Administration of Foreign-invested Construction Enterprises Provisions

For the purposes of these Provisions, the term "foreign-invested construction enterprises" means wholly foreign-owned construction enterprises, Sino-foreign equity joint venture construction enterprises and Sino-foreign cooperative joint venture construction enterprises invested in and established in the People's Republic of China pursuant to Chinese laws and regulations.

Article 3: Foreign investors that wish to establish foreign-invested construction enterprises and engage in construction activities in the People's Republic of China shall obtain, in accordance with the law, an approval certificate for a foreign-invested enterprise issued by the administrative department in charge of foreign trade and economic cooperation, register with the State Administration for Industry and Commerce or the local administration for industry and commerce authorized thereby and obtain a construction enterprise qualification certificate issued by the administrative department in charge of construction.

Article 4: Foreign-invested construction enterprises engaged in construction activities in the People's Republic of China shall abide by Chinese laws, rules and regulations.

The lawful business activities and lawful rights and interests in the People's Republic of China of foreign-invested construction enterprises shall be protected by Chinese laws, rules and regulations.

Article 5: The State Council administrative department in charge of foreign trade and economic cooperation is responsible for the administration of the establishment of foreign-invested construction enterprises; and the State Council administrative department in charge of construction is responsible for the administration of the qualifications of foreign-invested construction enterprises.

The administrative departments in charge of foreign trade and economic cooperation of provinces, autonomous regions and municipalities directly under the central government shall be responsible for the administration of the establishment of foreign-invested construction enterprises within their authorized scopes of authority; and the administrative departments in charge of construction of provinces, autonomous regions and municipalities directly under the central government shall be responsible for the administration of the qualifications of foreign-invested construction enterprises within their jurisdictions in accordance herewith.

PART TWO: APPLICATION FOR THE ESTABLISHMENT AND THE QUALIFICATIONS OF ENTERPRISES AND THE EXAMINATION AND APPROVAL THEREOF

Article 6: The application, examination and approval of the establishment and the qualifications of foreign-invested construction enterprises shall be administered by grade and by type.

Applications for the establishment of foreign-invested construction enterprises with special grade and grade one general contractor qualifications or with specialized contractor grade one qualifications will be examined and approved by the State Council department in charge of foreign trade and economic cooperation and the applications for the qualifications of such enterprises will be examined and approved by the State Council administrative department in charge of construction. Applications for the establishment of foreign-invested construction enterprises with general contractor or specialized contractor grade two or lower qualifications and labour subcontractor qualifications will be examined and approved by the administrative departments in charge of foreign trade and economic cooperation of provinces, autonomous regions and municipalities directly under the central government and the applications for the qualifications of such enterprises will be examined and approved by the administrative departments in charge of construction of provinces, autonomous regions and municipalities directly under the central government.

If a Chinese investor in a Sino-foreign equity joint venture construction enterprise or a Sino-foreign cooperative joint venture construction enterprise is an enterprise under the administration of the central authorities, the establishment of such joint venture will be examined and approved by the State Council administrative department in charge of foreign trade and economic cooperation and its qualifications will be examined and approved by the State Council administrative department in charge of construction.

Article 7: The application procedure for the establishment of a foreign-invested construction enterprise with general contractor special grade or grade one qualifications or specialized contractor grade one qualifications is set forth below:

(1) The applicant submits an application for establishment to the administrative department in charge of foreign trade and economic cooperation of the province, autonomous region or municipality directly under the central government where the proposed enterprise is to be established.

(2) The administrative department in charge of foreign trade and economic cooperation of the province, autonomous region or municipality directly under the central government completes the preliminary examination within 30 days from the date of its acceptance of the application and forwards the application materials to the State Council administrative department in charge of foreign trade and economic cooperation after it gives its consent;

(3) The State Council administrative department in charge of foreign trade and economic cooperation sends the application materials to the State Council administrative department in charge of construction for its opinion within 10 days after the date of receipt of the preliminarily examined materials. The State Council administrative department in charge of construction expresses its opinion within 30 days after the date of receipt of the letter seeking its opinion. The State Council administrative department in charge of foreign trade and economic cooperation renders its written decision on whether or not to approve the application within 30 days after the date of receipt of the written opinion from the State Council administrative department in charge of construction. If it grants its approval, it issues an approval certificate for a foreign-invested enterprise. If it rejects the application, it issues a written explanation of the reasons therefor.

