do carry significant weight. But as the pace and permanence of foreign investment in China quickens, and as the administrative process for creating and administering China's laws matures, the overriding importance of personal relationships as a substitute for carefully thought-out, fully negotiated contracts will significantly decline.(2)

Indeed, as is becoming clearer with each new law promulgated, there is now an extensive body of Chinese law governing foreign investment, one of increasing sophistication and transparency. The process of formulating and administering foreign investment law has been in place since the start of the new economic reform era, making it worthwhile to review its development and structure.

The list of new laws is extensive. Beijing began to develop legislation to attract foreign direct investment in 1979 with the People's Republic of China Law on Joint Ventures using Chinese and Foreign Investment, or the "Equity JV Law," which permitted Sino-foreign equity joint ventures with limited liability to be formed. Implementing regulations have been created since 1983, and various pieces of legislation have supplemented the Equity JV Law to regulate areas such as labor management, taxation, land use, foreign-exchange transactions and technology transfer by joint ventures.(3) The Law for Cooperative Enterprise, popularly referred to in China as Sino-foreign contractual joint ventures, was promulgated in 1986, with Detailed Rules for the Implementation of the Contractual JV Law being approved by the central government's State Council and promulgated by the Ministry of Foreign Trade and Economic Cooperation in August 1995. Options for foreign investment were expanded through legislation permitting wholly foreign-owned enterprises in April 1986, holding companies in April 1995 and the creation of foreign-invested share companies for which provisional regulations were issued in January 1995.(4) To address concerns about the transfer of state assets to joint ventures or other economic enterprises in which there was foreign ownership, the State Council promulgated the Administration of State Asset Valuation Procedures in 1991.(5)

In 1995 alone, we have seen the introduction of a law outlining the role of the People's Bank of China,(6) a commercial banking law,(7) a law governing the insurance industry in China(8) and a national law providing, for the first time, the legal structure for the creation of security interests in real estate and personal property.(9) Perhaps most significantly, the principal governmental organizations responsible for administering China's foreign investment laws - the State Planning Commission, the Ministry of Foreign Trade and Economic Cooperation and the State Economic and Trade Commission - promulgated Interim Provisions on Guiding Foreign Direct Investment (the "Investment Guidelines") in June 1995. These Investment Guidelines apply to all forms of foreign investment in China and, in a detailed catalogue, enumerate those sectors of foreign investment which are encouraged, restricted or prohibited. The significance of this is dramatic given the Investment Guidelines' comprehensive sweep and the insight which they provide into the administrative process in China.

The laws regarding foreign investment in China establish a multistage approval process. In creating a foreign invested enterprise with a Chinese partner, the first step is to enter into a letter of intent outlining the joint venture, in order to establish the basis for the review and approval process. The Chinese party will then be responsible for obtaining approval for the business from the industry bureau, which supervises the specific industry in which the project is involved. The industry bureau may then consult with the State Planning Commission, particularly for larger projects, to insure conformity with the appropriate annual and five-year plans. The Chinese and foreign parties will then prepare a joint feasibility study, which i s reviewed by the industry bureau and, for larger projects or those involving certain equipment, the State Planning Commission. The parties then enter into a joint venture contract or form a foreign invested enterprise, pursuant to documents approved by the Ministry of Foreign Trade and Economic Cooperation. Foreign-exchanee arrangements, as needed, must be made with the appropriate branch of the State Administration for Exchange Control. Thus a foreign-invested project receives certification of approval only if the proper "examination and approval authority" has reviewed and approved a formal application, feasibility study and organizational documents. Although the Ministry of Foreign Trade and Economic Cooperation and the State Planning Commission are permitted to delegate their examination and approval authority to relevant provincial and municipal counterparts, the delegation must not violate thresholds for specific provinces, municipalities and regions promulgated by the State Council in Beijing. In general, foreign-invested enterprises with total investment in excess of $30 million must be approved at the central government level.

