Implementing Rules for the Law of the People's Republic of China on Wholly Foreign-owned Enterprises (Revised in 2014) 

Order of the State Council No.648

February 19, 2014

(Approved by the State Council on October 28, 1990, issued by the Ministry of Foreign Trade and Economic Cooperation on December 12, 1990, amended in accordance with the Decision of the State Council on Amending the Implementing Rules for the Law of the People's Republic of China on Wholly Foreign-owned Enterprises on April 12, 2001 for the first time, and revised under the Decision of the State Council on Repealing and Revising Certain Administrative Regulations for the second time on February 19, 2014)

Chapter I General Provisions

Article 1 These Rules are formulated in accordance with the Law of the People's Republic of China on Wholly Foreign-owned Enterprises.

Article 2 Wholly foreign-owned enterprises (hereinafter referred to as "WFOEs") shall be subject to and protected by the laws of China.
In their business activities within the territory of the People's Republic of China, WFOEs must abide by the laws and regulations of China and may not harm China's public interest.

Article 3 The establishment of WFOEs must be beneficial to the development of China's national economy and yield notable economic benefits. The State encourages WFOEs to use advanced technology and equipment, develop new products, upgrade and replace existing products and conserve energy and raw materials, and encourages the establishment of WFOEs that export their products.

Article 4 Industries in which the establishment of WFOEs is prohibited or restricted shall be regulated in accordance with the provisions of the State on the guidance of foreign investment orientation and the Catalogue for the Guidance of Foreign Investment Industries.

Article 5 No application to establish a WFOE may be approved in any of the following circumstances:
1. where China's sovereignty or public interest would be harmed;
2. where China's State security would be jeopardized;
3. where China's laws and regulations would be violated;
4. where China's national economic development requirements would not be satisfied; or
5. where environmental pollution might be caused.

Article 6 WFOEs shall manage their own operations on its own and be free from interference within their approved scope of business.

Chapter II Establishment Procedures

Article 7 The examination and approval of applications to establish WFOEs shall be carried out by the Ministry of Foreign Trade and Economic Cooperation (hereinafter referred to as "MOFTEC") of the People's Republic of China; approval documents shall be issued following the examination and approval process.
The State Council authorizes the people's governments of the provinces, autonomous regions, municipalities directly under the Central Government, specially designated cities in the State plan and special economic zones to examine and approve applications for the establishment of WFOEs which are under the following circumstances and issue approval documents thereto:
1. where the total amount of investment does not exceed the limits of examination and approval authority specified by the State Council; and
2. where the State does not need to allocate raw materials, and the nationwide balance of energy, communication and transportation, foreign trade export quotas, etc. are not be affected.
Within 15 days of approving the establishment of a WFOE within the scope of authority specified by the State Council, the people's government of the relevant province, autonomous region, municipality directly under the Central Government, specially designated city in the State plan or special economic zone shall report such approval to the MOFTEC for record (the MOFTEC and the people's governments of the provinces, autonomous regions, municipalities directly under the Central Government, specially designated cities in the State plan and special economic zones shall hereinafter be referred to collectively as "examination and approval authorities").

Article 8 Where any application is made to establish a WFOE whose products involve any export license, export quota or import license or are subject to the import restriction of the State, the prior approval of the competent foreign trade and economic cooperation department shall be obtained in accordance with the limits of administrative authority.

Article 9 Prior to applying to establish a WFOE, the foreign investor shall submit a report in relation to the following matters to the local people's government at or above the county level where the enterprise to be established is located. The contents of the report shall include: the purpose of establishing the WFOE; the scope and scale of its business; the products to be produced; the technology and equipment to be used; the area and specifications of land to be used; the specifications and quantities of water, electricity, coal, coal gas and other energy sources required; public facility requirements, etc.
The local people's government at or above the county level shall issue a written reply to the foreign investor within 30 days of receiving such a report submitted by the foreign investor.