(4) A foreign-invested construction enterprise that obtains an approval certificate for a foreign-invested enterprise shall register with the registration authority within 30 days.

(5) After obtaining its enterprise legal person business licence, the enterprise shall apply for construction enterprise qualifications in accordance with the provisions for the administration of construction enterprise qualifications.

Article 8: The application procedures for the establishment of a foreign-invested construction enterprise with general contractor or specialized contractor grade two or lower qualifications and labour subcontractor qualifications shall be determined by the administrative departments in charge of foreign trade and economic cooperation and the administrative departments in charge of construction of the provinces, autonomous regions and municipalities directly under the central government by making reference to Article 7 hereof and the provisions for the administration of construction enterprise qualifications and by taking into account the actual circumstances of their regions.

The qualifications of foreign-invested construction enterprises examined and approved by the administrative departments in charge of construction of provinces, autonomous regions and municipalities directly under the central government shall be reported to the State Council administrative department in charge of construction for the record within 30 days after the approval date.

Article 9: When a foreign-invested construction enterprise applies to upgrade its qualification grade or to add qualifications other than its main qualifications, it shall carry out the relevant procedures with the administrative department in charge of construction in accordance with relevant provisions.

Article 10: When applying to establish a foreign-invested construction enterprise, the following materials shall be submitted to the administrative department in charge of foreign trade and economic cooperation:

(1) an application for the establishment of a foreign-invested construction enterprise signed by the legal representatives of the parties;

(2) a feasibility study prepared or approved by the parties;

(3) the contract for and the articles of association of the foreign-invested construction enterprise signed by the legal representatives of the parties (only the articles of association need to be submitted for a wholly foreign-owned construction enterprise);

(4) the notice of the preliminary approval of the enterprise name;

(5) proofs of the legal person registration and bank proofs of creditworthiness of the parties;

(6) the engagement documents and supporting documents of the chairman of the board, board members, managers, project technical persons, etc. whom the parties propose to appoint; and

(7) the balance sheets and profit and loss statements of the parties for the most recent three years audited by a registered accountant or accounting firm.

Article 11: When applying for its qualifications, a foreign-invested construction enterprise shall submit the following materials to the administrative department in charge of construction:

(1) a foreign-invested construction enterprise qualification application;

(2) its approval certificate of a foreign-invested enterprise;

(3) its enterprise legal person business licence;

(4) bank proofs of creditworthiness of the parties;

(5) the engagement documents and supporting documents of the chairman of the board, board members, managers, project technical persons, etc. whom the parties propose to appoint;

(6) the balance sheets and profit and loss statements of the parties for the most recent three years audited by a registered accountant or accounting firm; and

(7) other materials that the provisions for the administration of construction enterprise qualifications require be submitted.

Article 12: The total amount of the capital contribution(s) of the Chinese party/parties to a Sino-foreign equity joint venture construction enterprise or Sino-foreign cooperative joint venture construction enterprise shall not account for less than 25% of such enterprise's registered capital.

Article 13: Sino-foreign equity joint venture construction enterprises and Sino-foreign cooperative joint venture construction enterprises that were established prior to the implementation hereof shall have their qualification grade verified anew in accordance with these Provisions and the provisions on the administration of the qualifications of construction enterprises.

Article 14: The documentation that these Provisions require applicants to submit shall be in Chinese. If the originals of certificates are in a foreign language, Chinese translations thereof shall be submitted.