Where specific aspects of a business transaction are addressed, China's legal structure seeks to require foreign parties to agree to contractrual provisions, which are clearly favorable to the Chinese side, while allowing deviations from the pro-Chinese norm only with approval of the appropriate authority. Take, for instance, the regulations promulgated by the State Council in 1985 and related implementing rules created by the Ministry of Foreign Trade and Economic Cooperation in 1988 to govern technology transfers, the "Technology Transfer Law."(10) This law requires that a licensor of technology warrants that the licensed intellectual property is suitable for the objective of the project and requires the licensor to be responsible for all infringement costs. Among other things, restrictions on the licensee's power to develop and improve the technology, on the licensee's ability to acquire similar technology from other sources and on the continued use of the technology after the contract's expiration all require special approval. Furthermore, the time limit for maintaining confidentiality generally may not exceed the duration of the contract unless the examining and approving authorities specifically permit otherwise. Such terms set forth in the Technology Transfer Law could effectively turn a licensing arrangement into a sale of technology.

There are several things which are quite clear from the record of law creation and the pattern of administration of China's laws on foreign investment. First, there is a definite policy in China that foreign investment should be strictly on Beijing's terms. Thus, certain industries, such as broadcasting, telecommunications and entertainment are essential closed to foreign ownership or control. Initially, there was a strong emphasis at the national level on technology transfer and the development of export-oriented industries, which could generate hard currency. There was and still is significant concern that state assets should not pass into foreign at inadequate valuations. A strong bias continues towards central government control, reflected in the relatively low threshold for central government approval. The concern is to protect domestic business operations from foreign competition in sectors where the need for foreign technology was not perceived by central planners.

The central legislative mechanism has been to enact relatively schematic laws and regulations, which direct the parties to the rigorous administrative review process. Where specific matters of significant international business negotiations have been addressed, a rather one-sided approach has often been taken.(11) The general thrust of the legislation was not permissive, and one could not conclude that what was not prohibited was therefore permitted. Rather, the administrative process was put in place to allow China to gain experience in managing foreign investment. The process was remarkably fluid for a country emerging from a decidedly anti-capitalist, anti-foreign environment. Although there was consensus that experimentation with market-driven techniques was worthwhile, the extent of permitted movement toward market socialism was by no means clear. In fact, the experience under China's investment laws has been better than many would have expected. In large measure, this can be said because administrators of the laws at the State Planning Commission and the Ministry of Foreign Trade and Economic Cooperation approached their task in a remarkably pragmatic way.

For instance, Chinese law generally does not permit the importation and sale of a product which is the intended output of a new joint Sino-foreign investment project. Yet, pre-production sales are often critical for adjusting the intended product to local requirements or preferences. After considerable internal debate, pre-production sale of imported products has been permitted, up to 30 percent of planned output, on an ad hoc basis after considerable negotiation and debate.

However, investors are still left with the negative perceptions and jaundiced views of the Chinese legal process. My observations are not the result of a systematic empirical study. Instead, they are distilled from my own experiences and those of my colleagues in dealing with the Chinese legal system and interacting with the administrators who apply and adapt their law. This said, I have come to believe that investors' negative perceptions are rooted in three areas: 1. the process itself, which given the task at hand must be flexible, but not transparent; 2. the lack of consensus on how a socialist market economy can be developed and the role overseas capital, business and technology plays in the process; and 3. the regional tensions within, China itself and the observable weakness of the center when dealing with the rapidly growing coastal areas and special economic zones.

Let us look first at the process itself. Chinese law requires a step-by-step approach to foreign investment. As each step is taken, approvals must be obtained from the appropriate supervising ministry In the case of telecommunications, for instance, approval comes from the Ministry of Post and Telecommunications, the appropriate office of the Ministry of Foreign Trade and Economic Cooperation and from the State Planning Commission, if in the latter case the project involves significant commitment of central-government resources, such as transportation and natural resources. Depending on the nature of the business enterprise and the needs of the foreign investors to obtain a return in foreign currency and repatriate that foreign currency abroad, approvals may also be required from the State Administration for Exchange Control.(12) As this process unfolds, new issues arise which can have profound macroeconomic and political implications, on which there is no clear political consensus. Business structures and financing techniques can be proffered by the overseas party with which the administrators have little or no experience. Although the foreign investment review process has been going on in China to some extent for more than fifteen years, only in the past four to five years have the size and complexity of the proposed projects presented some of these issues.

