Forms of Foreign Investment

Sino-foreign Equity Joint Ventures, Sino-foreign Contractual Joint Ventures, Wholly Foreign-Owned Enterprise are the three main forms of Foreign Direct Investment in china for absorbing foreign capital.There are some Other investment forms ,such as Share Company with Foreign Investment, Foreign Invested Holding Company, Joint Exploitation, BOT, etc.

1. Chinese-Foreign Equity Joint Ventures Sino-foreign Equity Joint Ventures are enterprises jointly established within Chinese territory companies, enterprises, and other economic entities on the other side. An equity joint venture shall be invested and operated jointly by both foreign and Chinese investors, who shall share the profits and losses, as well as risks, in proportion to their respective shares in the registered capital. Sino-foreign Equity Joint Ventures are Limited Liability Company, and possess the status of Chinese legal person. In such an enterprise, the proportion of the investment contributed by the foreign party shall in general not be less than 25% of the total. The partner could offer cash, or other kinds of things instead such as building, workshop, machinery, industrial property right, special technique, and field utilization right The profits and other legal interests that foreign investors have shared can be remitted out or reinvested China.

2. Sino-foreign Contractual Joint Ventures Sino-foreign Contractual Joint Ventures are enterprises jointly established within Chinese territories by foreign companies, enterprises, other economic entities of individuals and Chinese companies, enterprises or other economic entities, according to their cooperative conditions. The both parties to a contractual joint venture should prescribe in the contract their respective conditions, lights, obligations, incomes distribution, responsibilities for risks and debts, the company management and negotiations on the property transaction at the expiration. When establishing China-Foreign Contractual Joint Ventures, the foreign party provides land, factory buildings, certain usable machines and facilities, and in some cases a certain amount of capital as well. Sino-foreign Contractual Joint Ventures may posses the status of conventional person or not.

3. Wholly Foreign-Owned Enterprises Wholly Foreign-Owned Enterprises are invested entirely by foreign companies, enterprises, other economic entities or individuals within Chinese territory in accordance with the related Chinese laws. Wholly Foreign-Owned Enterprises usually take the form of limited liability companies, and do not include the Chinese Branch of foreign company or other economic organization.

4. Share Companies With Foreign Investment Share Companies with Foreign Investment are stock limited companies set within China’s territory by foreign companies, enterprises, or other economic organizations with Chinese companies, enterprise or other economic organizations, which are established according to the principle of stock. All principal of Share Company with Foreign Investment is made up of equal amounts of stocks, every stockholder would take certain responsibility for company in accordance with his amount of stocks, and the company is responsible for debts with all estate. It is a form of foreign-invested company, which fits with relative regulations of national laws and statutes on foreign investment company.

5. Foreign Invested Holding Company Foreign Invested Holding Companies are Sino-foreign Equity Joint Ventures or Wholly Foreign-Owned Enterprises within Chinese territory that deal with direct investment usually in the form of limited liability companies. Foreign investors, who apply to establish an Foreign Invested Holding Company must possess great assets and good reputation, establish a certain mount of companies within China, and own over $30 million of actual-paid part of registration principal. Upon the approval of the Chinese government, Foreign Invested Holding Company could enjoy a broader field of managing than other ordinary companies, in an attempt to encourage big overseas companies to carry out their series of investment plans. At present foreign invested Holding Company can invest in the fields of industry, agriculture, infrastructure and energy that the county encourages and permits.

6. Joint Exploitation Join Exploitation refers to that Chinese company and foreign company sign venture contract to carry out a joint exploration on inland and offshore petroleum, and mineral resources. It is a widely used form of economic cooperation in the field of natural resources exploration throughout the world. The main features of the joint exploration are high risks, high input, and high output. Joint exploitation is usually carried out in three phases: exploration, development and production.

On the newly-revised Civil Procedural Law

The newly-revised Civil Procedural Law was adopted by the Decision of the Thirtieth Session of the Standing Committee of the tenth People's Congress on Amending the Company Law of the Peoples Republic of China on October 28, 2007 and shall come into force upon April 4, 2008. Great revision on the re-trial system and the execution system has been made in the newly-revised Civil Procedural Law. For one thing, as far as re-trial system is concerned, with the purpose of resolving problems in the process of appealing, two aspects are emphasized particularly on in the newly-revised Civil Procedural Law:
1. to perfect the procedure of applying for re-trial to make it more public, reasonable ; and in contrast to the former, the importance of due process is all the more emphasized in the newly-revised Civil Procedural Law;
2. to perfect legal reasons for applying for re-trial, which are embodied in Clause 179 in the newly-revised Civil Procedural Law.

For another, on the respective of execution system, the following aspects are emphasized particularly on:
1. Some punishment measures are supplemented in case legal obligations are not fulfilled by the executee.
2. In case that the execute doesn’t fulfill legal obligations stipulated in legal writ and is likely to secrete and transfer his property, the executer shall be entitled to take mandatory measures.
3. In case that the execute doesn’t fulfill legal obligations stipulated in legal writ, he or she should report for his property information within the past year upon the date of receiving execution notice.
4.Civil verdicts and rulings with force adeffect and criminal verdicts and rulings concerning property shall be executed by the first instance court and the court of the same level where property locates that shall be executed.
5. The period for applying for execution shall be 2 years.

About Bankruptcy Custodian

When the people's court accepts an application for bankruptcy, it shall meanwhile designate a bankruptcy custodian.

The post of a bankruptcy custodian may be assumed by a liquidation group comprised of personnel from relevant departments and organs or by such lawfully established social intermediary agencies as a law firm, an accounting firm, a bankruptcy liquidation firm and etc..

The people's court may, in light of the real status of a debtor and upon consulting the opinions of the relevant social intermediary agencies, designate the relevant personnel who have a good command of special knowledge and have obtained the practice qualification as a bankruptcy custodian.

Under any of the following circumstances, one may not assume the post of bankruptcy custodian:
(1) Having a record of criminal punishment for deliberate crime;
(2) Having been revoked of the relevant practice qualification certificate of related specialty;
(3) Having any interest with the case; or
(4) Any other circumstance under which the people's court deems it improper for him or her to act as a bankruptcy custodian.
Where an individual assumes the post of a bankruptcy custodian, he shall purchase the responsibility insurance for practice.

A bankruptcy custodian shall fulfill the following functions and duties:
(1) Taking over the asset, seals as well as the account books and documents of the debtor;
(2) Surveying the financial status of the debtor and formulating the financial statements;
(3) Determining the internal management of the debtor;
(4) Determining the daily expenditure and other necessary expenditures of the debtor;
(5) Determining, before the holding of the first meeting of creditors, whether to continue or terminate the debtor's business;
(6) Managing and disposing of the debtors' assets;
(7) Appearing in actions, arbitrations or any other legal procedures on behalf of the debtor;
(8) Suggesting the hold of creditors' meetings; and
(9) Fulfilling other functions and duties that the people's court believes it should perform.

In the case of any separate provision on the bankruptcy custodian's functions and duties in the present Law, it shall prevail.

About Northeast Revitalization Plan

On August 20, 2007, China announced Northeast Area Revitalization Plan (hereinafter referred to as “Plan”) officially. In this Plan, foreign funds and private capitals will be encouraged to participate in the reforming and reorganization of State-own enterprises in various forms, and they will be entitled to the treatments to the original State-owned enterprises in bad debt cancellation after verification, interest exemption and deduction, land use and other related tax and credit policies. They will be guided to invest in high technology industries, equipment manufacture, modern agriculture, service industry, and infrastructure and environment protection; however, they will be restricted or banned from investing in industries with high energy consumption, substance consumption and heavy pollution. This Plan arouses the extensive concern of the foreign capitals. I think, the foreign capitals need to consider the following points while facing this good investment opportunity: The cost of land is relatively low, but the policy is changing fast; The labor cost is relatively low, but the advanced managerial talent is insufficient; The environment governed by law is not good as is in the developed city.

Business of the Foreign-funded International Freight Forwarding Agent Enterprises

Since December 11, 2005, foreign-funded international freight forwarding agent enterprises can be established by foreign investors in the form of Chinese-foreign equity joint venture, Chinese-foreign contractual joint venture or wholly foreign-funded, can deal with international freight forwarding and relevant businesses for their consignors in their consignors' name or their own name upon commission of the consignees or consignors of the imported goods, and can collect remunerations for the services it provides.The minimum registered capital for setting up a foreign-funded international freight forwarding enterprise shall be 1 million US dollars, and may deal with part or all of the following businesses upon approval:
(1) booking (ship leasing, air chartering and cabin chartering), consigning, storing and packaging;
(2) supervision of loading and unloading of goods, consolidating and devanning, distribution, transferring and relevant short-distance transport services;
(3) acting as an agent to make customs declarations, check and inspection, and to purchase insurance;
(4) preparing the relevant documents, paying for the freight, settling and paying the miscellaneous expenses;
(5) freight forwarding of international exhibits, personal articles and goods in transit;
(6) international multimode transportation and consolidation (including container shipping);
(7) international express (excluding delivery of personal letters and official documents of any political party, the political and military bodies at and above the county level);
"personal letter" means the bill of document, certificate, valuable security, book draft, printed matter...etc. of each kind of file and not- personal attribute outside of letter.
(8) consultation and other international freight forwarding businesses.
Foreign-funded international freight forwarding agent enterprises undertaking international express delivery of letters or articles with the nature of letters (excluding delivery of personal letters and official documents of any political party, the political and military bodies at and above the county level) shall, upon approval of the commercial administrative department, go through the post authorization formalities with the post department.