Article 10 Any foreign investor who wishes to establish a WFOE shall apply to the examination and approval authority via the people's government at or above the county level where the enterprise to be established is located, and submit the following documents:
1. an application to establish a WFOE;
2. a feasibility study report;
3. the Articles of association of the WFOE;
4. the name of the legal representative (or the names of the members of the board of directors) of the WFOE;
5. the legal certificate and proof of creditworthiness of the foreign investor;
6. the written reply from the people's government at or above the county level where the WFOE to be established is located;
7. a list of required imported goods; and
8. any other documents to be submitted.
The documents described in Items 1 and 3 of the preceding paragraph must be made in Chinese. The documents described in Items 2, 4 and 5 may be made in a foreign language, but shall be accompanied by Chinese translations.
Where two or more foreign investors jointly apply to establish a WFOE, a duplicate copy of the agreement entered into between the investors shall be submitted to the examination and approval authority for record.

Article 11 The examination and approval authority shall make a decision on whether or not to approve an application to establish a WFOE within 90 days of the date on which it receives all the documents pertaining to the application. Where the examination and approval authority finds that the aforementioned documents are incomplete or inappropriate, it may require the applicant to submit the supplemented or corrected documents within a specified period of time.

Article 12 After an application to establish a WFOE is approved by the examination and approval authority, the foreign investor shall, within 30 days from the date on which it receives the approval document, apply to the administrative authority for industry and commerce for registration and obtain a business license. The date of issue of the business license of a WFOE shall be deemed to be the date on which the enterprise is established.
The approval document for a WFOE shall automatically become void and null if the foreign investor fails to apply to the administrative authority for industry and commerce for registration within 30 days of the date on which the approval document is issued.
WFOEs shall register with the appropriate tax authorities within 30 days of their establishment.

Article 13 A foreign investor may appoint a Chinese foreign investment enterprise service organization or other economic organization to handle the matters described in Article 8, Paragraph 1 of Article 9, and Article 10 of the Rules on the foreign investor's behalf, provided that a contract relating to the appointment shall be concluded.

Article 14 An application to establish a WFOE shall include the following information:
1. name, domicile and place of registration of the foreign investor and name, nationality and position of its legal representative;
2. name and domicile of the WFOE to be established;
3. scope of business, product types and scale of production;
4. total amount of investment, registered capital, sources of funds, forms and period of capital contribution of the WFOE to be established;
5. organizational form and structure and legal representative of the WFOE to be established;
6. the major equipment to be used and the condition thereof, and the level and sources of the production technology and processes to be employed;
7. the target customers and sales areas for the products and the marketing methods and channels;
8. the arrangements for payments and receipts of foreign exchange funds;
9. the relevant structural establishment and staffing, and the hiring, training, remuneration, welfare, insurance, labor protection, and other arrangements pertaining to employees;
10. the maximum possible degree of environmental pollution that might be caused, and measures to address this problem;
11. the land to be selected and its area;
12. the funds, energy and raw material required for capital construction, production and operations, and the solution thereof;
13. the schedule for completion of the project; and
14. the operating period of the WFOE to be established.

Article 15 The Articles of association of a WFOE shall cover the following matters:
1. name and domicile;
2. purpose and scope of business;
3. total amount of investment, registered capital, subscribed capital contribution, contribution ways and time limit;
4. organizational form;
5. internal organizational structure and the functions and powers and rules of procedure thereof, and the responsibilities and powers of personnel such as the legal representative, the general manager, the chief engineer and the chief accountant;
6. the principles and systems for financing, accounting and auditing;
7. labor management;
8. operating period, termination and liquidation; and
9. the procedure for amending the Articles of association.

Article 16 The Articles of association of a WFOE and any amendments thereto shall become effective upon approval by the examination and approval authority.

Article 17 Any material change in capital due to the division, merger or any other reason shall be subject to the approval of the examination and approval authority, and a Chinese registered accountant shall be engaged to verify such change and issue a capital verification report. Upon approval by the examination and approval authority, the registration formalities for such change shall be completed with the administrative authority for industry and commerce.


Chapter III Organizational Form and Registered Capital

Article 18 The organizational form of a WFOE shall be a limited liability company, or, subject to approval, may also be other form of liability.
Where a WFOE is a limited liability company, the liability of the foreign investor in respect of the enterprise shall be limited to the extent of the investor's capital contribution.
Where a WFOE is established in any other form of liability, the liability of the foreign investor in respect of the enterprise shall be determined in accordance with Chinese laws and regulations.


