7. Appendices

Opinions of the State Council on Further Implementing the Strategy of Revitalizing the Old Industrial Bases Including Northeast China

[State Council Document No. 33/2009]

People’s governments of provinces, autonomous regions and municipalities directly under the Central Government, and ministries and commissions directly under the State Council.

Important by-stage achievements have been made in the past five years since implementation of the strategy of revitalization of the old industrial bases including Northeast China. Specifically, major breakthrough was made on institutional innovation with focus on reform of state-owned enterprises, the economic system with diversified ownership structure was under rapid development, the economic structure was optimized, the independent innovation ability was obviously improved, those bases were more open to the outside world, the infrastructure was ameliorated, key livelihood issues were gradually solved and both urban and rural areas took on a new look. It is proved by the practice that the strategy of the Central Government for revitalizing the old industrial bases including Northeast China is timely and correct. However, deep-rooted problems on aspect of system and structure in the old industrial bases including Northeast China are to be solved, the achieved results are to be reinforced and the potential for accelerated development are to be exerted. In current situation, the government shall learn from experience gained from practices, enrich the revitalization strategy and formulate new policies and measures in a timely manner, which are necessary to counter global financial crisis, promote steady and fast economic development and boost rejuvenation of the old industrial bases including Northeast China. To this end, opinions are proposed as follows:

I. Optimize economic structure and build a modern industrial system

1. Speed up merger and restructuring of enterprises. The principle of market domination and government guidance shall be insisted on and regional, industrial and ownership limits shall be eliminated. Efforts shall be made to optimize resource allocation, promote merger and restructuring of enterprises and develop large corporation groups with international competitiveness. Where any association and restructuring of enterprises in Northeast Region involves disposal of any asset of shares converted from debts, the right concerning such shares shall be properly handled by new disposal approaches according to real situations. China supports association and restructuring of large corporation groups under the Central Government with local enterprises, encourage private and foreign-invested enterprises to participate in reform and restructuring of enterprises in the old industrial base and give prior supports to merged or restructured enterprises for their technical transformation.

2. Make great efforts to facilitate nonpublic economy and small and medium sized enterprises. A fair competition environment shall be created to equally protect different ownerships and boost development of nonpublic economy. Policies on financing, taxation and market access shall be put into effect to encourage nongovernmental investment in infrastructure, public utility, financial service and social causes. The government shall promote the co-development of public assets, private assets and foreign assets and actively develop the mixed-ownerships economy. Employees are allowed to hold certain percentage of shares of their restructured enterprise. Small and medium sized enterprises shall be guided to innovate in institutional system and improve operation and management level and market competitiveness. The advantages of concentration of large enterprises in the old industrial bases including Northeast China shall be fully exerted and small and medium sized enterprises are encouraged to establish cooperation relationships with large enterprises to form industrial chains and develop to be professional, unique and superior? The government shall improve its service to small and medium sized enterprises’ entrepreneurial financing, continue the establishment of the credit system and the credit guarantee system for such enterprises and support small and medium credit re-guarantee enterprises and their affiliates to expend their businesses.

3. Improve and empower pillar industries. The plan on adjusting and revitalizing key industries shall be carried out. More efforts shall be made on structural adjustment, elimination of backward facilities and avoidance of repeated construction. The government shall actively promote IT-based industrialization, transform traditional industries by modern IT means and improve the level of digitalization and intellectualization. The more shares of the Central Government budget shall go to adjustment and reconstruction projects in the old industrial bases including Northeast China. Industries with competitiveness, key enterprises and important brands in this region are encouraged to increase market shares. More efforts shall be made to increase the production of large castings and forgings, nuclear power equipment, wind power equipment, shield machinery, advanced vessel and marine engineering equipment, large agricultural machinery, high-speed motor chain units, high-power locomotives, high-end digital control machine tools and key parts and components, which are of competitiveness and are in urgent need in market. Enterprises are encouraged to purchase equipment made in China and apply initial important technical equipment. The Export-Import Bank shall arrange certain credit quota annually to support export of important technical equipment made in northeast China and the People’s Bank of China and the Administration of Foreign Exchange shall give policy supports. More efforts shall be made to promote structural adjustment of auto industry in northeast China, mainly developing autos of self-owned brands, autos with small capacity engines, autos using new energy and key parts and components. The product structure of steel industry shall be further adjusted. Efforts shall be made on energy saving and emission reduction, elimination of backward facilities and improvement of market competitiveness. Meanwhile, more efforts shall be made on resource exploration and development and foreign cooperation, and improvement of guarantee level of ore resources supply. The oil industry shall be optimized. The organs concerned shall speed up the execution of large oil-refining and ethylene projects, improve processing capability and develop fine chemicals and chemical fertilizer industries.