Provided Foreign-funded international freight forwarding enterprise has started business operations for one year or more and its registered capital has been paid, it may apply for setting up branches in other places in the China. The business scope of a branch shall fall within that of the parent company. The civil liabilities of the branch shall be borne by the parent company. The registered capital of a foreign-funded international freight forwarding enterprise shall be subject to an increase of RMB 500,000 Yuan for each branch undertaking international freight forwarding businesses it sets up. If its registered capital has exceeded the minimum one, the exceeding part may be used as money for increasing the registered capital of the company.

The minimum registered capital of a qualified service provider from Hong Kong or Macao that invests in the Mainland to establish an international freight forwarding enterprise shall meet the following requirements:
(1) If he/it runs maritime international freight forwarding businesses, the minimum registered capital shall be 5 million Yuan;
(2) If he/it runs aerial international freight forwarding businesses, the minimum registered capital shall be 3 million Yuan; and
(3) If he/it runs overland international freight forwarding businesses, the minimum registered capital shall be 2 million Yuan.If he/it runs two or more items of businesses in the preceding paragraphs, the minimum registered capital shall be the minimum amount of the higher/highest one.
After investors establishing an international freight forwarding enterprise in China has paid all the registered capital, it may apply for setting up branches in other places in the China. Its registered capital shall be subject to an increase of RMB 500,000 Yuan for each branch it sets up. If its registered capital has exceeded the minimum one, the exceeding part may be used as money for increasing the registered capital for setting up branches.

Chinese Legal Frameworks

In order to create favorable investment environment and to encourage overseas firms to invest in China, since the year of 1979 the Chinese government has been gradually setting up a relatively complete legal system, and constituted a foreign investment policy system, which mainly includes industrial policies, regional policies, regional policies, tax policies and financial polices.

1.Legal Frameworks
The main laws and regulations for foreign investments in china include:
1.1Major foreign investment laws and regulations
a)The law of P.R, C on Chinese-Foreign Equity Joint Ventures and its implementation regulations;
b)The law of P.R, C on Chinese-Foreign Contractual Joint Ventures and its implementation regulations;
c)The law of P.R, C on Wholly Foreign-Owned Enterprise and its implementation regulations;
d)The law of P.R, C on Foreign-invested enterprises, the income tax and its implementation regulations;
e)Provisions on Guiding Foreign Investment Direction;
Industrial Catalogue Foreign Investment;
Catalogue of Advantageous Sectors for Foreign Investment in Central and Western Regions;
f)The law of P.R, C on the Protection Taiwan Compatriots’ Investment.
(Notes: the related laws and regulations also apply to the investments from Hong Kong, Macao and Taiwan in China mainland.)

2. General Laws and Regulations
a)The Company Law of the People’s Republic of China;
b)The Contract of the People’s Republic of China;
c)The Insurance Law of the People’s Republic of China;
d)The Arbitration Law of he People’s Republic of China;
e)The Labor Law of the People’s Republic of China;
f)Provisional Regulations of the People’s Republic of China on Value-Added Tax;
g)Provisional Regulations of the People’s Republic of China on Consumption Tax;
h)Provisional Regulations of the People’s Republic of China on Business Tax;

3. International Treaties
(1) Bilateral Investment Treaties
(2) Bilateral Agreement on the
Avoidance of Double Taxation

Establishment of Representative Office of Foreign Enterprises in China

A foreign enterprise, when applying for permission to establish a resident office in China, should produce the following documents and reference materials:

(1) An application form signed by the chairman of the board of directors or the general manager of that enterprise. The content of the application form should include such details as the name of the resident office to be set up, the name(s) of the responsible member(s), the scope of activity, duration and site of the office;

(2) The legal document sanctioning the operation of that enterprise issued by the authorities of the country or the region in which that enterprise operates;

(3) The capital creditability document issued by the banking
institution(s) which has business contacts with that enterprise;

(4) The credentials and brief biographies of the members of the resident office appointed by that enterprise.

A banking or insurance institution which desires to open a resident office should, apart from producing the documents and reference materials as specified in Paragraphs (1), (2) and (4) of the foregone section, produce at the same time an annual report on the assets and liabilities and losses and profits of the head office of that enterprise, its constitution and the composition of its board of directors.

Applications of foreign enterprises for permission to establish resident offices are to be approved by one of the following organizations:

(1) A trader, manufacturer or a shipping agent should apply to the Ministry of Foreign Trade of the People's Republic of China for approval;

(2) A banking or insurance institution should apply to the People's Bank of China for approval;

(3) A maritime shipping operator or a maritime shipping agent should apply to the Ministry of Communications of the People's Republic of China for approval;

(4) An air transport enterprise should apply to the General Administration of Civil Aviation of China for approval;

(5) Enterprises outside these lines of activity should, according to the nature of their operations, apply to the proper commissions, ministries or bureaus under the Government of the People's Republic of China for approval.

Liquidation Termination and Business Renewal of Foreign-funded Enterprises in the Liquidation Procedure

Where any foreign-funded enterprise suggests the termination of a contract and charter thereof ahead of schedule to dissolve the enterprise, it may enter into the liquidation procedure upon the approval of the relevant examination and approval organ. Where any enterprise, in the liquidation procedure, files an application for liquidation termination and business renewal, the examination and approval organ shall, on preconditions that it may not damage the interests of any enterprise creditor, third party or the public social interests, and may not breach any industrial policy on using foreign capital, allow the enterprise to stop the on-going liquidation and restart the operation thereof.

Any enterprise that applies for liquidation termination and business renewal shall observe the relevant laws and regulations of China and meet the following conditions:
1. The investors of the enterprise have unanimously agreed to the liquidation termination and business renewal;
2. The enterprise authority has decided to terminate liquidation and restart its business;
3. The liquidation committee has agreed on liquidation termination and business renewal and submits a statement on the liquidation progress thereof;
4. The enterprise has not written off its registration in the administration of industry and commerce;
5. The business operational term of the enterprise has not expired;
6. Meeting the requirements concerning the business place of legal person as provided by relevant laws and regulations;
7. The assets of the enterprise have not been distributed, or those shareholders who have got the said distributed assets have returned or have promised to return the assets of the enterprise within a specified period;
8. The enterprise and the investors thereof have no action in violation with any law, regulation or rule.

Therefore, the examination and approval organ shall require an applicant to submit the following documents:
1. An application letter on liquidation termination and business renewal which has been affixed with the signatures and the seal of all investors;
2. A decision of the enterprise authority on liquidation termination and business renewal;
3. An agreement letter of the liquidation committee on liquidation termination and business renewal;
4. A statement of the liquidation committee on liquidation progress;
5. The charter, contract, approval certificate and business license of the enterprise;
6. A document certifying that those shareholders who have got the distribution have returned the relevant assets or a letter of shareholders on promising to return the enterprise assets as distributed in a specified term;
7. Any other document as required by the department of commerce.

Where the examination and approval organ have checked that the aforesaid documents are inerrable, it may, in light of the application as filed by the enterprise for liquidation termination and business renewal, directly give an official written reply on whether or not to grant the approval thereof. For any written reply on liquidation termination and business renewal, the written reply on the approval for terminating the contract and charter ahead of schedule and dissolving enterprise does not have to be discharged. Any written reply of approval shall be simultaneously reported to the administrative department in charge of enterprises, the customs, administrative organs of foreign exchange, the registration organs of enterprises, taxation authorities, etc.

Obligations Of The Relevant Personnel Of The Debtor

During the period from the day when the court decides to accept an application for bankruptcy to the day when the procedures for bankruptcy are concluded, the relevant personnel of the debtor shall bear the following obligations:

(1) Properly preserving the assets, seals and account books as well as documents under its occupation and management;
(2) Working according to the requirements of the court and bankruptcy administrator and answering their inquiries in a faithful manner;
(3) Attending the creditor's meeting and answering the creditors' inquiries;
(4) Not leaving its domicile in the absence of permission of the court; and
(5) Not assuming any post of director, supervisor or senior manager in any other enterprise.

The term "relevant personnel" as mentioned in the preceding paragraph are the legal representatives of an enterprise, which may, upon approval of the court, include the financial managers and other operators of the enterprise.
After the court accepts an application for bankruptcy, the repayment of debts made by a debtor to individual creditors shall be invalidated.

On the Labor Contract Law

The Labor Contract Law of the People’s Republic of China was adopted by the Decision of the twenty-eighth Session of the Standing Committee of the tenth People's Congress on June 29, 2007 and shall come into force upon January 1, 2008. In comparison with the Labor law enacted in 1994, under this law protection laborers shall be improved and management costs of human resources undertaken by employers shall go up accordingly.

It is estimated that upon the effectiveness of this law great adjustment shall be made in those regulations on labor contract made by local governments and legislative mode on labor relations fixed on. And management concept of human resources held by employers shall be faced with subversive challenges, which certainly will have a deep effect on employers’ human resources management and comprehensive management. Some investors from abroad stand against this law, for the role of workers union under the leadership of the Communism Party of China shall be emphasized and workers union shall be entitled to sign collective contract on wage and welfare on workers’ behalf. However, most medias from abroad make a positive evaluation of this law, because it is demanded in this law that employers should sign a written contract with their employees and temporary workers should be limited which shall help more and more laborers obtain a long-term employment guaranty. More important, public opinions have been widely asked for since the first draft was published by China government on April, 2006. Although some provisions that multinational corporations request to retract at their utmost are still retained in this law, they express satisfaction with government’s permitting public’s participation and accepting public opinions in the process of legislation. We’d like to list out some provisions in the Labor Contract Law to show its difference with the Labor Law enacted in 1994: 1. If, prior to the renewal, a fixed-term employment contract was concluded on two consecutive occasions, an open-ended employment contract shall be concluded. 2. If an Employer fails to conclude a written employment contract with a Employee within one year from the date on which it starts using the Employee, the Employer and the Employee shall be deemed to have concluded an open-ended employment contract. 3. If an Employer fails, in violation of this Law, to conclude an open-ended employment contract with a Employee, it shall each month pay to the Employee twice his wage, starting from the date on which an open-ended employment contract should have been concluded. 4. The employment contracts between staffing firms and the Employees to be placed shall be fixed term employment contracts with a term of not less than two years. Staffing firms shall pay labor compensation on a monthly basis. During periods when there is no work for Employees to be placed, the staffing firm shall pay such Employees compensation on a monthly basis at the minimum wage rate prescribed by the People’s Government of the place where the staffing firm is located. 5. Staffing firms shall inform the Employees placed of the content of the placement agreements. Staffing firms may not pocket part of the labor compensation that the Accepting Units pay to the Employees in accordance with the placement agreement. Staffing firms and the Accepting Units may not charge fees from the Employees placed Now we’re focusing on studying in detail effects that the Labor Contract Law may bring about on China's labor legal system in existence so as to assist our clients in renewing their management system of human resources.