Let us look next at this process in the context of two industries -- power generation and telecommunications -- and some of the issues presented. The first questions to ask are, will foreign parties be permitted to own assets in these areas, and what degree of ownership will be permitted if any ownership interest is permitted at all? Second, how are the outputs of these critical industries to be priced? In making these decisions, what effects will pricing issues and foreign ownership, among other things, have on inflation, economic growth and regional prosperity? Also, what national objectives have to be taken into account? The availability of electric power, for instance, is readily understood as being critical to sustained economic growth. The ricing of that power is also of paramount importance, because of its impact on price levels and inflation generally In telecommunications, will foreign ownership or operational rights threaten the political or military status quo? Implicit in the approval process is an examination and resolution of all these issues in the context of approving a specific foreign investment.

However, behind the questions lie insufficient consensus among China's planners on all of the above issues. There does not appear to be any broad agreement in Beijing on the role which role which foreign capital should play in the development of the electric power industry, much less on details like the pricing of electric power, the allowed returns on capital or the length and extent of foreign ownership. At the same time, responding to China's perceived need for foreign capital and, to a lesser extent, foreign know-how, development and financial agencies from all over the world, like the World Bank, are offering China a bewildering array of alternatives. In the telecommunications field, the context is even more difficult. Yet, in this industry, there does appear to be one clear principle outlined in the Investment Guidelines: Foreign ownership or operation of telecommunications systems is, quite simply, prohibited. But, telecommunications companies, investment banks and law firms from around the world are active in China, not only selling equipment, but seeking to devise ways to participate in the benefits of owning and operating the telecommunications systems that will be equipped and developed with their equipment and know-how. How can this be happening in the face of such a seemingly clear and unambiguous statement of the law? The answer appears to be that overseas investors better understand the evolutionary nature of the administrative process. As the issues of control are addressed in the negotiating process, creative solutions to the political and military concerns will evolve and find approval.

Effectively, the administration of China's laws on foreign investment is an ongoing dialogue between China and the outside world, which is designed to allow foreign investment to flow into China, while the national debate over how best to use and regulate this foreign investment continues. If, in fact, this is not what the process is about, it is what the process ought to be about. Over the past two years, looking at the power industry, hundreds, if not thousands, of power plant development and financing proposals have come under the review of the foreign investment bureaucracy. Extensive experience has been gained in analyzing the economic structure and impact of these transactions on China's power market and options. At the same time, through the public debt and equity markets in the West, alternative methods of raising foreign capital for China's power needs have been explored. To be sure, this process has produced enormous frustration among overseas power developers, who have invested substantial sums in maneuvering their projects toward approval. But it would be a mistake to conclude that the process is not a legitimate one aimed at developing appropriate modalities for foreign investment in China's power generation. A similar process is under way on a lesser scale in the telecommunications area. Although no major projects in the electric or telecommunications area have been cleared, substantial issues have been addressed. This is the essence of the Chinese administrative process for foreign investment. Although a national consensus on some issues may not have been achieved, many novel and potentially troublesome issues relating to legal structure, operations, fuel supply and pricing formulae can be and are addressed and solved through direct negotiations between the foreign and Chinese parties doing business together and the regulators.