4. Take initiatives to nurture industries with potentials. The region shall develop basic support parts and components, processing tools and special raw materials by taking advantage of its strong equipment manufacturing ability. It shall develop civil-military dual-purpose technologies by take advantage of concentration of military industrial enterprises to promote co-development of civil and military purpose technologies and enhance the leading role of military industrial enterprises. Relying on its advantage as a raw material processing base, the region shall spare no efforts to develop downstream distinctive light industries. With the advantages of its large quantity of agricultural and forest products with superior qualities and its developed stockbreeding, the region may put more efforts on development of deep processing of agricultural and forest products. The advantage of abundant Chinese medical plant resources shall be given full play to develop modern Chinese medicines. Since it is located in the center of northeast Asia, the region shall enhance its cooperation with neighboring countries on energy and resources development. Emerging industries including aviation, electronic information, biological pharmaceutics, new energy and new materials shall be proactively developed. Local governments are encouraged to set up special support funds for those industries with potentials.

5. Speed up the development of modern service industry. Domestic and foreign financial institutions are encouraged to establish branches and offices in Northeast Region. Cities that meet certain requirements are encouraged to undertake financial reform and innovation. Small and medium financial institutions are under active support. The region may promote establishment of auto financial companies and expand auto consumption financing channels. The northeast property transaction platform shall be improved on aspect of mutual connection, regional integration and function expansion. Dalian Commodity Exchange is supported to build itself an important futures transaction center in Asia and launch new types of futures with competitiveness in northeast China and consistent to its functional positioning based on improvement of its current listing future types. The modern logistics shall be facilitated. Researches shall be made to formulate special plans for development of logistics in northeast China and a batch of major regional logistics parks shall be established in a comprehensive way. The development of software and service outsourcing industries shall be quickened. Three service outsourcing demonstration cities—Dalian, Harbin and Daqing—are under major support and Yanji and Suifenhe are encouraged to take advantages of their unique locations to develop software and service outsourcing industries. The plan for adjustment and revitalization of cultural industry shall be carried out to support accelerated development of cultural industries including cultural innovation, publishing and distribution, production of films and TV programs, performances and recreation, cultural exhibition, digital sector and animation, so as to create cultural brands with characteristics of Northeast Region. Constructions of public cultural infrastructure and projects for benefits of the public shall be strengthened and the public cultural service system shall be improved. Efforts on protection of cultural relics shall be heightened and overseas cultural exchange shall be expanded. More efforts shall be made to develop tourism. The organs concerned shall launch special plans for tourism development in Northeast Region as soon as possible to enhance construction of tourism infrastructure, develop appealing destinations with distinctive features and improve management and service level, so as to build barrier-free larger northeast tourism zone.

6. Support the fast development of clusters of key industries. Liaoning coastal economic zone, Shenyang economic zone, Heilongjiang-Daqing-Qiqihar industrial corridor and Changchun-Jilin-Tumen region economic zone are encouraged to speed up development and become high-class modern industrial bases in China. The organs concerned shall formulate development plans to support Shenyang Tiexi old industrial base to be adjusted and reconstructed as a new demonstration zone of equipment manufacturing and support the development of the equipment manufacturing clusters in Dalian, so as to create an advanced equipment manufacturing base with international competitiveness. Efforts shall be made to promote the construction of the energy and heavy chemicals base in east area of Inner Mongolia, coal-based power and chemicals base in east area of Heilongjiang and coal-based chemicals in west area of Liaoning to improve the transformation and utilization level of resources. The leading role of hi-tech industrial bases including Shenyang, Changchun, Harbin, Dalian and Tonghua shall be fully exerted to form advanced industries and industrial clusters with core competitiveness. Regions with mature conditions are supported to establish distinct industrial parks with influences and large scale. The development of Changchun automobile industry development zone and railway transport equipment industrial park shall be speeded up. Endeavors shall be made on establishment of Dalian national ecological industrial demonstration zone (under category of venous industries). The expansion of national economic and technical development zones and upgrading of major provincial development zones that meet requirements in northeast China shall be promoted.