Procedure Law And Court Rules

Authored by: Luo Wei  

Table of Contents  
    I.Legislative History
    II.Distinctive Characteristics of Chinese Civil Procedure Law
    1.Trial Independent Resting in Courts not Judges or Benches
    2.Two Trials to Conclude a Case
    3.Procuracies'Supervision of Civil Adjudication
    4.Proactive Role of Chinese Judges
    5.Mediation
    6.Involvements of Litigants'Units (Employers)
    7.Separated Set of Procedures for Maritime Litigation
    III.Judicial Interpretations for the Civil Procedure Law
    VI.Conclusion 

This introduction briefly surveys the legislative history of Chinese civil procedure law and discusses some distinctive characteristics of the Chinese civil procedure law. This introduction will help readers understand the evolution of China’s civil procedure law, the different practices in Chinese civil proceedings, and how the Chinese civil procedure legislation is supplemented by the judicial interpretations.

I. Legislative History Although, in ancient China,there were rich histories in codifying laws into statutes,there was no separate statute on civil procedure until 1910 when the Court of the late Qing Dynasty promulgated the Qing Imperial Code of Civil Procedure [Daqing minshi susong lü or《大清民事诉讼律》].This law was formulated by imitating the Japanese Civil Procedure Law of 1890 under the supervision of Mr. Shen Jiaben [沈家本 1840-1913], the Commissioner of the Legal Reform Commission.Because the Japanese Civil Procedure Law of 1890 was modeled after the German Imperial Code of Civil Procedure of 1877,the Qing Imperial Code of Civil Procedure mirrors the basic legal characteristics of the civil law system. One year later in 1911, the Qing Dynasty was overthrown by a revolution, and the Republic of China was founded. Soon after the Republic of China was founded, China fell into civil war.The central government (was also called the Northern Government [Beiyang Zhengfu or 北洋政府]) established in Peking (Beijing) was controlled by the northern warriors, while the more revolutionary factions led by the Nationalist Party established the Nationalist Government in Guangzhou in 1921. During this period of time, the Northern Government and the Notional Government promulgated their own versions of the civil procedure law respectively. In 1928 when the arm led by the Nationalist Party unified China, the Nationalist Government established its capital in Nanjing. In 1935, the Nationalist Government promulgated the Civil Procedure Law of the Republic of China.

In 1927 when Nationalist Government began to crack down the Chinese Communist Party (CCP),the CCP turned its revolutionary movement into underground.In November 1931, the CCP established the Chinese Soviet Republic with about a dozen revolutionary bases in some rural areas in China, mainly in the Jianxi Province. Between 1931 and 1937 when the CCP entered the united front with the Nationalist Government to fight against the Japanese aggression, to rule its territory and pursue the communist revolution, the Government of the Chinese Soviet Republic departed from the legal system established by the Nationalist Government and issued a series of decrees. Some of these decrees dealt with the issues of judicial procedures but there was no decree specialized in civil procedure.Between 1937 and 1949, the local governments in the areas under the CCP controlled basically followed the legal system established by the Nationalist Government but also developed the principle of “mediation first and trial second” [tiaojie weizhu,shenpan weifu or 调解为主, 审判为辅] in the civil litigation.This principle still influences today’s Chinese civil litigation.

In February 1949,eight months before the People’s Republic of China (PRC) was founded, the Central Committee of the CCP issued the Order on the Abolition of Six Laws System of the Nationalist Party and Establishing the Judicial Principles in the Liberated Areas.This order abolished all the laws and the judicial system created by the Nationalist Government.It also instructed communist judicial institutions to handle matters according to the provisions of the programs, laws, orders, acts, or resolutions made by the CCP, and to apply the CCP’s policies when no such provisions existed. The principle of this order also was adopted in the Common Program which served as the interim constitution for the PRC from 1949 to 1954.

On September 15,1954, The First Plenary Meeting of the First National People’s Congress (NPC) was held in Beijing.On September 20, 1954, the first constitution of the PRC and the Organic Law of the National People’s Congress were enacted and promulgated. The next day, the NPC also enacted and promulgated the Organic Law of the State Council, the Organic Law of the People’s Courts, the Organic Law of the People’s Procuracies, and the Organic Law of Local People’s Congresses and Local People’s Committees at All Levels. Finally, these laws gave a legal basis to establish a governmental structure for the PRC based on the socialist ideology. In the 1950’s,the PRC tried to develop a legal system by imitating the former Soviet Union’s legal system.The PRC employed the socialist ideology created by Marx and Lenin, which stressed that law and the legal system represented the will of the ruling class in a class society, as they were instruments for the ruling class to oppress the governed class. Due to constant political movements and the Culture Revolution, there had not been many legislative creation and publication activities before 1978 when the PRC began its economic reform.

Although the government of the PRC ran the country without a civil procedure law until 1982, the Chinese courts relied on the civil procedure rules promulgated by the Supreme People’s Court (SPC).In October 1956, the SPC published the Summary of the Civil Case Adjudication Procedures of the People’s Courts at All Levels.Based on this summary, in 1957,the SPC formulated and promulgated the Adjudication Procedure of Civil Cases.In 1979, the SPC also promulgated a new set of civil procedure rules called the Provisional Regulations on the Procedure System for the People’s Courts to Adjudicate Civil Cases. After the Cultural Revolution ended in 1976, and particularly after Deng Xiaoping (1904–1997) was restored to power in 1978, the new Chinese leaders started an ambitious campaign to establish a modern legal system and bring the rule of law to China,albeit within the context of a socialist dictatorship.The three very basic laws that China needed but did not have at that time were criminal code,criminal procedure code,and civil procedure code. In 1979,the NPC enacted the criminal code and the criminal procedure code first. In September 1979,the Legal Affairs Working Commission of the NPC’s Standing Committee began to draft the first civil procedure code. On March 8, 1982, the NPC’s Standing Committee enacted the first civil procedure law of the PRC on an experimental basis or the Provisional Civil Procedure Law [min shi su song fa (shi xing) or民事诉讼法(试行)].

After nine-year experimental application of this provisional civil procedure law,on April 9, 1991,the NPC enacted a new civil procedure law at its Fourth Session of the Seventh Congress.During these nine years, China had transformed its economic system from the planed economy to the market economy,the privately-owned businesses also grew tremendously,and the legislations related to civil laws such as the Marriage Law,the Succession Law, the General Principles of Civil Law,the Economic Contract Law, etc had been enacted. In 1986,the Legal Affairs Working Commission of the NPC’s Standing Committee began to revise the provisional civil procedure law according to these changes and these new legislations.The Provisional Civil Procedure Law of 1982 had 205 articles while the Civil Procedure Law (CPL) of 1991 has 270 articles. The CPL of 1991 has existed for twenty-five years and has not been amended.

II. Distinctive Characteristics of Chinese Civil Procedure Law

Although the CPL of 1991 looks as similar to a piece of legislation based on the continental European legal model, it has some of its distinctive characteristics because of the influences of the current Chinese social system, judicial establishment,culture value,and legal traditions.Such distinctive characteristics are summarized and discussed as follows.

1. Trial Independent Resting in Courts not Judges or Benches

Unlike Western countries and the United Nations, which consider the core principle of judicial independence as the independence of judges,the Chinese constitution only recognize the judicial independence of courts.In addition, according to Article 11 of the Organic Law of the People’s Court, every people’s court must establish an adjudicating committee that has the power to discuss and decide significant or difficult cases and other issues related to adjudication. Such a setting obviously undermines the judicial independence of trial judges and collegial benches. If a case is considered significant or difficult, it may have to be submitted to the adjudicating committee to discuss and decide the judgment. The problem is that the adjudicating committee decides the judgment behind closed doors instead of before the court. As a result, the adjudicating committee does not hear the testimonies of witnesses and the verification of evidence before the court. The rights of the plaintiffs and defendants to an open and fair trial could be denied.

This Chinese concept of judicial independence of courts resulted in the current system of Chinese trial and judgment delivery discussed above and gives some leeway for other members of the courts to intervene in trial outcomes. Therefore, some Chinese jurists challenge the legality of the final review power resting on the adjudicating committees of local courts.Some even argue that China should treat the independence of trial judges as the center of judicial independence and abandon the establishment of adjudicating committees.However, some believe that the pros outweigh the cons resulting from the current establishment of the adjudicating committees in local courts because it serves to prevent corrupt judges from giving unfair judgments. Of course, one of the fundamental problems of judicial independence in China is due to the current political system, under which the courts’ budgets and judges’salaries are controlled by their local governments while the judges’promotions and removals are mainly controlled by the central government.