The resolution of these issues may or may not be reflected in publically available rules and regulations. One of the striking features of Chinese administrative practice is that negotiated provisions of joint venture contracts are often permitted, although on their face, the negotiated provision conflicts with the requirements of published law: This is critical to the process for building law. There are two parts of this process which are troublesome to non-Chinese business parties. First is the stark contradiction between the written law and the negotiated agreement. By what authority is the exception made? Chinese administrators often explain this apparent lack of authority for their ruling by citing directives or rules that are nei bu (literally, "internal"), directives which can not be released to foreigners. That these nei bu directives do, in fact, exist, can not be denied. Knowing why they exist is important to understanding the Chinese administrative process. As we have seen, China's foreign investment laws are developing in the context of the debate as to the pace of economic reform and the role foreign investment will play. To protect state enterprises inexperienced in dealing with foreigners, the law initially focused on tilting the playing field against the foreigners by requiring that certain key contracts contain provisions favorable to the Chinese party which in other countries are often the subject of intense negotiation. At the same time, the political climate in China was such that foreign investment was only officially welcome if it brought significant advantages to China, such as advanced technology or export earnings. But the reality of transactions was often very different from the political ideal. Nei hu directives allow the regulators to strike a negotiated balance between the political objectives and the practical realities. Many such directives are permissive, allowing regulators to approve provisions in legal documentation which are otherwise proscribed. By making the directives internal, at least three objectives are achieved. First, there is a kind of plausible denial should other parties seek similar relief, since the basis for the exception in a given situation can often be distinguished from the case in hand. Second, the lack of publicity has the effect of avoiding a more generalized knowledge of the flexibility in the system, since once a relaxation of standards is published, it becomes the new paradigm. Third, internal directives can avoid some of the political ramifications of taking a proinvestment stand, which has not yet achieved broad political consensus. On the other side of the coin, these internal directives can provide a quick means of disseminating an anti-investment stand without facing the external pressure from trade negotiators for foreign governments seeking to promote open access to the Chinese economy.

The important point to recognize is that these internal directives are not a sign of an absence of law, but an important artifice permitting the regulatory process to remain flexible and pragmatic in a fast evolving and highly political environment. They are also not an excuse for graft and corruption, since they have objective meaning and can be readily and intelligently discussed with regulators. Finally, over time, when the principles involved have been validated by experience and achieve political consensus, they can be promulgated in public form. Indeed, much of the recently published Investment Guidelines make manifest a number of permissions and restrictions which had previously only existed as nei bu. The Investment Guidelines, with respect to the electric power industry, for example, now designate thermal, hydroelectric, nuclear and alternative energy power plants as encouraged investments, but provide that the state must have the controlling shares or a dominant position for hydroelectric plants of 250 megawatts or more, or nuclear plants.(13) Prior to the publication of the Investment Guidelines, these positions were not well understood and were the subject of internal directives. Lest one get the impression, however, that the administrative process has become completely transparent, one must wonder what meaning will be given to the phrase dominant position. One can expect that there will be considerable negotiation and administrative interpretation, which may give rise to nei bu directives, which in turn may reach a sufficiently broad consensus to be officially promulgated.

Another major contributor to the notion that China does not have meaningful laws regarding foreign investment is the country's regionalism, with fast-developing coastal and other prosperous areas seeking ways to move their local economies forward despite the central government's wishes to control inflation and spread development to other poorer regions. The extent to which these regional tensions color the foreigns investor's views of Chinese law can not be underestimated. As we have seen, Chinese law sets limits on the size of projects that can be approved at the municipal or provincial level. In most cases, the upper limit for provincial approval is a total investment of $30 million. Prior to 1992, the vast majority of foreign invested projects in China did not exceed this threshold. Local approvals were readily obtained, and enforcement of undertakings was lax. Required capital commitments were usually not made in a timely manner. This was a period of opportunistic investment in light manufacturing and real estate development with an export orientation and significant potential for hard-currency generation and quick investment returns. Since 1992, the size and pace of investment in China has changed, with larger projects exceeding the provincial approval threshold becoming routine. At the same time, since June 1993, the central government has been focused on controlling the rate of inflation and developing macroeconomic controls to make this possible. This has made regional tensions more obvious on every level, from resistance to sharing tax revenues to attempts to avoid submitting to central government review for projects above the threshold which local officials saw as vital to continued rapid growth of their region. It quickly became clear that, in this period of inflation fighting and macroeconomic control, Beijing's approval for many projects was likely to involve substantial delay, and in key sectors of the economy, particularly in power plant development, approval might not come for a very long time.