Article 19 The term "total amount of investment in a WFOE" refers to the total amount of funds required to set up a WFOE, i.e., the sum of capital construction fund and working fund required to invest according to its scale of production.

Article 20 The term "registered capital of a WFOE" refers to the total amount of capital registered with the administrative authority for industry and commerce for the establishment of a WFOE, i.e., the total amount of capital contributed by the foreign investor.
The proportion of registered capital in the total amount of investment of wholly foreign-owned enterprises shall be in compliance with relevant provisions of China.

Article 21 A wholly foreign-owned enterprise may not reduce its registered capital during its operating period. However, where it is necessary to reduce its registered capital due to a change in the total amount of investment and production or in the scale of its operations, an enterprise may do so subject to the approval of the examination and approval authority.

Article 22 Any increase in or transfer of the registered capital of a wholly foreign-owned enterprise must be approved by the examination and approval authority. Upon approval, any such change shall be registered with the administrative authority for industry and commerce.

Article 23 Any mortgage or assignment of the property, rights or interests of a wholly foreign-owned enterprise must be approved by the examination and approval authority and notified to the administrative authority for industry and commerce for its records.

Article 24 The legal representative of a wholly foreign-owned enterprise shall have the responsibility for and the power to represent the enterprise in accordance with its Articles of association.
In the event that the legal representative is unable to exercise his powers, he shall appoint an agent, in writing, to exercise such powers on his behalf.

Chapter IV Methods and Time Limits For Contributing Capital

Article 25 Foreign investors may contribute capital in the form of freely convertible foreign currency, or may capitalize assets such as machinery, equipment, industrial property or proprietary technology according to the monetary value of such assets.
Subject to the approval of the examination and approval authority, a foreign investor may also use Renminbi profits derived from any other foreign investment enterprise it has established in the People's Republic of China as a capital contribution.


Article 26 Any machinery or equipment capitalized by a foreign investor according to its value shall be machinery or equipment required for production activities by the wholly foreign-owned enterprise concerned.
The value at which machinery or equipment is capitalized shall not exceed the current cost of the same kind of machinery or equipment on the international market.
A detailed list shall be made of all machinery and equipment that is capitalized according to its value. Such a list shall include the names, types, quantities, assessed values, and other details concerning the machinery and equipment. The list shall be annexed to the application to establish the wholly foreign-owned enterprise and submitted to the examination and approval authority together with the application.


Article 27 Any industrial property or proprietary technology capitalized by a foreign investor according to its value shall be owned by the foreign investor concerned.
Detailed information shall be prepared concerning any industrial property or proprietary technology that is capitalized according to its value. Such information shall include copies of ownership documents and details on the validity of such documents, information on the technical functions and practical applications of the property or technology concerned, and the bases and standards used for assessing their values. The above information shall be annexed to the application to establish the wholly foreign-owned enterprise and submitted to the examination and approval authority together with the application.


Article 28 When machinery or equipment that has been capitalized according to its value arrives at a Chinese port, the wholly foreign-owned enterprise concerned shall request that a Chinese commodity inspection organization inspect the machinery or equipment. The commodity inspection organization shall issue an inspection report.
In the event of any discrepancy between the type, quality and quantity of machinery or equipment that has been capitalized according to its value and the type, quality and quantity of the machinery or equipment specified on the list of assets capitalized according to their value submitted by the foreign investor to the examination and approval authority, the examination and approval authority shall have the power to demand that the foreign investor rectify the discrepancy within a specified period of time.

Article 29 The examination and approval authority shall have the power to inspect industrial property or proprietary technology that has been capitalized according to its value after the use of such property or technology has commenced. In the event of any discrepancy between such industrial property or proprietary technology and the information originally supplied by the foreign investor, the examination and approval authority shall have the power to demand that the foreign investor rectify the discrepancy within a specified period of time.

Article 30 The period of time within which a foreign investor is to contribute its capital shall be specified in the application to establish the wholly foreign-owned enterprise and in the enterprise's Articles of association.


Chapter V Use of Land and Related Fees

Article 31 The land to be used by a wholly foreign-owned enterprise shall be arranged by the people's government at or above the county level where the enterprise is to be located. Land use shall be considered and arranged in the light of local circumstances.