II. Speed up the technological advancement of enterprises and fully improve their independent innovation capability

7. Strengthen technical transformation of enterprises. Technical transformation of enterprises is an important content of adjustment and reconstruction of the old industrial base and critical experience for obtaining achievements on revitalization. More supports shall be given to technical transformation: the fund for adjustment and reconstruction of the old industrial bases including Northeast China shall be appropriated from the current relevant special investment funds and the investment from Central Government budget will be increased to support technical transformation of enterprises in the old industrial bases including Northeast Region, mainly for a batch of recently-selected projects. The share of the budget of the Central Government for operation of state-owned assets for state-owned enterprises in the old industrial bases including Northeast Region shall be increased. The investment fund for equipment manufacturing industry shall be established as soon as possible, mainly supporting the technical transformation and merger and restructuring of equipment manufacturing enterprises in northeast area.

8. Improve independent innovation capability. The old industrial bases including Northeast Region shall give play to the human resource advantage and establish a sound system to encourage independent innovation. In the major development fields in the old industrial base, based on leading enterprises and major projects, a batch of technical innovation and hi-tech industrialization projects with strong leading power and influence and quicker returns shall be carried out. The scientific research and industrial advantages of the old industrial bases including Northeast Region shall be fully utilized. Through major national scientific and technical special projects and special projects of building innovation ability, a batch of project research centers, engineering labs and enterprise technical centers shall be established and breakthroughs on core technologies and key generic ones may be made. Enterprises are supported to effectively utilize internationally innovation resources to improve their abilities of creation and recreation based upon introduction and absorption. The old industrial base is supported to attract talents and teams of entrepreneurship and R&D ones in urgent need in some major industries. The national projects of introduction of one thousand talents and introduction of one hundred talents shall mainly support introduction of overseas talents to the old industrial bases including Northeast China. Flexible policies and measures such as share participation by means of technology and option incentives are encouraged to be taken so as to create good environment for high-end talents to put their abilities to use.

9. Promote industrial application of the results of independent innovation. All efforts shall be made to promote the application of the results of independent innovation so as to transform such results into advanced productivity and culture new economic growth powerhouses. More supports shall be given to application of independent innovative results in hi-tech fields including new energy, new materials, biology, IT, aviation and high-speed railway. Vigorous endeavors shall be made to promote combination of efforts of enterprises, universities and research institutions and encourage institutions of higher learning and scientific and research institutions to transfer their independently innovative results to enterprises and more scientific and technical personnel to found scientific and technical enterprises. Scientific and technical enterprises that satisfy requirements are under prior support to be listed in the second board to raise funds. Special funds for hi-tech industry development in the old industrial bases including Northeast Region shall continue to exist, mainly supporting construction of national hi-tech industrial bases in the old industrial bases including Northeast Region, application of results of independent innovation and innovation ability. The local governments concerned shall formulate policies to support the application of the results of independent innovation to production in the old industrial base.

III Speed up the development of modern agriculture and reinforce its fundamental position

10. Vigorously develop modern agriculture. The Northeast Region is of advantaged conditions to develop modern agriculture. Governments in the region shall focus on improving land productivity, resources utilization rate and labor productivity and launch policies and measures to boost development of modern agriculture in Northeast Region. Those governments shall take into consideration of the plan for newly increase of 100bn grain production across the country to enhance grain production in the region and build the region a steady national strategic grain base. More efforts shall be made on implementation of the scientific and technical program for increase of grain production and promotion of new technologies for high yield, superior quality, cost saving and efficient improvement. The structure of agricultural machinery shall be optimized and the mechanical level of agriculture shall be improved. Efforts shall be heightened on construction of storage yards for agricultural machinery and tractor roads. The subsidies for agricultural machinery operation in important links such as deep scarification shall be studied. Research shall be made on a long-term system for stabilizing production of corns and soybeans. The policy of national collection and storage of corns and soybeans produced in Northeast Region shall continue to be executed at proper time. The state-owned farms shall continue to play its positive role in developing modern agriculture and safeguard national food safety. The program of 揷o-development of large state-owned farms and counties shall be promoted to provide demonstration and socialization services for local agriculture development. Agricultural cooperation between

Northeast Region and the outside shall be enhanced and the enterprises that meet requirements are supported to undertake agricultural cooperation and development in neighboring countries and regions.