The Five-year Reform Plan of the People’s Courts promulgated in October 1999 aims to establish a fair, clean,and efficient judicial system and deals with some of the problems stated above. One of its major reforms is to increase the responsibility of the collegiate benches and independent judges in adjudication. According to the plan, except for those very “significant and difficult” cases that should be submitted to the adjudicating committee for judgment, the collegiate benches and independent judges should determine all cases. The presidents of the people’s court cannot change their judgments. However, it is the adjudicating committee of the people’s courts that has the power to decide which cases are to be considered “significant and difficult.”For these cases, the adjudicating committee can still decide the judgments behind closed doors. Therefore, independent power of adjudication of judges and even collegiate benches remains limited.

2. Two Trials to Conclude a Case

In 1954 when the PRC enacted its first Organic Law of the People’s Court, it adopted the principle of “the four levels of courts and at most, two trials to conclude a case”, which means one trial at the first instance and one trial at the second instance (on appeal) to conclude a case. Therefore, most Chinese litigation is adjudicated in basic people’s courts (at county level) or intermediate people’s courts (at metropolitan city level), while higher people’s courts, and the Supreme People’s Court handle appeals. Intermediate people’s courts handle cases appealed from judgments entered by basic people’s courts. The CPL also follows this principle. Article 158 of the CPL proscribes:“The judgments and rulings of a people's court of the second instance shall be final.” According to the Chinese scholars,the main reasons behind this principle are (1) to reduce the financial burdens of litigating parties, (2) to avoid the prolong of litigation, and (3) to prevent the higher courts and the Supreme People’s Courts from being overwhelmed with adjudicating appeals so that these courts can focus on directing and supervising the operations of lower courts.

Not all civil cases need to be adjudicated under the principle of “four levels of court but two trials to conclude a case.” Some civil cases only take one trial for the conclusion, such as the cases only to be adjudicated by the SPC and the cases to be adjudicated by local courts according to the Spcial Procedure,the Procedure for Hastening Debt Recovery, and the Procedure of Public Summon.

Because the principle of “two trials to conclude a case” lacks the third tier judicial review, some Chinese jurists had a concern that it may not be adequate to make sure all possible judicial remedies can be exhausted. To make up this shortcoming, the Chinese legislators added the Procedure of Adjudication Supervision in the CPL as Chapter 16. Under the Procedure of Adjudication Supervision, (1) when a court discovers any of the judgments or rulings made by its own judges or benches have mistakes, the court may decided to retry these cases; (2) when the SPC or a court at high level finds any of the judgments or rulings made by a lower court have mistakes, the court may bring these cases up for a new try or order the lower court to retry these cases; (3) if a party believes that a judgment or ruling has mistake, he may plead the court that adjudicated his case or the court at higher level to retry the case; and (4) the Supreme People’s Procuracy or a procuracy at higher level may request a court at lower level to retry some cases under certain circumstances.

3. Procuracies’Supervision of Civil Adjudication

The functions and powers of the people’s procuracies are rather unique compared to the prosecuting organs of the most of western countries.Under Article 17 of the Organic Law of the People’s Procuracy of 1979,the people’s procuracies not only investigate and prosecute criminal cases but also have the powers to supervise the adjudications conducted by the people’s court at all levels. This power can be traced back to Article 129 of the Constitution and is confirmed by the Criminal Procedure Law,the Civil Procedure Law,and the Administrative Litigation Procedure Law.Under Chapter 16 Procedure of Adjudication Supervision of the CPL, if the Supreme People’s Procuracy or a local procuracy discovers that any judgments or rulings were made under the circumstances of insufficient evidence, mistakes, violation of procedure, or corruption, the procuracy may file a protest against the court that rendered these judgments or rulings. The court that receives such a protest must re-adjudicate the case.Since no procuracy participates in civil litigations of either first or second instance, how does a procuracy knows that a judgment or ruling is made under the circumstances described above? Normally, the civil litigants who believe that the judgments might be unfair or the adjudications might have involved with corruption practice may file complaints to the people’s procuracies. If a procuracy believes that a complaint is reasonable, it may investigate the allegation. If the allegation is true, the procuracy may file a protest against the court that rendered the judgment and demand a retrial.

Every year,the Chinese procuracies file thousands of protests against the judgments or rulings made by Chinese courts.In 2002, the Chinese procuracies filed 8,921 civil case protests (this figure does not include economic and intellectual property dispute cases) and among them, 4,069 cases received different judgments and 601 cases were dismissed after they had been re-adjudicated by courts.Some of these civil protested cases have been compiled by the Procurating Department of the Supreme People’s Procuracy and published by China Law Press since 1999.

It may be understandable that the Chinese procuracies have this judicial supervision power to contest Chinese courts in criminal cases because the major function of the procuracies is to prosecute criminals. However, it is hard to understand the necessity to give the procuracies such a power in civil litigation. The Chinese legal academia believes giving such a power to the procuracies is unnecessary and allows the procuracies to encroach upon the principle of judicial independence.

4. Proactive Role of Chinese Judges

Although the judicial independence of Chinese Judges is confined by the adjudication committees, Chinese judges play more proactive role in Chinese civil proceedings. The CPL requires trial judges to ascertain facts.In addition, Article 116 of the CPL requires trail judges to review all the files for a civil case carefully and authorizes the judges to investigate and collect evidence as necessary before the trial commences. Event for appealed cases, the judges of appellate courts should also verify the facts of the appealed case by consulting the files, making necessary investigations, and questioning the parties.Under these provisions, the judges must not only make sure that all the evidence provided by civil disputing parties is truthful but also ascertain the facts that are not claimed by the litigants.In other words, even if parties provide evidence, the judges may also conduct their own investigation and collect any relevant evidence as long as they believe it is necessary. When Chinese judges investigate civil cases or collect evidence, all individuals and units have to assist them.

Clearly, China adopted the inquisitorial model for its civil procedure.This model is influenced by the former Soviet Union’s judicial system in which judges not only control trials but also have the power to investigate civil cases, verify evidence provided by litigants and collect additional evidence.

The Chinese judicial procedure does not have a jury system like the common law countries but has a check-and-balance system called the People’s Assessor System to make sure that the trials and judgments would be fair. However, the People’s Assessor System is very different from the American jury system. Under the People’s Assessor System, the people’s assessors are not selected randomly, instead, they are firstly picked and screened by the local people’s courts with the local justice departments and then the popele’s courts ask their local people’s congresses to confirm their selections.The term of a people’s assessor is five years with unlimited possibility of renewal.Even though the Chinese law proscribes that the people’s assessors have the same power as judges, the law only provides that the people’s assessors should not be less than 1/3 of the members of a collegial bench.Therefore,in most of cases,the judges are the majority members of a collegial bench. Because the decisions of a collegial bench are based on the views of its majority members, the judges’opinions would prevail if the judges outnumber the people’s assessors.

5. Mediation

The concept of mediation is deep rooted in Chinese culture, philosophy, and history. Since the ancient time, the Chinese focal philosophy has been “the mean” [zhongyong or 中庸] and the teaching of “harmony is the most valuable”[he wei gui or和为贵] is embedded in every Chinese mind. Therefore, in the past, it was very common for Chinese people to settle their civil disputes by seeking mediation from their local elders. Even today, many Chinese would choose mediation rather than courtroom litigation. Today’s Chinese mediation can be categorized into two major systems of mediation. One is the people’s mediation [renmin tiaoju, 人民调解, or civilian mediation] system and the other is the mediation system conducted by the people’s courts.

In 1954, the State Council promulgated the Provisional Organic Regulation on the People’s Conciliation Committee [《人民调解委员会暂行组织通则》] to establish the civilian mediation system.This provisional regulation was replaced by Organic Regulation on the People’s Conciliation Committee also promulgated by the State Council in May 1989. Under the system, a People’s Conciliation Committee should be established for every village in countryside and neighborhood in city. Each committee consists of three to nine mediators whom are elected by local citizens every three years. In 1989, there were 1,006,040 People’s Conciliation Committees and 5,937,110 people’s mediators in China. Under the leadership and direction of the basic level governments (township) and the basic level people’s courts, the People’s Conciliation Committees mediate local civilian disputes presented by individual parties according to Chinese laws, administrative regulations, government policies, and the moral standards of the society.However, the legal binding effect of the mediation agreements is limited because any party dissatisfies with a mediation result, even after a mediation agreement has been reached, he still can file a lawsuit to a people’s court for adjudicating the dispute.

In 2002, 4,636,139 civilian disputes were settled through the mediation of the People’s Conciliation Committees in China while 4,393,306 civil and commercial lawsuits combined were adjudicated by the people’s courts.It can be seen that the people’s mediation system plays a very important role in the Chinese legal system. However, from the following statistical comparison table, it can be seen that gradually, more and more Chinese have chosen courts to settle their civil disputes.

Table 1. The Statistical Comparison of the Civil Cases Mediated by the People’s Conciliation Committees Versus the Civil, Commercial, and Economic Cases Adjudicated by the People’s Courts

Year Cases Mediated by the People’s Med. Committees Cases Adjudicated by the People’s Courts Med. :

Adj. Ratio
1986 7,307,049 1,311,562 7:1
1992 6,173,209 2,596,804 6.2:2.6
1997 5,543,166 4,720,341 5.5:4.7
2002 4,636,139 4,393,306 4.6:4.4

The decline of the civilian disputes presented to the People’s Conciliation Committees for settlement is probably due to three major reasons. The first reason should be the establishment of the people’s courts and the qualification improvement of judges. Between 1949 and 1983, there was no law to specifically describe qualifications for judges in China.During this time, most Chinese judges were selected by the central and local party organizations based on their loyalties to the party and how closely they were associated with the party. As a result,the retired officials of the People’s Liberation Army became the major source for the judges and prosecutors.In 1983 when the 1979 Organic Law of People’s Courts was amended, the words “the adjudicators of people’s courts shall have legal knowledge” were added into Article 34. Because of this provision, some of the judges who did not have a law degree tried to obtain a formal legal training. Since 1995 when the Judges Law of the PRC were first promulgated, all the judges who did not have a law degree had to go through a certain legal training program accredited by the government to be able to stay in the position of judges. In 2001 when the Judges Law was amended, the legal education standards to qualify as a judge or a prosecutor were raised. Since then, the minimum educational requirement for a new judge or prosecutor is a bachelor degree. Since 2001, besides having legal education requirements, to be qualified as a candidate for a judge or prosecutor, one also needs to obtain the Legal Professional Qualification Certificate [falü zhiye zige zhengshu or 法律职业资格证书] after passing the National Judicial Exam.

