INTERIM REGULATIONS ON CERTAIN MATTERS RELATING
TO INLAND ASSOCIATED ENTERPRISES (OF UNDERTAKINGS) IN
THE GUANGZHOU ECONOMIC AND TECHNOLOGICAL DEVELOPMENT ZONE

(Adopted at the Guangzhou Mayor's Work Meeting on
March 6, 1985 and Promulgated for
Implementation by the Municipal People's
Government on April 9, 1985)

SUBJECT: ECONOMIC & TECHNOLOGICAL DEVELOPMENT ZONES

ISSUING-DEPT: GUANGDONG PROVINCE

ISSUE-DATE: 03/06/1985

IMPLEMENT-DATE: 04/09/1985

LENGTH: 2279 words

TEXT:

[Article 1] In order to expedite the construction of the Guangzhou Economic and Technological Development Zone (hereinafter referred to as "development zone") and to enhance the capacity to introduce foreign capital, these Regulations are formulated in accordance with the pertinent provisions and decisions of the State Council and the Interim Regulations on Guangzhou Economic and Technological Development Zone.

[Article 2] The relevant departments and their enterprises (or undertakings) in Guangzhou (including suburbs and counties), in Guangdong Province or other provinces and of the State Council (hereinafter referred to as "inland enterprises or undertakings") are encouraged to come to the development zone to jointly establish enterprises (or undertakings). The following forms of association may be adopted:

(1) Tripartite association among inland enterprises or undertakings, enterprises or undertakings belonging to the Administrative Committee of the Development Zone and investors;

(2) Bipartite association between inland enterprises (or undertakings), or enterprises (or undertakings) belonging to the Administrative Committee of the Development Zone and investors;

(3) Bipartite association between scientific research units or universities and colleges, and investors to establish enterprises and undertakings in the development zone.

Rights and obligations of parties to inland associations shall be exercised and performed according to the pertinent provisions of the "Interim Regulations on the Guangzhou Economic and Technological Development Zone".

[Article 3] Only inland enterprises and undertakings of county level or corresponding to county level or above that come to the development zone and by their competent authorities can establish associated or independent enterprises and undertakings in the development zone. They can only commence their operations after they have consulted the relevant units in the development zone, concluded agreements for cooperation which have been examined and approved by the competent authorities authorized by the Administrative Committee of the Guangzhou Economic and Technological Development Zone (hereinafter referred to as "Administrative Committee of the Development Zone") and registered with the Administration Organization for Industry and Commerce in the development zone.

[Article 4] The establishment and management of jointly established enterprises (or undertakings) in the development zone (hereinafter collectively referred to as "inland associated enterprises") shall be carried out in accordance with the relevant provisions of the Interim Regulations on the Guangzhou Economic and Technological Development Zone.

[Article 5] The main scope of cooperation for inland associated enterprises is as follows:

(1) Industrial projects with advanced technology or exceptionally advanced technology;

(2) To establish scientific and technological development organizations and jointly develop new techniques and new products;

(3) Import and export trade of Chinese-foreign joint ventures and cooperative ventures and scientific and technological development organizations;

(4) Commerce, service and tourist industries.

[Article 6] The major modes of investment for inland associated enterprises are:

(1) Joint investment and joint operation;

(2) Independent investment in projects with advanced technology;

(3) Other modes determined through consultation of the parties to inland associated enterprises.

[Article 7] Inland associated enterprises shall be taxed in the same manner as other enterprises in the development zone and shall enjoy preferential treatment in accordance with the relevant provisions of Chapters 2 to 4 of the Tentative Procedures for the Implementation of the Industrial and Commercial Taxes in the Guangzhou Economic and Technological Development Zone.

Newly-established inland associated enterprises having difficulty in paying the consolidated industrial and commercial tax as stipulated in the regulations may apply for tax exemption for one to three years.0 Where they continue to incur losses after the expiration of the said period, they may apply to the tax authorities and report the matter to the Administrative Committee of the Development Zone for approval and, depending on different circumstances, be allowed tax exemption or reduction. Upon approval by the Administrative Committee of the Development Zone, inland-foreign associated enterprises may process spare parts or engage in craftsmanship related cooperation outside the development zone.

[Article 8] The balance of net profits, after payment of income tax, belonging to the Guangzhou party (including suburb and counties) to the inland associated enterprises before 1990, need not be handled in, provided 10% of the balance of the said after-tax profits is deducted and handed to the local finance department.

[Article 9] Inland associated enterprises shall, in accordance with the regulations provided by the finance department of the development zone, pay a certain amount to the labour protection fund to be used for social welfare in the development zone.

[Article 10] The charging standards and methods for the various fees payable by inland associated enterprises shall be the same as those of other enterprises in the development zone.

Inland associated enterprises besides paying land use fee according to the rates stipulated in Article 12 of the Tentative Procedures of the Guangzhou Economic Technological Development Zone for Land Management may enjoy the following preferential treatment: -

(1) Levy of land use fee may be assessed from the time the enterprise starts operation (including trial-production);

(2) Where land is exploited by area-contracting, land use fee may be exempted for ten (10) to fifteen (15) years depending on the specific circumstances.

[Article 11] Products produced by inland associated enterprises shall be sold mainly outside China or in markets in the development zone according to the market demand of the development zone.0 A certain proportion of them may be sold in inland markets upon approval by the competent departments of the State Council or the Guangzhou Municipal People's Government.