Article 32 Within 30 days of the date of issue of its business license, a wholly foreign-owned enterprise shall present its approval document and business license to the land administration department of the people's government at or above the county level where the enterprise is to be located, go through the procedure to acquire land use rights, and obtain a land use certificate.

Article 33 A land use certificate is the legal document giving a wholly foreign-owned enterprise the right to use land. No wholly foreign-owned enterprise may assign land use rights during its operating period without obtaining approval.

Article 34 A wholly foreign-owned enterprise shall pay rent to its local land administrative department when it collects its land use certificate.

Article 35 Wholly foreign-owned enterprises that use developed land shall be liable to pay land development fees.
The land development fees referred to in the preceding paragraph shall include expenses incurred in the requisitioning of the land, demolition, removal and resettlement, and construction expenses incurred when linking the wholly foreign-owned enterprise concerned to existing infrastructure. Land development work units may charge land development fees in a lump sum or by way of annual installments.

Article 36 Wholly foreign-owned enterprises that use undeveloped land may independently develop such land or engage appropriate Chinese work units to carry out such development work. The construction of infrastructure facilities shall be centrally managed by the local people's governments at the county level or above where wholly foreign-owned enterprises are located.

Article 37 The scales for rent and land development fees charged to wholly foreign-owned enterprises shall be set in accordance with the relevant provisions of China.

Article 38 The term of a land use right held by a wholly foreign-owned enterprise shall be the same as the operating period of the enterprise concerned.

Article 39 In addition to obtaining land use rights in accordance with this Chapter, wholly foreign-owned enterprises may obtain such rights pursuant to other laws and regulations of China.

Chapter VI Purchases and Sales

Article 40 Wholly foreign-owned enterprises shall have the right to decide on their own purchases of machinery, equipment, raw materials, fuel, spare parts, accessories, components, devices, means of transportation, office articles and other items for their own use (hereinafter referred to as "physical goods").
Wholly foreign-owned enterprises that purchase physical goods in China shall, provided the parties have equal bargaining power, be granted terms equivalent to those enjoyed by Chinese enterprises.

Article 41 Wholly foreign-owned enterprises may sell their products on the Chinese market. The state encourages wholly foreign-owned enterprises to export their products.

Article 42 Wholly foreign-owned enterprises shall have the right to export their own products, and may also appoint Chinese foreign trade companies or companies outside the People's Republic of China to sell their products on their behalf.
Wholly foreign-owned enterprises may sell their own products in China or appoint a commercial organization to sell their products on their behalf.

Article 43 Where a foreign investor contributes as capital machinery or equipment for which China requires an import license, the wholly foreign-owned enterprise concerned shall, either directly or via an appointed agent, apply to the relevant licensing authority and obtain an import license on the basis of the enterprise's approved list of imported equipment and physical goods.
Where any wholly foreign-owned enterprise, within the scope of its approved business activities, imports physical goods required for its own production activities for which Chinese regulations require that an import license be obtained, the enterprise shall draw up an annual import plan for the relevant physical goods and shall apply to the relevant licensing authority once every six months to obtain an import license.
Any wholly foreign-owned enterprise that exports products for which China requires an export license shall draw up an annual export plan and apply to the relevant licensing authority once every six months to obtain an export license.

Article 44 The prices of physical goods imported by wholly foreign-owned enterprises and associated labor services shall not exceed the normal prices for the same physical goods and services on the international market at the relevant time. The prices of products exported by wholly foreign-owned enterprises shall be independently set by wholly foreign-owned enterprises by reference to the prices on the international market at the relevant time, provided that they are set no lower than reasonable export prices. The taxation authorities shall, in accordance with tax laws, have the power to investigate the legal liability of any wholly foreign-owned enterprise that seeks to evade tax by importing goods at high prices and exporting goods at low prices or in any similar way.

Article 45 Wholly foreign-owned enterprises shall provide statistical information and submit statistical returns in accordance with the Statistics Law of the People's Republic of China and Chinese regulations concerning the system for the maintenance of statistics on the use of foreign funds.

Chapter VII Taxation

Article 46 Wholly foreign-owned enterprises shall pay taxes in accordance with the laws and regulations of China.

Article 47 The employees of wholly foreign-owned enterprises shall pay individual income tax in accordance with the laws and regulations of China.

