Further Improving the Screening and Rectification of Non-experimental Foreign-funded Commercial Enterprises Circular

2. With respect to Chongqing Jiang Tian International Commerce Plaza Co., Ltd listed in Document No. 98 under the cancellation (revocation) category but not yet cancelled (revoked), cancellation /revocation shall be carried out in accordance with the relevant stipulations. As for Chengdu Carrefour Chain Supermarket Co., Ltd and Shanghai Longhua Le Gou Household Shopping Co., Ltd that were established without authorized approval after the issuance of the Immediate Cessation of Unauthorised Approval and Covert Establishment of Foreign-funded Commercial Enterprises Circular (Guo Jing Mao Wai Jing [2000] No. 1072) issued by SETC, MOFTEC and the former SAIC on 13 November 2000, the foreign parties thereto shall transfer their equity interest therein and withdraw from the operation. The local departments concerned should work out measures for implementing the above decisions and submit the results of such implementation to SETC, MOFTEC and SAIC for the record by the end of 2001.

3. With respect to the 65 enterprises that have been converted into domestic enterprises or ceased operation or whose registration has been cancelled, the local authorities concerned should carry out further inspection and verification, and submit their findings to SETC, MOFTEC and SAIC for their record by the end of 2001.

4. With respect to the 32 enterprises listed in Document No. 98 under the approved category and enterprises that have been verified as having complied with the rectification requirements under Item 1 of this Circular, they shall be admitted for experimentation step by step. Where foreign parties to those enterprises that are located in experimental cities and that possess advanced marketing technique and have performed outstandingly in purchasing Chinese products, the enterprises concerned may be given the status of experimental enterprises upon approval in accordance with the Pilot Procedures. Enterprises located in non-experimental cities may not be converted into experimental enterprises prior to the promulgation of new stipulations [dealing with this issue]². They shall continue to be treated under Document No. 98 as enterprises that "do not have the authority to operate import and export business, may not engage in wholesale business, may not expand their business scope and construction scale, may not open branch stores or extend their term of cooperation, and may not enjoy any tax exemption or reduction in respect of the equipment and raw materials imported for their own use (hereinafter referred to as the Five Prohibitions) and regulatory work thereon shall be strengthened. If any such enterprise opens branch stores in any experimental cities in the western region, it may be converted into an experimental enterprise upon approval of its application in accordance with the Pilot Procedures.

5. With respect to enterprises established with investment from Carrefour of France, they shall be handled in accordance with the Opinions for Dealing with Commercial Business Activities Carried Out by Carrefour of France in China in Contravention of State Regulations Circular (Guo Jing Mao Wai Jing [2001] No. 354) issued by SETC, MOFTEC and SAIC.

6. With respect to those non-experimental foreign-funded commercial enterprises whose establishment has not yet been reported to the central authorities, local governments concerned should retrospectively report such cases within one month after the issuance of this Circular. If the establishment of such enterprises is not reported within the time limit, the registration body shall cancel their registration or revoke their business licence.

7. In view of the fact that Henan Zhengzhou [Dennis] Department Store Co., Ltd opened its branch stores without authorization and in contravention of the Pilot Procedures, its status as an experimental enterprise shall be suspended. Henan Provincial Economic and Trade Commission, Foreign Economic and Trade Department and Administration for Industry and Commerce should carry out rectification of it and submit, as soon as possible, the results of the rectification to SETC, MOFTEC and SAIC for verification. Before the rectification is carried out and the requirements are met, the said enterprise shall be regulated in accordance with the Five Prohibitions set out in Document No. 98.

8. In the future, application for the establishment of a foreign-funded commercial enterprise and any branch store of a foreign-funded commercial enterprise shall, in accordance with the Pilot Procedures, be submitted to SETC and MOFTEC for approval and be registered with SAIC or the local administration for industry and commerce authorized by SAIC. Meanwhile, no foreign-funded commercial enterprise may be established covertly in any locality. If any such enterprise is discovered to have been established, it shall be dealt with seriously, and the responsible administrator in the local government shall be held administratively responsible.

Local governments should regard the rectification of non-experimental foreign-funded commercial enterprises as an important task for rectifying market order, and should lose no time in carrying out such rectification in the light of our country's imminent accession to the WTO. Lessons should be learned, and the State policies and regulations should be implemented strictly to standardize activities in the commercial sector involving foreign investment. Orders should be executed without fail so as to ensure the healthy and orderly procedure for the work of utilizing foreign capital.

Endnotes:

1 Translation provided by Sidley Austin Brown & Wood.
2 Words in square brackets were added to help readers better understand the English translation of this document.