Where one of the following requirements is satisfied, all or a large portion of the products may be sold inland upon examination by the Administrative Committee of the Development Zone and approval by the Guangzhou Municipal People's Government: -

(1) Products produced wholly or largely (over 70%) from domestic raw and processed materials;

(2) Products provided from imported raw and processed materials but which are urgently needed in China;

(3) Products produced by advanced technology and equipment introduced from abroad but which are specially needed in China.

Customs duties and consolidated industrial and commercial tax on import will be levied on those parts of the products to be domestically sold, which are made of imported raw materials. Domestic sales are restricted to the Guangdong Province but such control may be lessened within the prerequisite of balancing foreign exchange after approval by the Guangzhou Municipal People's Government.

[Article 12] Upon approval in accordance with these provisions, raw and processed (auxiliary) materials, fuels, advanced equipment, spare parts and components, etc. needed by inland associated enterprises in their production may be imported duty free from international markets.0 The products so produced and sold within the development zone may be exempted from consolidated industrial and commercial tax.

[Article 13] The inland party to an inland associated enterprises may purchase, with the net profits obtained in the development zone, products, equipment and raw and processed materials from the development zone or international markets which may be transported inland upon approval by the Guangzhou Municipal People's Government and payment of customs duties and consolidated industrial and commercial tax on import.

[Article 14] Means of communication and office supplies imported for self-use by inland-foreign associated enterprises with investment by foreign investors may be exempted from consolidated industrial and commercial tax on import upon approval by the Administrative Committee of the Development Zone.

[Article 15] Inland may use province and municipality as units or the competent authorities of the State Council as units to organize its own enterprises and, together with development zone enterprises, establish "Industry and Trade Associated Enterprises" or "Production and Scientific Research Associated Bodies". Import and export trade, such as purchasing self-use machinery and equipment, and raw and processed materials, exporting their own products, may be operated by the "Industry and Trade Associated Enterprises" or "Production and Scientific Research Associated Enterprises" either through the agency of specialist companies on import and export trade in the development zone or by themselves upon approval.0 Inland party to the associated enterprises, which possess products of famous brand and of local characteristics, may display and sell such products in the development zone and may export them in the name of the associated enterprises.

[Article 16] Profits distributed to the inland party to an inland associated enterprise may be remitted inland through a bank in the development zone, and may also be dealt with by the party itself in accordance with the provisions of Article 13 of these Regulations.

Enterprises or undertakings in Guangzhou (including suburbs and counties) which invest in and establish enterprises or undertakings in the development zone with their own capital or through bank loans may enjoy the following preferential treatments: -

(1) The profits obtained within the first three years will belong to the newly-established enterprises or undertakings.

(2) The newly-established enterprise or undertakings may appropriately raise the proportions of the reserve fund, bonus fund, welfare fund and enterprise development fund using the net profits obtained.

[Article 17] As regards the foreign exchange portion of the profits obtained by an inland associated enterprise, the ratio of the inland party's share of the foreign exchange may, through consultation by all parties to the inland associated enterprise, be increased.0 (The share may be 20% more than the entitlement under the original ratio.) The development zone enterprise party shall be compensated for the extra portion of foreign exchange distributed to the inland party with RMB on the basis of foreign exchange rate.

[Article 18] Those inland associated enterprises which are not renewed after the expiration of their term of cooperation shall deal with their assets in accordance with the provisions of their contracts. Assets other than factories and sites, belonging to the inland party, may be transferred to the development zone enterprise party may be dealt with by themselves.

[Article 19] The inland party to an inland associated enterprise, which has a contract term of more than five years, such as those of large scale, or with advance technology or with good economic results shall, after going into actual operation, appoint non-transferable leading cadres, scientific and technical staff and part of the skilled workers (including their dependents with registered urban residence to manage operations and perform technical work in the development zone. Upon examination and approval by the Administrative Committee of the Development Zone the said persons may report to the local authorities in the development zone for change of residence, the specific procedures being handled by the public security organs.

[Article 20] The transferable personnel of the inland party to an inland associated enterprise (the term of transfer being generally not less than two (2) years) must register for temporary residence in the development zone.

[Article 21] Each party shall be responsible for making arrangements for its personnel (retirement and resignation arrangement being handled by the original unit) at the expiration of the term of cooperation of an inland associated enterprise. 0Those inland personnel with registered permanent residence in the development zone, if they are needed there, may be retained for work upon approval. Inland personnel shall apply for the removal of their residence registration upon returning to their original work-units.

[Article 22] Inland personnel working in the development zone, whether their residence has been registered as temporary or permanent, shall receive the same treatment (including political treatment, economic treatment and welfare treatment) as other personnel in the development zone.

[Article 23] Disputes arising out of the performance of the agreement, contract and articles of association between the parties to an inland associated enterprise should be resolved through consultation. If disputes cannot be settled through consultation, then the parties may request conciliation or arbitration by an arbitration agency designated by agreement, or file a suit directly before a judicial body in Guangzhou.

[Article 24] The right to interpret and revise these Interim Regulations is vested in the Administrative Committee of the Development Zone.

[Article 25] These Interim Regulations shall come into force on the date of their promulgation.