The second reason should be that the urbanization of the rural population and the free floating of working population have changed the people’s traditional bondage to their local village or neighborhood committees. And the People’s Conciliation Committees are created under these local village and neighborhood committees. The third reason should be that the civil disputes have grown more sophisticated in China. Many Chinese do not feel confident to submit their disputes to the People’s Conciliation Committees for settlement.

As mentioned above, between 1937 and 1949, the principle of “mediation first and trial second” [tiaojie weizhu shenpan weifu or 调解为主, 审判为辅] for the civil litigation was established in the areas under the communist army’s control. This principle had been practiced by Chinese courts until April 1, 1991. Before April 1, 1991, Chinese courts needed to focus their efforts on mediation in civil litigation.The Civil Procedure Law of 1991 changed this practice into the new practice of mediating civil disputes based on the principle of voluntariness of the parties.Since then, the courts would offer mediation options to civil litigation parties and would not mediate civil disputes against any parties’ wishes. The following statistical comparion table shows that the percentage of civil and commercial disputing cases mediated by the Chinese courts of first instance has been steadily declining since 1992 after the CPL of 1991 became effective.

Table 2.The Statistical Comparison of the Percentage of Civil, Commercial,and Economic Cases Mediated by the Chinese Courts of First Instance in 1990,1992,and 2001

Year Case Types Total Cases Accepted Cases Mediated Percentage of Cases being Mediated
1990 Civil 1,851,897 1,194350 64%
1990 Commercial 588,143 414,580 70%
1992 Civil 1,948,786 1,136,970 58%
1992 Commercial 650,601 397,404 61%
2001 Civil 3,459,025 1,270,556 37%
2001 Commercial 1,155,992 351,776 30%

The decline of civil and commercial disputes mediated by the people’s courts is probably due to the reason that the mediation is easier for judges to engage in corruption and to practice favoritism. The CPL does not proscribe the specific method of the mediation. In reality, many Chinese judges mediate civil disputes without both parties presenting before them.Some judges who took bribes from the parties had used their positions to press the other parties to accept the settlements that may not be fair. Because trial is open and all the facts involving in a civil case should be clarified and judgments should be rendered based on law, more and more Chinese gradually feel more comfortable to put their disputes on trial instead of mediation. 

6. Involvements of Litigants’ Units (Employers)

Since the socialist system was established in 1950’s in China, the unit that each individual belongs to or work for have become a very important part of his or her life event in personal matters. For those Chinese who are not employed, the neighborhood committees or the villege committees located in the places where they live are treated as their basic units. Before the Chinese economic reform started in 1978, most of Chinese would work for a unit for the rest of their lives. Although, today, Chinese can quit and choose any units or employers as they wish and most Chinese units or employers can fire any of their employees (except civil servants), the units or employers still play a very important role in their employees’ personal files, which can also be reflected from the Chinese civil procedure law.

There are very provisions in the CPL, which involves the units of civil litigants in civil proceedings. Article 15 of the CPL provides that any relevant state organs, organizations, units, or employers may support individuals or units whose civil rights have been infringed to file civil lawsuits.This provision obviously authorizes the state organs and units to intervene civil disputes among individuals or units especially under the circumstances if the victimized individuals or units are afraid of litigation. The rationale of this interference is to protect the legitimate interests of the state and individuals and to fight against illegal civil acts.The supports of litigation normally include the following actions: to explain the relevant laws and government policies to the victimized individuals or units, to encourage them to file lawsuits with people’s courts, to help them with legal paper work, and testify for them before the courts, etc.Some Chinese see this intervention of units as the state’s encroachment of people’s private life.

Other provisions of getting units or employers involved in the Chinese civil proceeding also include the following circumstances. When a party becomes incapacitated and his close relatives are not available, his unit or employer may recommend someone to represent him in his civil action.Not only any units that have information about a case are obligated to testify in court, but also the relevant units shall encourage their employees who have the knowledge of a case to give testimonies.When a court sends an inspector to inspect or examine physical evidence on site, the inspector must invite the relevant unit to send personnel to participate in the inspection.When a party and his close relatives of a civil litigation refuses to accept a court order, the court may also ask the relevant basic organization or unit to which the party belongs for assistance in serving the court order.If a unit fails to assist the courts in judicial investigation or enforcement, the unit may be imposed with fine.

7. Separated Set of Procedures for Maritime Litigation

Until July 1, 2000 when the Special Maritime Procedure Law (the SMPL) became effective, maritime litigation procedure in China was governed by the general Civil Procedure Law and by a variety of judicial interpretations and provisional documents issued by the Supreme People’s Court (SPC), dealing with issues such as maritime dispute jurisdictions and the arrest of ships.However, before the SMPL was enacted, in 1984, the NPC passed a resolution to authorize the SPC to establish maritime courts along the Chinese costal cities.Since 1984, ten maritime courts have been established in ten port cities along the coast, namely (from north to south) Dalian, Tianjin, Qingdao, Shanghai, Ningbo, Xiamen, Guangzhou, Haikou, Beihai, and Wuhan that is not on coast but a port city along Yangtse River. A maritime court's level is equivalent to an intermediate people's court and its appellate court is the higher court of the province or the metropolitan city directly under the central government (such as Shanghai and Tianjin).

The initial purpose of establishing the maritime courts was to response to the rise of maritime disputes and the needs of the special expertise in adjudicating maritime cases.In 1978, China began to reestablish its judicial system but in early 1980s, China still lacked qualified judges. Therefore, the establishment of the maritime courts solved this problem by concentrating all maritime litigations on the maritime courts. Soon after China began its economic reform and adopted open-door policy, Chinese foreign trade and shipping industry have been expended rapidly.Today, China has emerged as one of the major international trade partner and a major maritime nation. Therefore,as early as 1990s, Chinese Government brought forward an ambitious plan to make China become one of centers in the world for both maritime transportation and maritime dispute resolution. Between 1980 and 1998, the annual growth rate of Chinese ships in tonnage was 7.7% while the world average growth rate was only 1.3%.The maritime cases accepted by the Chinese maritime courts for adjudication grew from 753 cases in 1990 to 5,166 cases in 1998.To respond to this plan,the NPC,the State Council,and the SPC have enacted and promulgated a series of significant laws and regulations on maritime disputes among them the Maritime Law and the SMCP are most important.In addition to enacting domestic laws, the Chinese government has also ratified most of the maritime conventions.Today, China has established a quite sophisticated judicial regime for the resolution of maritime disputes.

As early as 1985 when the Standing Committee of the NPC passed the resolution to establish the maritime courts, the resolution also gave the maritime courts with the authority to adjudicate all maritime cases involving carriage by sea and river at first instance. In 1989, the SPC promulgated the Rule on the Jurisdiction of the Maritime Courts, which further defined the jurisdiction of the maritime courts.The scope of the maritime courts’ jurisdiction is later confirmed, detailed, and expended by the SMPL. In addition to what the CPL has provided for territorial jurisdiction, the SMPL has furthermore provided for free choice of Chinese jurisdiction by the parties in dispute, thus, even though the dispute does not occur within Chinese territory, a Chinese maritime court should have jurisdiction over the dispute if the written agreement of the parties so provided. For any issues not covered by the SMPL, the CPL will apply. The SMPL covers the main issues frequently involved in maritime litigation including jurisdiction, arrest of ships, injunctions, preservation of evidence, security, and service of court documents, trial and other related procedures. The SMPL also provides a comprehensive set of rules designed to meet the special requirements of maritime litigation.

III. Judicial Interpretations for the Civil Procedure Law China

adopted the Continental European Civil Law System but does not formally recognize the precedent authority of case law. But the Chinese statutes are generally abstract and vague. In addition, it normally takes a long time to amend statutes. Therefore, in 1981, the NPC Standing Committee passed a resolution to authorize the SPC to interpret questions involving the specific application [juti yingyong or具体应用]] of laws and decrees in trials.According to this resolution, it can only be construed that the NPC only authorizes the SPC to interpret specific issues derived from concrete cases regarding application of laws and regulations. Inherently, courts should have power to apply law or interpret law on specific cases. However, since 1981, the SPC has not only issued legal opinions upon specific requests from lower courts but also proactively promulgated hundreds of judicial interpretations dealing with broader and presumed legal issues of applying laws without any specific requests from lower courts.

Because the power of approving a judicial interpretation resides with the Adjudicating Committee of the SPC and the committee only consists of about ten members, if a judicial interpretation dealing with substantive law and constitutes an act of legislature, it seems too lucrative for the SPC to issue such judicial interpretations to supplement the legislature. Many Chinese jurists also criticize such practice. Regardless the legitimacy of the SPC’s power to issue judicial interpretations, such a kind of interpretations forms a very important source of Chinese law.