This led to a period of what some may call clever innovation, and others would call patent repudiation, aimed at avoiding the necessity for central-government approval for favored local projects. Two techniques became popular. One involved issuing multiple approvals at levels below the provincial limit for projects where the total investment exceeded that limit, for example, for a project with a total investment of $85 million, issuing two approvals for $29 million, and one approval for $28 million. The other was proffering a variety of techniques engagingly referred to as waving at Beijing. Indeed, there are a number of ways to wave at Beijing. In utilizing the technique commonly referred to as bei an (for the record), the provincial or municipal authority would make a formal report to the counterpart office at the central government level noting its approval of the project.(14) A lack of response from the central-government office was taken as concurrence. In other cases, it was asserted that national-level publicity through newspapers or television was sufficient notice to the higher authority to warrant its silence as assent.(15) One can only speculate as to the impressions that this kind of administrative process may have left on, non-Chinese parties used to the orderly paperwork, public hearing and judicial review accorded to, say, the approval process of a utility merger at the American Federal Energy Regulatory Commission. Indeed, at times, one could find some login in this process. Some projects in China can be built in phases, with each phase having a total investment amount that is below the approval authorities' limit. In other cases, there may have been a kind of de facto delegation of approval authority to a subordinate body and a legitimate reporting process. But in many cases, multiple project approvals and waving at Beijing appear to overseas investors to be a complete disregard of the rule law, as it would be understood in the Western sense.

We should pause here to address a basic point of jurisprudence. One might ask the question, putting aside for the moment the view that one should obey the laws of a country in which one does business for ethical reasons, why not take advantage of the somewhat dubious techniques of waving, to Beijing or multiple project approvals, particularly, as is often the case, if competent Chinese legal practitioners are willing to countenance this approach? This is indeed a difficult question since, as we have seen, the nature of the process encourages a testing of boundaries and respect for innovation. I think the answer is a complex one, which may depend on the business objectives of the party facing the issue and the rationale for the departure from the norm.

Looking at business objectives, does the non-Chinese party plan to grow and develop business in China for the long term, or is the objective a quick return which minimizes the risk of subsequent scrutiny and corrective action? At least from a business point of view, one can see the temptation to ignore legal requirements, particularly if those requirements are imposed at the central government level, and one is confident of their support at the local or provincial level. This may, in part, explain the impression that the right political connections are as important or more so than dealing with the delays and constraints of the regulatory process. On the other hand, if the objective is to build a long-term and growing business that will expand as China matures, relying on the legal shortcut of close personal ties with local officials is essentially shortsighted.

It is also important, in making this pragmatic calculation, to take into account how one proposes to realize an investment. If there is the opportunity for a quick profit from operations without looking to the international 'capital markets or a sophisticated buyer of the business for a return, multiple local approvals or bei an may be warranted. If, however, the foreign party is looking for sophisticated investors or international stock markets for capital raising or a cashout opportunity, or plans to sell to an international strategic buyer, a legal structure which can withstand the diligent investigation of sophisticated parties is a stark necessity. Risks that make sense for private entrepreneurs will not be acceptable to the capital markets or to business partners with a long-term orientation.

A third factor which is or should be relevant to a decision to exploit ambiguities in the Chinese legal system is the nature of the governmental interest which will be disregarded. If the business objectives of a foreign-invested project are, in all major respects, consistent with current Chinese investment policy and the intent of the legal strategy is to shorten the approval time, for instance, one may accept the shortcut approach. If, however, a clear government policy is being ignored, for example, a fair valuation for state assets contributed to a foreign-invested enterprise, continued control of the external debt obligations of Chinese legal persons including foreign-invested entities, reasonable and noninflationary pricing for critical commodities or the initiation of foreign investment in sensitive sectors of the economy, the calculus runs very strongly against disregarding any meaningful aspect of the Chinese legal process.

By this time, the reader may well be asking how he can have any confidence that even if fie follows the administrative process for foreign investment in detail, the outcome has the force of law. The answer here is, in my judgment a simple one. The process is by design a flexible one, and if it is followed appropriately, the approval of the Ministry of Foreign Trade and Economic Cooperation will be respected as authoritative, even if the foreign invested enterprise departs from published regulations. Until publication of the Investment Guidelines, there was considerable uncertainty over the results of not following the approval process rigorously Many Chinese practitioners took the view that one could take the word of local officials and that they had the authority to approve agreements without written support from higher levels. It was thought that if there were irregularities in the approval process, because local officials exceeded their authority, the sanctions would be borne by the approval authorities and not by the business enterprise. The Investment Guidelines make it clear that this is no longer the case. While providing for sanctions for officials who abuse their power or are derelict or negligent in the performance of their duties, Article 13 of the Investment Guidelines specifically notes that parties who obtain project approval by fraudulent means will be subject to penalties and their project may be rescinded.(16) This blunt language, read in the context of the strenuous efforts being made by the central government to gain greater macroeconomic control, is a clear message that the central government will be increasingly less tolerant of shortcuts and outright evasions of economic regulation.

