Ministry of Construction, Administration of Concessions for Urban Utilities Procedures

Promulgated: March 19 2004
Effective: May 1 2004
Applicability: A "concession for an urban utility" is defined as a system whereby the government selects an urban utility investor or operator by means of the market competition mechanism and specifies its operation of a certain urban utility product or provision of a certain service for a certain period of time and within a certain scope (Article 2).
  The Procedures apply to implementation of concessions for such urban industries as supply of water, gas and heating; public transport; treatment of sewage; and disposal of waste in accordance with the law (Article 2).

Main contents: Article 7 of the Procedures lists the criteria for participation in bidding for a concession. For example, the bidder should have the corresponding registered capital, facilities and equipment as well as good creditworthiness, sound financial standing and appropriate debt service capacity. Article 9 specifies terms that should be included in a concession agreement, such as: the particulars, district, scope and term of operation of the concession; security management; performance bond; the termination and modification of the concession; liability for breach of contract; and method for dispute resolution. A concessionaire should fulfil such responsibilities as: formulation of annual production or supply plans in a scientific and rational manner; organizing enterprise work safety in accordance with relevant state and industry regulations; and submission of medium to long-term development plans, annual business plans, annual reports, resolutions of the board of directors, etc. to the department in charge for the record (Article 11). The term of a concession should not exceed 30 years (Article 12). Under certain circumstances, the department in charge may revoke a concession and impose a provisional takeover (Article 18). For example, assignment or lease of the concession without authorization, disposal or mortgage of the business property without authorization or occurrence of a major quality-related or work safety-related accident due to poor management.