As discussed in the brief history of Chinese civil procedure law above, before the existence of the Chinese civil procedure law, in 1957, the SPC formulated and promulgated the Adjudication Procedure of Civil Cases, and in 1979, promulgated the Provisional Regulations on the Procedure System for the People’s Courts to Adjudicate Civil Cases, which lasted until the CPL of 1991 was promulgated. In 1984, two years after the provisional CPL of 1982 was promulgated, the SPC issued two rules regarding the applications of the provisional CPL. They were the Opinion on Several Issues of Enforcing the Provisional Civil Procedure Law and the Answers to Several Issues Regarding How to Apply the Provisional Civil Procedure Law in the Adjudication of Economic Disputes.On July 14, 1992, a little bit more than a year after the CPL of 1991 was promulgated, the SPC issued the Opinion on Several Issues Regarding the Application of the CPL of the PRC. This Opinion serves as the second most important legal instrument for the Chinese civil procedure next to the CPL of 1991 (the full-text of this Opinion was translated and included in this book).

Besides the judicial opinions directly interpreting the CPL, the SPC also issues many rules to deal with more general issues that CPL fails to address. Such as, the Several Rules on Evidence in Civil Procedures,the Rule on the Review of Civil Case Files Conducted by Litigation Representatives,and the Several Rules on the Application of the Summary Procedure in the Adjudication of Civil Cases 1991 (the full-text of these three rules were translated and included in this book).These rules serve as court rules to supplement the CPL and the Opinion of the SPC on Several Issues Regarding the Application of the CPL. For example, China still does not have a piece of legislation on evidence so the Several Rules of the SPC on Evidence in Civil Procedures becomes very important to know how evidence is collected, evaluated, presented, examined, cross-examined, and admitted in civil proceedings.

After running a combined search of the subject as “civil procedure” and the promulgator as “the Supreme People’s Court” on the Database of Chinese National Laws, Administrative Regulations, Rules, and Judicial Interpretation at http://law.Chinalawinfo.com, as of July 9, 2005, it retrieved 650 pieces of the judicial interpretations and opinions issued by the SPC related to the civil procedure rules since 1949.It can be seen that there is a vast of the legal instruments issued by the SPC. Therefore, it is also very important to study these instruments when trying to learn the Chinese civil procedure law.

VI. Conclusion

Although the Chinese civil procedure law has its distinctive characteristics that are unfamiliar to the most of Western jurists, it can be seen that the significance in some of these characteristics have been diminishing. As China continues to deepen its judicial reform and polish its legislation and judicial interpretations on the civil procedure law and relevant court rules, it is optimism to foresee Chinese judges would become more independent from administrative influences, more ethical in adjudicating civil cases, and more competent in rendering fair judgments; the Chinese people’s mediation system and the mediation conducted by judges would continue to play a very important role in the reconciliation of civil disputes while more and more Chinese would submit their civil cases to the people’s courts for trials; and the inferences of individual lives from the state and employers would become minimums. The Chinese judicial system has developed a very sophisticated and relatively independent regime for adjudicating maritime disputes. Therefore, when dealing with maritime disputes, not only substantive law on maritime but also a different set of maritime procedure law and rules need to be consulted. Finally, the court rules formulated and issued by the SPC have filled some gapes and patched some holes for the Chinese civil procedure system although the CPL has not been amended 1991. Therefore, no one should overlook the judicial interpretations and opinions of the SPC.