Article 48 Any wholly foreign-owned enterprise that imports the following supplies shall be entitled to tax reductions and tax exemptions in accordance with the relevant provisions of the tax laws of China:
1. machinery, equipment, spare parts, construction materials and materials required for installing and reinforcing machinery that serve as capital contributions of the foreign investor;
2. machinery, equipment, spare parts, vehicles and production management equipment necessary for the enterprise's production activities that are imported by the wholly foreign-owned enterprise concerned using funds limited to the enterprise's total amount of investment; and
3. raw materials, auxiliary materials, components, spare parts and packaging materials imported by the wholly foreign-owned enterprise for the production of export products.
Where, after obtaining approval, any of the imported materials described in the preceding paragraph are sold in the People's Republic of China rather than being exported, or are used in the manufacturing of products to be sold in the People's Republic of China rather than for the manufacture of export products, duties and taxes shall be paid retrospectively in accordance with China's tax laws.

Article 49 Export products produced by wholly foreign-owned enterprises, other than those the export of which is restricted by China, shall be eligible for tax reductions, tax exemptions and tax refunds in accordance with the relevant provisions of China's tax laws.

Chapter XIII Foreign Exchange Controls

Article 50 The foreign exchange business of wholly foreign-owned enterprises shall be handled in accordance with the relevant foreign exchange control regulations of China.

Article 51 A wholly foreign-owned enterprise may, on the strength of the business license issued to it by the administrative authority for industry and commerce, open accounts with banks in the People's Republic of China that are permitted to engage in foreign exchange business. Payments into and out of such accounts shall be supervised by the banks with which they are opened.
The foreign exchange revenue of a wholly foreign-owned enterprise shall be deposited in a foreign exchange account it has opened with a bank. Foreign exchange payments shall be made from a foreign exchange account.

Article 52 Any wholly foreign-owned enterprise that seeks to open a foreign exchange account with a bank outside the People's Republic of China to meet its operating or business needs must obtain approval from the China's exchange control authorities and regularly report its foreign exchange receipts and payments and submit bank statements in accordance with SAFE regulations.

Article 53 After paying tax in accordance with China's tax laws, the wages and other lawful foreign exchange income of expatriate, Hong Kong, Macao and Taiwan employees of wholly foreign-owned enterprises may be freely remitted out of the country.

Chapter IX Financial Matters and Accounting

Article 54 Wholly foreign-owned enterprises shall establish financial and accounting systems in accordance with Chinese legislation and the regulations of China's financial authorities and shall notify their local financial and taxation authorities of such systems for their records.

Article 55 The fiscal year of wholly foreign-owned enterprises shall commence on January 1 of the calendar year and end on December 31 of the same year.

Article 56 Wholly foreign-owned enterprises shall make allocations to reserve funds and to bonus and welfare funds for their employees from their profits after paying income tax in accordance with China's tax laws. The allocations made to the reserve fund of an enterprise shall be no lower than 10% of the enterprise's after-tax profits; when the total amount of funds so allocated is equal to or greater than 50% of the enterprise's registered capital, no further allocations shall be made. Wholly foreign-owned enterprises shall independently determine their allocation rates to bonus and welfare funds for employees.
Wholly foreign-owned enterprises shall not distribute any profits until any losses from prior fiscal years have been offset. Profits retained from prior fiscal years may be distributed together with distributable profits from the current fiscal year.

Article 57 Accounting records, books and statements produced by wholly foreign-owned enterprises shall be written in Chinese; any such records, books or statements that are written in a foreign language shall include notes in Chinese.

Article 58 Wholly foreign-owned enterprises shall maintain independent accounting records.
Annual accounting statements and liquidation accounting statements of wholly foreign-owned enterprises shall be prepared in accordance with the regulations of China's financial and taxation authorities. Where accounting statements are prepared in a foreign currency, Renminbi accounting statements shall be prepared simultaneously by converting the foreign currency amounts into Renminbi.
Chinese registered accountants shall be engaged to verify the annual accounting statements and liquidation accounting statements of wholly foreign-owned enterprises and to issue verification reports.
The wholly foreign-owned enterprise annual accounting statements and liquidation accounting statements described in the second and third paragraphs of this Article, together with the report issued by a Chinese registered accountant, shall be submitted within the prescribed time limits to the financial and taxation authorities and shall be filed with the examination and approval authority and the administrative authority for industry and commerce for their records.