So, we return to our central question. Is there law in China? The answer, I think, is a compelling yes. Is the law transparent and accessible? Here the answer is an equally resounding no. The only safe course is to follow carefully, but aggressively, the administrative path which the law prescribes. As we have seen, this can be lengthy and arduous, especially when the underlying economic transaction presents significant political and economic issues. The Chinese government and particularly those ministries which administer Foreign investment, such as the Ministry of Foreign Trade and Economic Cooperation are aware of the problems and, in my experience, deal honestly and patiently with these problems. Where greater transparency is possible, they are willing to provide it. But the complexity of both the task at hand and the political environment in which the regulators work can not be underestimated. We have sketched some of this background. The best course is to fully engage the process, press your case to the fullest and make maximum use of wit and ingenuity. The outcome will benefit both overseas investors and China. (1) Close personal relationships, particularly family ties, characterize certain successful businesses built in China and in other Asian countries. See Edward A. Gargan, "From Chickens to Chemicals", The New York Times, 14 November 1995, pp. D1, D4. Indeed, the importance of guan xi by no means escapes Western observers. See Jim Rohwer, Asia Rising: Why America Will Prosper as Asia's Economies Boom. According to Chinese statistics, 80 percent of $220 billion worth of "foreign" investment was made in China between 1979 and 1993 by firms in Taiwan, Hong Kong, Macau, and Singapore. "Overseas Chinese. Family Affairs, The Economist, 11 Nov. 1995, p. 12. (2) More and more frequently, it is being understood that connections alone do not guarantee successful business in China. See, e.g., "China Market Myths: Look before you jump," EIU Business Asia, 6 November 1995. A successful Sino-foreign joint enterprise will not prosper simply because of an abundance of connections, but only when the partners complement each other's business needs and share common investment objectives. See James Tsang, "Joint Venture in China: choosing the Right Partner," 17 East Asian Executive Reports 4, 15 April 1995, p. 8. (3) See, for example, "Zhongwai Hezi Jingyin Qiye Laodong Guanli Guiding Shishi Banfa (Provisions for the Implementation of the Regulations on Labor Management in Joint Ventures Using Chinese and Foreign Investment)," translated in China Laws for Foreign Business - Business Regulations, CCH Australia Limited, 6-522; "Zhonghua Renmin Gonghe Guo Zhongwai Hezi Jingying Qiye Suode Shui Fa (The Income Tax law of the People's Republic of China for Chinese-Foreign Equity Joint Ventures)," (1980) repealed and replaced by "Zhonghua Renmin Gonghe Guo Waishang Touzi Qiye He Waiguo Qiye Suode Shui Fa (Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises)," (1991) translated in China Laws for Foreign Business-Business Regulation, CCH Australia Limited, 32-505 and the "Detailed Rules for the Implementation of the Income Tax Law of the People's Republic of China for Sino-foreign Equity Joint Ventures," (1980) repealed and replaced by the Detailed Rules for the Implementation of the Income Tax Law of the People's Republic of China for Foreign Investment Enterprises and Foreign Enterprises, (1991) translated in China Laws for Foreign Business--Business Regulation, CCH Australia Limited, 32-507. (4) See "Zhonghua Renmin Gonghe Guo Waizi Qiye Fa (The Law of the People's Republic of China Concerning Enterprises with Sole Foreign Investment)," (1986) translated in China Laws for Foreign Business--Business Regulation, CCH Australia Limited, 13-506, "Detailed Rules for the Implementation of the law of the People's Republic of China on Sole Foreign Investment Enterprises," (1990) translated in China Laws for Foreign Business--Business Regulation, CCH Australia Limited, 13-507; "Guanyu Waishang Touzi Juban Touzi Xing Gongsi de Zhanxing Guiding (Provisional Regulations Governing the Establishment of Investment-Type Companies by Foreign Business Investment," (1990) translated in China Laws for Foreign business-business Regulation, CCH Australia Limited, 13-400; "Guanyu Sheli Waishang Touzi Gufen Youxian Gongsi Ruogan Wenti De Zhanxing Guiding (Provisional