【注释】
　　 [1]Zhongguo fa zhi tong shi [Chinese Legal History or《中国法制通史》] vol. 9, at 302─303 (Zhang Jinfan, et al. ed. [张晋藩等编], Beijing: Fa lü chu ban she 1999).
[2]Id. at 303─304.
[3]Hideo Tanaka, et al. ed., the Japanese Legal System 506 (Tokyo: University of Tokyo Press, 1976).
[4]Zhongguo min shi su song fa jiao cheng [the Textbook of the Chinese Civil Procedure Law 《中国民事诉讼法教程》] 25 (Beijing: Ren min fa yuan chu ban she [the People’s Court Press], 1994).
[5]Id.
[6]Id. at 26.
[7]Id. at 26 & 27.
[8]Guan yu fei chu Guomindang liu fa quan shu yu que li jie fang qu de si fa yuan ze de zhi shi [The Order on the Abolition of the Six Laws System of the Nationalist Party and Establishing the Judicial Principles in the Liberated Areas or《关于废除国民党六法全书与确立解放区的司法原则的指示》].
[9]Xin Chunying, Chinese Legal System & Current Legal Reform 333 (Beijing: China Law Press, 1999).
[10]Guan yu geji ren min fa yuan min shi an jian shen pan cheng xu zong jie [the Summary of the Civil Case Adjudication Procedures of the People’s Courts at All Levels or《关于各级人民法院民事案件审判程序总结》].
[11]See supra note 4, at 30. Min shi an jian shen pan cheng xu [the Adjudication Procedure of Civil Cases or《民事案件审判程序》].
[12]Zuigao renmin fayuan ren min fa yuan shen pan min shi an jian cheng xu zhi du de gu iding (shi xing)《最高人民法院人民法院审判民事案件程序制度的规定(试行)》was promulgated by the SPC on Feburary 2, 1979 and repealed in 1991.
[13]See supra note 4, at 28─29.
[14]Basic Principles on the Independence of the Judiciary, adopted by the Seventh United Nations Congress on the Prevention of Crime and the Treatment of Offenders held at Milan from 26 August to 6 September 1985 and endorsed by General Assembly resolutions 40/32 of 29 November 1985 and 40/146 of 13 December 1985, says: “Whereas judges are charged with the ultimate decision over life, freedoms, rights, duties and property of citizens.”
[15]Article 125 of the 1982 Constitution and Article 4 of the Organic Law of the People’s Court (1983) proscribe: “The people’s courts exercise judicial power independently in accordance with law without any interferences from administrative agencies, organizations, or individuals.”
[16]Wang Liming [王利明], Si fa gai ge yang jiu [Judicial Reform Studies or《司法改革研究》] 197 (Beijing: Fa lü chu ban she, 2000).
[17]He Weifang [贺卫方], Si fa de li nian he zhi du [Judicial Concepts and System or《司法的理念和制度》] 122 (Beijing: the Press of the China University of Political Science and Law, 1998) and see also Wang Pang [王盼] et al., Shen pan du li yu si fa gong zheng [Adjudication independence and Judicial Fairness or《审判独立与司法公正》] 61–62 and 486–489 (Beijing: the Press of the China University of People’s Public Security, 2002).
[18]Wang Liming, supra note 171, at 195.
[19]Item 20 of Ren min fa yuan wu nian gai ge gang yao [the Five-year Reform Plan of the People’s Courtsor or《人民法院五年改革纲要》] promulgated by the Supreme People’s Court in 1999.
[20]Id.
[21]Fayuan siji liangshen zhongshen zhi or 法院四级两审终审制.
[22]Article 11 of the Organic Law of the People’s Court [Renmin fayuan zuzhi fa or 人民法院组织法] of 1954 and Article 12 of the Organic Law of the People’s Courts of 1979 (amended in 1983).
[23]Min shi Su song Fa [Civil Procedure Law] 75─76 (Jiang Wei et al. eds., Beijing: Zhongguo zheng fa da xue chu ban she [the Chinese People’s University Press], 2000).
[24]See Chapter 14 of the CPL for the Spcial Procedure, Chapter 17 of the CPL for the Procedure for Hastening Debet Recovery, and Chapter 18 of the CPL for the Procedure of Public Summon.
[25]Articles 177─188 of the CPL.
[26]Ren min jian cha yuan zu zhi fa [人民检察院组织法], which was enacted in 1979 and amended in 1983.
[27]Article 129 of the Constitution of 1982 proscribes that the people’s procuracies are the State organs in charge of legal supervison. Article 205 of the Criminal Procedure Law of 1996 and Article 185 of the CPL proscribe how the procuracies should chanllenge judgments or rulings made by courts. Article 64 of the Administrative Litigation Procedure Law (promulgated in 1989 and became effective in October 1990) authorizes the people’s procuracies with such a power.
[28]Article 186 of the CPL.
[29]The Statistical Table of Civil and Adiministrative Protests Filed by All Procuracies in 2002 [2002 nian quanguo jiancha jiguan banli minshi, xingzheng anjian kangsu qingkuang tongji biao or 《2002年全国检察机关办理民事、行政案件抗诉情况统计表》], published in Zhongguo fa lü nian jian [Law Yearbook of China 《中国法律年鉴》(2003)] at 1325 (Beijing: Zhongguo fa lü nian jian she [the Press of Law Yearbook of China], 2003).
[29]Ren min jian cha yuan min shi xing zheng kang su an li xuan [the Reporter of Selected Protested Civil and Administrative Cases of the People’s Procuracies or《人民检察院民事行政抗诉案例选》] published by China Law Press [Fa lü Chu ban she] since 1999.
[30]Supra note 20, at 255.
[31]Article 2 of the CPL.
[32]Art. 152 of the CPL. Art. 58 of the Several Rules of the Supreme People’s Court on Evidence in Civil Procedures [Zuigao Renmin Fayuan guan yu min shi su song zheng ju de ruo gan gui ding or 《最高人民法院关于民事诉讼证据的若干规定》] promulgated on December 21, 2001 also provides: “The judges and the parties may question the witnesses.”
[33]Zhong Jainhua & Yu Guanghua, Establishing the Truth on Facts: Has the Chinese Civil Process Achieved this Goal? 13 J. of Transnational Law & Policy 401─4026 (Spring 2004).
[34]Zhongguo min shi su song fa jiao cheng [the Textbook of the Chinese Civil Procedure Law 《中国民事诉讼法教程》] 160 (Beijing: the People’s Court Press, 1994).
[35]Art. 65 of the CPL.
[36]Zhong Jainhua & Yu Guanghua, Establishing the Truth on Facts: Has the Chinese Civil Process Achieved this Goal? 13 J. of Transnational Law & Policy 400 (Spring 2004).
[37]Id. Footenote 45.
[38]Articles 7─8 of the Resolution of the Standing Committee of the NPC on the Perfection of the People’s Assessor System (Quan guo ren min dai biao da hui chang wu wei yuan hui guan yu wan shan ren min pei shen yuan zhi du de jue ding《全国人民代表大会常务委员会关于完善人民陪审员制度的决定》) promulgated on August 28, 2004.
[39]Id. Art. 9.
[40]Id. Art.11.
[41]“When deliberating a case, a collegial bench shall observe the principle of minority obeying majority.” Art. 43 of the CPL.
[42]Confucius said: “The Superior Man actualizes the mean, the inferior man goes against it.” [“君子中庸；小人反中庸”] in the Doctrine of the Mean [Zhongyong or《中庸》]. Yu Tzu said, “Of the things brought about by the rites, harmony is the most valuable.” [“礼之用，和为贵”] in the Analects [Lunyu or《论语》].
[43]The Provisional Organic Regulation on the People’s Conciliation Committee [Ren min tiao jie wei yua nhui zan xing zu zhi tong ze or《人民调解委员会暂行组织通则》].
[44]The Statistical Table of the People’s Mediation General Status in 1989 [1989 nian quan guo ren min tiao jie gong zuo ji ben qing kuang tong ji biao or 《1989 年全国人民调解工作基本情况统计表》], published in Zhongguo fa lü nian jian [Law Yearbook of China 《中国法律年鉴》(1990)].
[45]Art. 6 of the Organic Regulation on the People’s Conciliation Committee.
[46]Id. Art. 9.
[47]The Statistical Table of 2002 Civilian Dispute Mediation [2002 nian tia jie mi jian jiu fen ton ji biao or 《2002 年调解民间纠纷统计表》), published in Zhongguo fa lü nian jian [Law Yearbook of China《中国法律年鉴》(2003) ] at 1336; the Statitical Table of 2002 Nation-wide Civil and Commercial Cases Adjudicated by Courts of the First Instance [2002 nian quan guo fa yuan shen li min shang yi shen an jian qing kuang tong ji biao or 《2002年全国法院审理民商一审案件情况统计表》], published in Zhongguo fa lü nian jian [Law Yearbook of China《中国法律年鉴》(2003) ] at 1320.
[48]The statistics of this table are complied from the statistical tables of the civil, economic, and commercial cases adjudicated by the Chinese courts of the first instance and the statistical tables of the civil cases mediated by the People’s Conciliation Committees, which were published in 1987, 1993, 1998, and 2003 Law Yearbook of China (Chinese version) respectively.
[49]The Provisional Organic Regulation of the People’s Courts [Ren min fa yuan zan xing zu zhi tiao li or《人民法院暂行组织条例》], the Provisional Organic Regulation of the Supreme Procuracy [Ren min Jian cha yuan zan xing zu zhi tiao li or《最高人民检察署暂行组织条例》], and the Organic Regulation of Local Procuracies at All Levels [Ge ji di fang ren min jian cha shu zu zhi tong ze or《各级地方人民检察署组织通则》] of the PRC, promulgated in 1951, all failed to mention any qualifications about judges and prosecutors respectively. Article 34 of the 1979 Organic Law of People’s Courts of the PRC only proscribed that any Chinese citizens who were twenty-three year old or older and have the right to vote and to be voted could be qualified for adjudicators. But, the 1979 Organic Law of People’s Prosecuracy and its 1983 amendment were still silence about qualifications for prosecutors.
[50]Si fa gong zhen yu si fa gai ge [Judicial Impartiality and Reform or《司法公正与司法改革》] 369 (Chen Weidong [陈卫东] ed., Beijing: Zhongguo jian cha chu ban she, 2002).
[51]Article 2 of the Provisional Measure of the National Judicial Exam (2001).
[52]Art.6 of the Provisional Civil Procedure Law of 1982.
[53]Art.9 of the CPL.
[54]The statistics of this table are complied from the statistical tables of the civil, economic, and commercial cases adjudicated by the Chinese courts of the first instance, which were published in 1991, 1993, and 2002 Law Yearbook of China (Chinese version) respectively.
[55]Limin [李民], Wo guo xian xing tiao jie zhi du de bi duan yu gai ge [the Malpractice of the Current Chinese Mediation System and Its Reform 我国现行调解制度的弊端与改革], available at http://article.chinalawinfo.com/article/user/article_display.asp?ArticleID= 23945 (this article was written and published on Chinalawinfo in 2003, last visited 4/1/05).
[56]Art.15 of the CPL.
[57]Zhong guo min shi su song fa jiao cheng [the Textbook of the Chinese Civil Procedure Law 《中国民事诉讼法教程》] 52 (Beijing: the People’s Court Press, 1994).
[57]Id. at 52─53.
[58]Art.58 of the CPL.
[59] Art.70 of the CPL.
[60]Art.73 of the CPL.
[61]Art.79 of the CPL.
[62]Art.103 of the CPL.
[63]The Special Maritime Procedure Law of the PRC [Hai shi su song te bie cheng xu fa or《海事诉讼特别程序法》] was adopted at the 13th meeting of the Standing Committee of the 9th session of the National People’s Congress of China (NPC, legislator) on the 25th of December 1999.　
　　The Decision of The Standing Committee of The National People'scongress on the Establishment of Maritime Courts in Coastal Port Cities [Quan guo ren min dai biao da hui chang wu wei yuan hui guan yu zai yan hai gang kou cheng shi she li hai shi fa yuan de jue ding or《全国人民代表大会常务委员会关于在沿海港口城市设立海事法院的决定》] was passed on Nov. 14, 1984.
[64]KX Li & CWM Ingram, Maritime Law and Policy in China 1 (London: Cavendish Publishing, 2002).
[65]Id.at 2&42.
[66]The Maritime Law [Hai sang fa] of the PRC was enacted by the Standing Committee of the NPC on November 7, 1992 and became effective on July 1, 1993.
[67]Supra note 62, at 2. For the list of international maritime conventions adopted by the PRC,see Table 2 of Maritime Law and Policy in China at 43.
[68]The Rule of the SPC on the Jurisdiction of the Maritime Court [Zui gao ren min fa yuan guan yu hai shi fa yuan shou an fan wei de gui ding or《最高人民法院关于海事法院收案范围的规定》] promulgated on May 13, 1989, which was superceded by the Several Rules of the SPC on the Jurisdiction of the Maritime Courts [Zui gao ren min fa yuan guan yu hai shi fa yuan shou an fan wei de ruo gan gui ding or《最高人民法院关于海事法院受理案件范围的若干规定》] promulgated on August 9, 2001.
[69]Item 2 of the Resolution to Enhance the Work of Legal Interpretation [[70 title='回到本文注源' name='mGuan yu jia qiang fa lü jie shi gong zuo de jue yi or《关于加强法律解释工作的决议》passed by the Standing Committee of the NPC on June 6,1981.
[70'>Guan yu jia qiang fa lü jie shi gong zuo de jue yi or《关于加强法律解释工作的决议》passed by the Standing Committee of the NPC on June 6,1981.
[70]The Opinion on Several Issues of Enforcing the Provisional Civil Procedure Law [[71 title='回到本文注源' name='mGuan yu guan che zhi xing＜min shi su song fa （shixing）＞ ruo gan wen ti de yi jian or《关于贯彻执行＜民事诉讼法（试行）＞若干问题的意见》 promulgated on August 30, 1984 and the Answers to Several Issues Regarding How to Apply the Provisional Civil Procedure Law in the Adjudication of Economic Disputes [Guan yu shen li jing ji jiu fen an jian ju ti shi yong＜min shi su song fa（shi xing）＞ ruogan wenti de jieda or《关于审理经济纠纷案件具体适用＜民事诉讼法（试行）＞若干问题的解答》promulgated on September 17, 1984. They were repealed in 1992.
[71'>Guan yu guan che zhi xing＜min shi su song fa （shixing）＞ ruo gan wen ti de yi jian or《关于贯彻执行＜民事诉讼法（试行）＞若干问题的意见》 promulgated on August 30, 1984 and the Answers to Several Issues Regarding How to Apply the Provisional Civil Procedure Law in the Adjudication of Economic Disputes [Guan yu shen li jing ji jiu fen an jian ju ti shi yong＜min shi su song fa（shi xing）＞ ruogan wenti de jieda or《关于审理经济纠纷案件具体适用＜民事诉讼法（试行）＞若干问题的解答》promulgated on September 17, 1984. They were repealed in 1992.
[71]Zui gao ren min fa yuan guan yu min shi su song zheng ju de ruo gan gui dingor [《最高人民法院关于民事诉讼证据的若干规定》] was passed at the 1201st meeting of the Judicial Committee of the SPC on December 6, 2001, and are hereby promulgated for implementation as of April 1, 2002.
[72]Zui gao ren min fa yuan guan yu su song dai li ren cha yue min shi an jian cai liao de gui ding or[《最高人民法院关于诉讼代理人查阅民事案件材料的规定》] adopted at the 1254th meeting of the Judicial Committee of the Supreme People’s Court on November 4, 2002 and promulgated on November 15, 2002.
[73]Zui gao ren min fa yuan guan yu shi yong jian yi cheng xu shen li min shi an jian de ruo gan gui ding or [《最高人民法院关于适用简易程序审理民事案件的若干规定》] promulgated by the SPC on July 4, 2003.
[74]Chinalawinfo.com is the most popular legal research website in China. It is a subsidiary of the Peking University School of Law. The Chinese name of the database is called Zhongguo fa lü fa gui gui zhang shi fa jie shi quan kui [中国法律法规规章司法解释全库]].