PART THREE: CONTRACTING SCOPE

Article 15: Wholly foreign-owned construction enterprises shall only be permitted to contract for the types of projects set forth below which fall within the scope of their qualification grade permits:

(1) projects constructed wholly with foreign investment, with foreign donations or with foreign investment and foreign donations;

(2) construction projects funded by international financial institutions that are, pursuant to the loan terms, granted through international invitations of bids;

(3) Sino-foreign joint construction projects in which the foreign investment accounts for 50% or more of the total; and Sino-foreign joint construction projects approved by the administrative departments in charge of construction of provinces, autonomous regions or municipalities directly under the central government in which the foreign investment accounts for less than 50% of the total but due to technical difficulties cannot be implemented solely by Chinese construction enterprises;

(4) Chinese-invested construction projects approved by the administrative departments in charge of construction of provinces, autonomous regions or municipalities directly under the central government that due to technical difficulties cannot be implemented solely by Chinese construction enterprises may be jointly contracted for by Chinese and foreign construction enterprises.

Article 16: Sino-foreign equity joint venture construction enterprises and Sino-foreign cooperative joint venture construction enterprises shall contract for projects falling within the scope of their qualification grade permits.

PART FOUR: OVERSIGHT

Article 17: The qualification grade standards for foreign-invested construction enterprises shall be the qualification grade standards for construction enterprises promulgated by the State Council administrative department in charge of construction.

Article 18: When a foreign-invested construction enterprise contracts as the general contractor for a project, it must carry out the work on the main structure of the project itself.

Article 19: If a foreign-invested construction enterprise and another construction enterprise jointly contract for a project, they shall contract for the project in accordance within the business scope of the permit of the enterprise with the lower qualification grade.

Article 20: If a foreign-invested construction enterprise violates Article 15 hereof by contracting for a project beyond the business scope of its qualification permit, it shall be fined not less than 2% and not more than 4% of the contract price; it may be ordered to suspend operations and undergo rectification and its qualification grade may be lowered; if the circumstances are serious, its qualification certificate shall be revoked; if it had illegal income, such income shall be confiscated.

Article 21: If a foreign-invested construction enterprise violates such relevant laws, rules or regulations as the PRC Construction Law, the PRC Invitation for and Submission of Bids Law, the Administration of the Quality of Construction Works Regulations, the Administration of the Qualifications of Construction Enterprises Provisions, etc. when engaging in construction activities, it shall be punished in accordance with relevant provisions.

PART FIVE: SUPPLEMENTARY PROVISIONS

Article 22: If a foreign enterprise that had obtained a Foreign Enterprise Project Contracting Qualification Certificate prior to the implementation hereof wishes to invest in and establish a foreign-invested construction enterprise, it may apply for the appropriate construction enterprise qualification grade on the basis of the results of its project contracting in the People's Republic of China, etc.

The qualification grade of a new foreign-invested construction enterprise that, pursuant to the first paragraph of this article, a foreign enterprise that has already established a foreign-invested construction enterprise in the People's Republic of China wishes to establish shall be verified in accordance with the regulations on the administration of the qualifications of construction enterprises.

Article 23: The establishment of construction enterprises and the engagement in construction activities by investors from the Hong Kong Special Administrative Region, the Macao Special Administrative Region and Taiwan in other provinces, autonomous regions and municipalities directly under the central government shall be handled with reference to these Provisions, unless otherwise specified in laws or regulations or by the State Council.

Article 24: The State Council administrative departments in charge of construction and foreign trade and economic cooperation are in charge of interpreting these Provisions ex officio.

Article 25: These Provisions shall be implemented as of December 1 2002.

Article 26: The Administration of the Quality of Foreign Enterprises Contracting Projects Inside the PRC Tentative Procedures (Order No. 32 of the Ministry of Construction) promulgated by the Ministry of Construction on March 22 1994 shall be repealed on October 1 2003.

Article 27: The Establishment of Construction Enterprises with Foreign Investment Several Provisions (ref. Jian Jian [1995] No.533) jointly promulgated by the Ministry of Construction and the Ministry of Foreign Trade and Economic Cooperation shall be repealed on December 1 2002.