Law of the People's Republic of China on Wholly Foreign-owned Enterprises (Revised in 2016)

Order of the President of the People's Republic of China No. 51

September 3, 2016

(Adopted at the 4th session of the Standing Committee of the 6th National People's Congress on April 12, 1986;revised according to the Decision on Revising the Wholly Foreign-owned Enterprise Law made at the 18th Session of the Standing Committee of the 9th National People's Congress on October 31, 2000, and issued according to the Order of the President of the People's Republic of China No. 41 on October 31, 2000;revised further according to the Decision of the Standing Committee of the National People's Congress on Revising Four Laws including the Law of the People's Republic of China on Wholly Foreign-owned Enterprises on September 3, 2016, and issued according to the Order of the President of the People's Republic of China No. 51)

Article 1 In order to expand foreign economic cooperation and technological exchange, and promote the development of the Chinese economy, the People's Republic of China permits foreign enterprises and other economic organizations or individuals (hereinafter referred to as "foreign investors") to establish wholly foreign-owned enterprises within the territory of the People's Republic of China, and shall protect the lawful rights and interests of such enterprises.

Article 2 The term "wholly foreign-owned enterprise" as used in this Law refer to any enterprise established within the territory of the People's Republic of China in accordance with applicable Chinese laws with capital provided solely by a foreign investor, but does not include any branch established in China by a foreign enterprise or other economic organization.

Article 3 Wholly foreign-owned enterprises must benefit the development of the Chinese economy. The State encourages the establishment of wholly foreign-owned enterprises that export commodities or that are technologically advanced.
The State Council is to provide for industries in which the establishment of wholly foreign-owned enterprises is prohibited or restricted.

Article 4 The investments, profits and other legitimate rights and interests of foreign investors in China are protected by Chinese law.
Foreign investors must obey Chinese laws and regulations, and shall not harm the public interest of China.

Article 5 The State is not to nationalize, or expropriate the assets of, wholly foreign-owned enterprises. In special circumstances, where necessary, the assets of a wholly foreign-owned enterprise may be expropriated for the public interest in accordance with legal procedures, with appropriate compensation paid.

Article 6 Any application to establish a wholly foreign-owned enterprise is subject to examination and approval by the State Council department in charge of foreign trade and economic relations or an agency authorized by the State Council. The examination and approval agency shall, within 90 days of receiving the application, make a decision on whether or not to approve it.

Article 7 After an application to establish a wholly foreign-owned enterprise has been approved, the foreign investor shall, within 30 days of receiving the approval certificate, apply for registration with the administrative authority for industry and commerce and obtain a business license. The date on which the wholly foreign-owned enterprise business license is issued shall be the enterprise's date of establishment.


Article 8 Any wholly foreign-owned enterprise that meets the criteria for legal personality under the relevant Chinese laws shall have legal person status in accordance with the law.

Article 9 Wholly foreign-owned enterprises shall invest in China within the period of time specified by the examination and approval authority concerned. Where a wholly foreign-owned enterprise fails to invest within the specified period of time, the administrative authority for industry and commerce shall have the right to revoke its business license.
The administrative authorities for industry and commerce shall carry out inspections of and supervise the investment status of wholly foreign-owned enterprises.

Article 10 In the event that a wholly foreign-owned enterprise goes through a breakup, merger or any other major change, the enterprise concerned shall apply for approval from the examination and approval authority and go through the registration procedure for the relevant change with the administrative authority for industry and commerce.


Article 11 A wholly foreign-owned enterprise shall be operated and managed in accordance with its approved Articles of association and shall be free from interference.


Article 12 Any wholly foreign-owned enterprise that employs Chinese staff shall sign employment contracts in accordance with the law. Employment contracts shall clearly stipulate matters such as terms of employment, dismissal, remuneration, welfare, labor protections and labor insurance.

Article 13 The employees of a wholly foreign-owned enterprise may, in accordance with the law, establish a labor union to undertake labor union activities and protect the legitimate rights and interests of employees.
Wholly foreign-owned enterprises shall provide the necessary conditions for the organization of activities by their labor unions.

Article 14 Wholly foreign-owned enterprises must establish accounting books and records in China, arrange for independent audits to be undertaken and, in accordance with applicable regulations, submit their accounting statements to and accept the supervision of the financial and taxation authorities.
In the event that a wholly foreign-owned enterprise refuses to maintain accounting books and records in China, penalties may be imposed by the financial and taxation authorities, and the administrative authority for industry and commerce may order the relevant enterprise to cease operations or revoke its business license.

Article 15 Raw materials, fuel and other physical goods that fall within the permitted scope of business of and are required by a wholly foreign-owned enterprise may be purchased on the domestic or international market in accordance with the principles of fairness and reasonableness.


Article 16 The various types of insurance required by a wholly foreign-owned enterprise shall be taken out with insurance companies in China.

Article 17 Wholly foreign-owned enterprises shall pay tax in accordance with the relevant provisions of state tax regulations and may enjoy preferential tax exemptions and reductions.
Any wholly foreign-owned enterprise that reinvests its profits in China after paying tax may, in accordance with the relevant provisions of state regulations, apply for a refund of the amount of income tax already paid on the amount reinvested.

Article 18 Matters relating to the foreign exchange of a wholly foreign-owned enterprise shall be handled in accordance with state provisions governing foreign exchange controls.
Wholly foreign-owned enterprises shall open bank accounts with the Bank of China or a bank designated by the State Administration of Foreign Exchange.

Article 19 The foreign investor in any wholly foreign-owned enterprise may remit abroad profits lawfully earned from the enterprise and other income and funds lawfully obtained following the liquidation of the enterprise.
Wages and other lawful income earned by foreign employees of wholly foreign-owned enterprises may be remitted abroad after individual income tax has been paid in accordance with the law.

Article 20 The operating period of a wholly foreign-owned enterprise shall be determined by the examination and approval authority concerned following an application made by the foreign investor. Where an extension of the operating period is sought, an application shall be made to the examination and approval authority no less than 180 days prior to the date on which the current operating period is due to expire. The examination and approval authority shall, within 30 days of receiving the application, make a decision on whether or not to approve the application.

Article 21 Where a wholly foreign-owned enterprise ceases business operations, a prompt announcement shall be made and the enterprise shall be liquidated in accordance with applicable legal procedures.
Pending the completion of liquidation procedures, the foreign investor shall refrain from disposing of the enterprise's assets other than for the purpose of carrying out the liquidation.

Article 22 Where a wholly foreign-owned enterprise ceases business operations, the enterprise shall go through the procedures for the cancellation of its registration and the return and cancellation of its business license with the administrative authority for industry and commerce concerned.

Article 23 Where the establishment of wholly foreign-owned enterprises does not involve the implementation of special access administrative measures prescribed by the state, the approval items stipulated in Article 6, Article 10 and Article 20 of this Law are subject to record-filing management. The special access administrative measures prescribed by the state shall be promulgated by or approved for promulgation by the State Council.


Article 24 Detailed regulations for the implementation of this Law shall be formulated by the State Council department responsible for trade and foreign economic relations and shall come into effect after being submitted to and approved by the State Council.

Article 25 This Law shall come into effect on the date of issue hereof.