来源:北大法律信息网

Sources Of Corporation Law In China

1.Company Law of the People’s Republic of China
(Adopted at the Fifth Session of the Standing Committee of the Eighth National People''s Congress on December 29, 1993.,Revised for the first time on December 25, 1999 according to the Decision of the Thirteenth Session of the Standing Committee of the Ninth People''s Congress on Amending the Company Law of the People’s Republic of China.,Revised for the second time on August 28, 2004 according to the Decision of the 11th Session of the Standing Committee of the 10th National People''s Congress of the People''s Republic of China on Amending the Company Law of the People’s Republic of China,and Revised for the third time at the 18th Session of the 10th National People''s Congress of the People''s Republic of China on October 27, 2005)

2.Law of the People’s Republic of China on Foreign-funded Enterprises
(Adopted at the 4th Meeting of the Sixth National People's Congress on April 12, 1986, amended in accordance with the Decision on Modifying the Law of the People’s Republic of China on Foreign-funded Enterprises adopted at 18th Meeting of the Standing Committee of the Ninth National People’s Congress on October 31, 2000, and promulgated by Order No. 41 of the President of the People's Republic of China on October 31, 2000)

3.Law of the People's Republic of China on Chinese-Foreign Equity Joint Venture
(Adopted by the Second Session of the Fifth National People's Congress on July 1, 1979 ,revised in accordance with " Resolution on Revision of the Law of the People's Republic of China on Chinese-Foreign Joint Venture" of the Third Session of the Seventh National People's Congress on April 4, 1990, and revised for the second time in accordance with "Resolution on Revision of the Law of the People's Republic of China on Chinese-Foreign Joint Venture" of the Fourth Session of the Ninth National People's Congress on March 15, 2001)

4.Law of the People's Republic of China on Chinese-Foreign Contractual Joint Ventures
(Adopted at the First Session of the Seventh National People's Congress, and revised according to the Decision on Modifying the Law of the People's Republic of China on Chinese-Foreign Contractual Joint Ventures adopted at the 18th Session of the Standing Committee of the Ninth National People's Congress on October 31, 2000, and promulgated by Order No.40 of the President of the People's Republic of China on October 31, 2000)

In the following there are also two laws , which are in common use to foreign investors:

1.Partnership Enterprise Law of the People's Republic of China
(Adopted at the 24th session of the Standing Committee of the 8th National People's Congress on February 23, 1997, and amended at the 23rd session of the Standing Committee of the 10th National People's Congress of the People's Republic of China on August 27, 2006)

2.Law of the People's Republic of China on Individual Proprietorship Enterprises
(Adopted at the 11th session of the Standing Committee of the 9th National People's Congress on August 30, 1999)

Summary of the Registration for Foreign-Invested Enterprises in China

Author: Zhong Yi, Liu Fei

1. Business forms for foreign investors to develop activities in China

 (1) Forms of enterprise

ⅰ.  Chinese-Foreign Equity Joint Ventures;

ⅱ.  Chinese-Foreign Contractual Joint Ventures;

ⅲ.  Foreign Capital Enterprises.

(2) In addition to establishing enterprises, there are following business forms for foreign investors to develop activities in China

ⅰ.  Foreign countries (regions) enterprises can be engaged in business activities of specific areas in China after making business registration, besides establishing enterprises. For details of those specific areas, please refer to Article 3 of 《The Registration and Management Methods of Foreign Countries (Regions) Enterprises Engaged in Production and Business Activities in China》.

ⅱ.  Foreign countries (regions) enterprises can also set up Resident Respective office in China to be engaged in non-direct business activities, such as business contact.

2. some particular provisions that should be referred to for establishing a foreign-invested enterprise and differences among the three forms of foreign-invest enterprises based on the given provisions

 (1)To set up a foreign-invested enterprise, 《Law of the People’s Republic of China on Chinese-Foreign Equity Joint Ventures》 , 《Law of the People’s Republic of China on Chinese-Foreign Contractual Joint Ventures》，《Law of the People’s Republic of China on Foreign Capital Enterprises》，《Guidance of Foreign Investment Industries》and other relevant foreign-invested special provisions, should be referred to.

(2) Based on provisions above, there are the following differences among the three forms of foreign-invest enterprises.

ⅰ. Both Chinese-Foreign Equity Joint Ventures and Chinese-Foreign Contractual Joint Ventures are set up jointly by foreign enterprises, other economic organizations or individuals and Chinese enterprises or other economic organizations. Foreign capital enterprises should be solely established only by foreign enterprises and other economic organizations.

ⅱ.  Shareholders of Chinese-Foreign Equity Joint Ventures should be liable for the enterprise to the extent of their respective contributions and share the profits based on the proportion of their respective contributions. Shareholders of Sino-foreign cooperative enterprises can set up a cooperation contract in which the allocation ratio of profits, the sharing ways of risks and losses and other conditions for cooperation are prescribed.

 3. processes that are included in the basic procedure to set up an enterprise

(1) Apply to Shanghai Administration of Industry and Commerce for the Approval of Enterprise Name to confirm your company’s name.

(2) Apply to Shanghai Foreign Investment Commission for Foreign-Invested Enterprises Approval.

(3)Apply to Shanghai Administration of Industry and Commerce for Establishment Registration within 30 days after obtaining the Foreign-Invested Enterprises Approval Certificate.

(4)Obtain a Business License from Shanghai Administration of Industry and Commerce. The date of issuance of the business license is the date of establishment of your company.

4. What is “Pre-Approval Document” required in registration? According to Laws, Administrative Regulation and other relevant provision, the establishment of some special company should be reported and the approval should be obtained before registration. Those approval files are called “Pre-Approval Document”. For example, to establish a food business company,《Food Sanitation Permit》issued by Shanghai Food and Drug Administration should be obtained before the application to Shanghai Administration of Industry and Commerce for registration.

Unregistered Foreign Companies Doing Business In China

I happened to read an article in China law blog about the unregistered foreign companies doing business in China, entitled, "URGENT ALERT: Register Your Company In China NOW" , which read:

"Tens of thousands of foreign companies conduct business in China without properly registering to do so. These companies hire and fire Chinese workers, buy and sell goods, and engage in virtually every sort of business activities one might expect in China."
"Bottom Line:No matter how good your China connections (and trust me, they are not as good as you think), and now it is the time to get legal by registering your company. "
This is a piece of good advice, but I don't approve the standpoint of "the Bottom Line:.....".

Although most unregistered foreign companies doing business in China know what they are doing is illegal , they still want to run the risk of being punished, because they may think the Chinese government' efforts to crack down on isn't great and timely.

More familiar problem is:
Even if the resident office of a foreign enterprise proves to have been engaged in direct profit-making operations in violation of the provisions of Procedures for the Registration and Administration of Resident Offices in China of Foreign Enterprises,it shall be ordered by the State Administration of Industry and Commerce to stop its business operations, with a fine of less than 20,000 yuan (RMB) only.

Another problem is:
Wherever a foreign company violates any provision of the Company Law by unlawfully establishing any branch within the territory of China, the organ in charge of company registration shall order it to correct or close down and may impose thereupon a fine of 50, 000 yuan up to 200, 000 yuan.

Writer's Comments:

China Law Blog said:

Thanks for running this, but I do not understand why you do not approve of my conclusion. Please explain. Thanks.

November 17, 2006 1:20 PM

Zhong Yi said:

The foreign corporation actually know that doing business in China requires company registration , but they may risking doing it because the violating cost is low.
Those foreign investors that I come in contact with are all very careful before entering Chinese market, so "Unregistered Foreign Companies" and "local people in China" didn't relate with each other directly.
That is just my own viewpoint.
Thank a lot for your reply , honored.

November 18, 2006 10:45 AM

Yuyu said:

It is really a common sense for most businessmen that wherever they wanna expand his operation overseas (not only in China)legal registration is mandatory by local government.
The so-called “unregistered foreign companies” or “local people in China” are only excuses stated by those that don’t feel like abiding by Company Laws in China. If I may say for whatsoever reasons, such as tax evasion, cost deduction and so on and so forth.
As far as foreign investors I know, nowadays they prefer undertaking all the formal procedures to establish their corporates or plants, which certainly get protected by local government as well as could be entitled to quite a lot investment privileges.

November 18, 2006 11:35 AM

China Civil Aviation

Foreign Investment in China Civil Aviation 1. Scope of Foreign Investments CAAC Industry

civil airports;

Flying areas of civil airports, including the runway, taxiway, connecting apron, parking apron, and flight assisting light; Terminal buildings. (The "civil airport" excluding the military-civil airport)

public & general air transport enterprises;

general aviation enterprises engaging in agriculture, forestry and fishery operations. general aviation enterprises engaging in business flight, air sight-seeing or serving the industry, but may not engage in the projects involving state secrets.

projects related to air transport.

air fuel, airplane maintenance, freight transport and storage, ground service, air food, parking lots and other approved projects. 2. Scope of Prohibited Foreign Investment Industries Foreign investors are forbidden from investing in and managing air traffic control systems. 3. Forms of Foreign Investment

Equity joint venture or contractual joint venture (hereinafter referred to as joint venture);

Purchasing shares of civil aviation enterprises, including the shares issued overseas and the foreign shares issued inside China by the aviation enterprises;

Other approved investment forms.

Foreign investors must be qualified as a Chinese legal person to invest, in the form of contractual joint venture, in public air transport and general aviation enterprises engaging in business fight and air sight-seeing. Where foreign investors invest in civil airports, the Chinese party shall take the relatively holding position.Where foreign investors invest in public air transport enterprises, the Chinese party shall take the holding position, and the proportion of investment made by one foreign investor (including its associate enterprises) may not exceed 25%. Other investment forms are by the proportion of foreign investment shall be determined by both the Chinese and foreig n parties through negotiation. The operating period of joint ventures with foreign investment shall not exceed 30 years generally.