Regulations on Several Issues Concerning the Establishment of Foreign Investment Companies Limited by Shares)" (1995) translated in China Laws for Foreign Business--Business Regulation, CCH Australia Limited, 13-405. (5) "Guoyou Zichan Pinggu Guanli Tiaoli (Administration of State Asset Valuation Procedures)," 16 November 1991 Zhonghua Renmin Gonghe Guo Falu Fagui Juanshu (Encyclopedia of Laws and Regulations of People's Republic of China, (I 994). (6) "Zhonghua Renmin Gonghe Guo Zhongguo Renmin Yinhang Fa (Law of the People's Republic of China on the People's Bank of China)," (18 March 1995) translated in China Economic News Supplement, no. 3, 4 April 1995. (7) "Zonghua Renmin Gonghe Guo Shangye Yinhang Fa (Commercial Banking Law of the People's Republic of China)," (1 July 1995) translated in China Banking & Finance, 6, 28 June 1995. (8) "Zhonghua Renmin Gonghe Guo Baoxian Fa (Insurance Law of the People's Republic of China)," (30 June 1995) People's Daily, section 2, 4 July 1995. (9) "Zhonghua Renmin Gonghe Guo Danbao Fa (Security Law of the People's Republic of China)," (1 October 1995) translated in China Law & Practice, 21, 11 August 1995. (10) "Zhonghua Renmin Gonghe Guo Jishu Yinjin Hetong Guanli Tiaoli (Regulations on Administration of Technology Import Contracts of the Peoples Republic of China)," (24 May 1985) translated in China Laws for Foreign Business - Business Regulation, CCH Australia Limited, 5-570. "Detailed Implementing Rules of the Administrative Regulations of the PRC on Technology Import Contracts", 20 January 1988, translated in China Laws for Foreign Business--Business Regulation, CCH Australia Limited, 5-573. (11) See (12) There are other hurdles, such as the State Asset Administration Bureau, the State Administration for Industry and Commerce, for the enterprise license and the General Tax Bureau of the Ministry of Finance for tax excemptions. (13) See section 6, no. 2 of the Index to the Investment Guidelines. (14) The source for the hei an procedure is found in Article 8 of the Implementing Regulations to the Equity Joint Venture Law, which states that 9%e establishment of a joint venture in China is subject to examination and approval by [the Ministry of Foreign Trade and Economic Cooperation]. . ." and gives the ministry the authority to entrust local municipal and provincial governments "with the power to examine and approve the establishment of joint ventures" subject to certain conditions. "the entrusted office, after approving the establishment of a joint venture, shall report this to [the Ministry of Foreign Trade and Economic Cooperation) for the record." Bei an, translated as "for the record," is currently widely used as a verb. (15) Though bei an is understood to refer to the process of a subordinate organization submitting a formal report to a higher authority (see note below), bian han is sometimes used to refer to an informal oral consultation. Da zhau hu orginates from the term 'to wave at" or "to greet." In colloquial language, it also carries the connotation of letting someone know about something.. Within the context of project approval, it refers to local authorities informing higher, i.e., central authorities on an informal, non-written basis of the existence of the approval of projects ostensibly within local approval limits. Da zhau hu, the publicity route, also assumes a tacit acceptance on the part of the higher authorities and requires no (16) Article 13 of the Investment Guidelines provides that: For parties to foreign investment projects who resort to fraudulent and other improper means to gain approval for their project proposals, legal liability shall be pursued in accordance with the law based (on) the seriousness of the circumstances. The examination and approval authority shall withdraw the approval previously granted to such projects and appropriate decisions shall be made by the relevant departments in charge in accordance with the law." translated in China Laws for Foreign Business -- Business Regulation, CCH Australia Limited, 13-420.
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Title Annotation:Contemporary China: The Consequences of Change
Author:Duffy, Edmund C.
Publication:Journal of International Affairs
Date:Jan 1, 1996
Words:6037
Previous Article:Securities markets and China's international economic integration.
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