Article 59 Foreign investors may, at their own expense, engage Chinese or foreign accounting staff to inspect the accounts of their wholly foreign-owned enterprises.

Article 60 Wholly foreign-owned enterprises shall submit their annual balance sheets and profit and loss statements to the financial and taxation authorities and shall file such financial statements with the examination and approval authority and the administrative authority for industry and commerce for their records.

Article 61 Wholly foreign-owned enterprises shall maintain their accounting records on their business premises. Such accounting records shall be subject to supervision by the financial and taxation authorities.
Where a wholly foreign-owned enterprise violates the provisions of the preceding paragraph, the financial and taxation authorities may impose a fine on the enterprise and the administrative authority for industry and commerce may suspend the enterprise's business activities or revoke its business license.

Chapter X Employees

Article 62 Wholly foreign-owned enterprises shall enter into employment contracts with their employees based in the People's Republic of China in accordance with the laws and regulations of China. Such contracts shall specifically cover matters such as terms of employment, dismissal, remuneration, welfare, labor protections and labor insurance.
Wholly foreign-owned enterprises shall not employ child workers.

Article 63 Wholly foreign-owned enterprises shall be responsible for the vocational and technical training of their employees and the establishment of an employee appraisal system in order that the production and management skills of their employees will enable such enterprises to meet their production and development requirements.

Chapter XI Labor Unions

Article 64 Employees of wholly foreign-owned enterprises shall have the right to establish basic-level labor unions and carry on labor union activities in accordance with the Labor Union Law of the People's Republic of China.

Article 65 The labor unions of wholly foreign-owned enterprises shall represent the rights and interests of their employees. Such unions shall have the right to enter into labor contracts with enterprises on behalf of their employees and to supervise the implementation of such contracts.

Article 66 The basic tasks of wholly foreign-owned enterprise labor unions shall be to protect the lawful rights and interests of employees in accordance with the laws and regulations of China; to assist enterprises in the reasonable administration and utilization of their employee bonus and welfare funds; to organize employees in political, scientific, technical and vocational study and in cultural and athletic activities; and to educate employees on the observance of disciplinary rules and to strive to accomplish the various commercial goals of the enterprise.
When a wholly foreign-owned enterprise holds a meeting to consider and decide any matter concerning its employees such as rewards, punishments, the remuneration system, welfare benefits, labor protections or labor insurance, a representative of the enterprise's labor union shall have the right to attend the meeting. Wholly foreign-owned enterprises shall listen to the opinions of their labor unions and obtain their cooperation.

Article 67 Wholly foreign-owned enterprises shall actively support the work of their labor unions and, in accordance with the Labor Union Law of the People's Republic of China, shall provide such unions with the necessary office space and equipment for administrative work and meetings and for their use in organizing welfare, cultural and athletic activities for employees. Wholly foreign-owned enterprises shall make monthly allocations to labor union funds at the rate of 2% of the total take-home wages of their employees. Such funds shall be used by labor unions in accordance with the provisions for the use of labor union funds formulated by the All-China Federation of Trade Unions.

Chapter XII Operating Periods, Dissolution and Liquidation

Article 68 The operating period of a wholly foreign-owned enterprise shall be tentatively set by the foreign investor in its application to establish the wholly foreign-owned enterprise, based on the specific circumstances of the industry in which the enterprise will operate and of the enterprise itself, and shall be approved by the examination and approval authority.

Article 69 The operating period of a wholly foreign-owned enterprise shall be calculated from the date of issue of its business license.
Where an extension is sought on the expiry of the operating period of a wholly foreign-owned enterprise, a written application for an extension of the operating period shall be submitted to the examination and approval authority no later than 180 days prior to the expiry date. The examination and approval authority shall make a decision on whether or not to approve the application within 30 days of the date on which it receives the application.
Any wholly foreign-owned enterprise that obtains approval to extend its operating period shall register the change with the administrative authority for industry and commerce within 30 days of the date on which it receives the relevant approval document.

Article 70 A wholly foreign-owned enterprise shall be dissolved in any of the following circumstances:
1. where its operating period has expired;
2. where it suffers heavy losses due to mismanagement and the foreign investor decides to dissolve the enterprise;
3. where it suffers heavy losses due to any force majeure event such as a natural disaster or war;
4. where it is declared bankrupt;
5. where it is dissolved in accordance with the law because of any violation of the laws or regulations of China, or because it has harmed the public interest; or
6. where any other ground for dissolution exists, as specified in the Articles of association of the wholly foreign-owned enterprise concerned.
In any of the circumstances described in Items 2, 3 and 4 of the preceding paragraph, the wholly foreign-owned enterprise shall voluntarily submit a written application for dissolution to the appropriate examination and approval authority for approval. The date on which the examination and approval authority grants approval shall be deemed to be the date on which the enterprise is dissolved.

Article 71 Any wholly foreign-owned enterprise dissolved pursuant to Item 1, 2, 3 or 6 of Article 70 hereof shall make a public announcement and notify its creditors within 15 days of the date of dissolution. In addition, the enterprise shall, within 15 days of the date on which it makes the public announcement relating to its dissolution, submit a proposal to the examination and approval authority concerning the procedures for and principles on which the liquidation of the enterprise and the selection of candidates for the liquidation committee will be based, and shall implement such proposals after they have been examined by the examination and approval authority.

Article 72 A liquidation committee shall be composed of the legal representative of the wholly foreign-owned enterprise concerned, representatives of the creditors of the enterprise and representatives of the relevant competent authorities. In addition, persons such as accountants and lawyers registered in China shall be invited to serve on the committee.
Liquidation expenses shall be paid out of the property currently held by the wholly foreign-owned enterprise on a priority basis.

Article 73 A liquidation committee shall exercise the following powers:
1. to convene creditors' meetings;
2. to take over the management of and administer the property of the enterprise, and to prepare a balance sheet and a property list;
3. to assess the value of the enterprise's property and to state the basis for the calculation of the values assigned;
4. to prepare a liquidation plan;
5. to redeem the claims of the enterprise, and to satisfy its debts;
6. to recover any outstanding shareholders' contributions;
7. to distribute any remaining property; and
8. to represent the wholly foreign-owned enterprise when it sues or is sued.

Article 74 Prior to the completion of the liquidation of a wholly foreign-owned enterprise, the foreign investor may not remit or otherwise take the funds of the enterprise out of the People's Republic of China and may not dispose of the enterprise's property of its own accord.
Upon the completion of the liquidation of a wholly foreign-owned enterprise, where the sum of the net assets of the enterprise plus the balance of its property exceeds its registered capital, the excess amount shall be regarded as profit, and income tax shall be paid on that amount in accordance with China's tax laws.

Article 75 Upon the completion of the liquidation of a wholly foreign-owned enterprise, the procedure for the cancellation of its registration shall be gone through and its business license shall be returned to the administrative authority for industry and commerce for cancellation.

Article 76 When a wholly foreign-owned enterprise liquidates and disposes of its property, provided the parties have equal bargaining power, Chinese enterprises or other commercial organizations shall have a priority right to purchase such property.

Article 77 Any wholly foreign-owned enterprise dissolved pursuant to Item 4 of Article 70 hereof shall be liquidated by reference to the relevant laws and regulations of China.
Any wholly foreign-owned enterprise dissolved pursuant to Item 5 of Article 70 hereof shall be liquidated in accordance with the relevant regulations of China.

Chapter XIII Supplementary Provisions

Article 78 All insurance policies taken out by wholly foreign-owned enterprises shall be taken out with insurance companies in the People's Republic of China.

Article 79 Contracts between wholly foreign-owned enterprises and other companies, enterprises, commercial organizations or individuals shall be governed by the Contract Law of the People's Republic of China.

Article 80 For wholly owned enterprises established in Mainland China by companies, enterprises, other commercial organizations, or individuals from Hong Kong, Macao or Taiwan, or by Chinese citizens resident abroad, the Rules shall apply mutatis mutandis.

Article 81 Foreign employees and employees from Hong Kong, Macao and Taiwan of wholly foreign-owned enterprises may bring vehicles and personal items reasonably required for their daily needs into Mainland China. Such employees shall carry out customs formalities for the relevant goods, etc., in accordance with the provisions of China.

Article 82 The Rules shall come into force on the date of issue hereof.