11. Strengthen infrastructure construction in agriculture and rural areas. Basic agricultural infrastructure with focus on water conservancy facilities and infrastructure in rural areas with focus on water, power, road and gas shall be built. The construction of major water conservancy projects including diverting Nenjiang River to Baicheng and to irrigation areas of the Sanjiang (Songhua River, Heilong River and Wusuli River) Plain, the downstream of Nierji Reservoir, the downstream of Chuole hydro complex and Da’an, and renewal and reconstruction of large irritation drainage pump stations. The reservoirs with potential dangerous conditions shall be reinforced and the projects of water-efficient irritation demonstration and small farm water conservancy shall be carried out. The special campaign of disseminating knowledge of scientific storage of grains shall be conducted and the technologies for scientific storage of grains shall be promoted. The development of new grain inventory and circulation businesses such as grain bank is under support. Nonstop transport of bulk grains by railway to other regions in China shall be promoted, the through transport by water and railway shall be more used and large grain logistics bases, transfer stations and load stations with strategic significance as well as grain warehousing and drying facilities shall be built. Active efforts shall be made to promote IT-based agriculture, establish a sound system of providing scientific, technical and socialized services and improve services. The development of urban and rural areas shall be planed in a comprehensive way and the development of small towns and central villages shall be quickened by combining the construction of new socialistic countries. The conditions of living and production of people in rural areas shall be ameliorated. The drinking water safety issue existed in rural areas shall be solved as soon as possible. The support funds of governments at the county level or below for construction projects for the pubic benefits in rural areas shall be cancelled.

IV Strengthen infrastructure construction and create conditions for overall revitalization

12. Accelerate the building of a comprehensive transport system. The special railway lines from Beijing to Shenyang, from Shenyang to Dandong and from Harbin to Qiqihar and the railways from Jilin to Tumen, from Dalan to Dandong, from Harbin to Mudan River and from Harbin to Jiamusi shall be started to build. The reconstruction of the existing railways including Mudan River-Suifenhe and the construction of the following railways shall be promoted: the northeast border railway, the Yiershi-Arihashate railway, the Baiyinhua-Chifeng-Jinzhou port coal special line, Tongjiang River Railway Bridge and the coastal railway. The main and feeder airports shall be constructed under a comprehensive plan. Efforts shall be made to improve the layout of airports in Northeast Region, advance the expansion and relocation of some airports in the region during the 11th Five-Year Plan period, and do good job on preparations for the expansion and relocation of some other airports to be expanded and relocated in the ?2th Five-Year Plan?period. Since the development of highway is relatively backward in Northeast Region, more investment shall be made in building highways and rural roads in Heilongjiang, Jilin and Inner Mongolia by consideration of the features of extremely cold in winter of the region. The team for coordination and promotion of transport infrastructure in Northeast Region shall be set up to coordinate, guide and facilitate building of transport facilities in the region and formulate a comprehensive transport plan for the region.

13. Optimize energy structure. The following two projects shall be started to build: two 10mn kilowatt wind power bases in the east area of Inner Mongolia and northeast China, and the channels for transport of coal-based power from the east area of Inner Mongolia and Heilongjiang to the outside. The first-stage works for the Liaoning Hongyan River Project Phase II and Xudapu and Jilin nuclear power project. The construction of grids in northeast area shall be enhanced and the reconstruction of the existing grids shall be promoted, so as to improve the power transmission ability of major grids. Efforts shall be heightened on reconstruction of grids in rural areas, especially major grain production areas, and forest regions. The issues concerning grid interconnection of small power resources including wind power shall be solved. Intellectual grid construction pilots may be made on the northeast grid.

V. Take initiatives to promote the transition of resource-oriented cities to facilitate sustainable development

14. Nurture and empower substitute and alternative industries. To develop substitute and alternative industries is the ultimate solution to economic transformation of cities that have exhausted resources. Efforts shall be made to implement the special plan for resource-based cities to create jobs, comprehensively use resources and develop substitute and alternative industries, and support and guide such cities to form their new dominant industries as soon as possible. Development banks and other financial institutions are encouraged to enhance their efforts to support the sustainable development of the said cities. For those cities, supports shall be given on aspect of layout of industries, examination and approval of projects, land use, loans and financing, technical development and market access. Those cities are encouraged to built parks for substitute and alternative industries and actively take transferred industries. The plan for development of substitute and alternative industries in the resource-based cities shall be formulated and implemented.

15. Establish a long-term sustainable development system. The system of reserves for sustainable development of resource-based cities shall be launched as soon as possible and the government-supported section of the special reserve fund shall be used to solve problems concerning environmental treatment in resource-based cities. Sustainable development pilots may be conducted in resource-based cities where resources exploitation is at growth or maturity stage. The formulation of the Regulations for Sustainable Development of Resource-based Cities shall be expedited. The people’s governments at the provincial level shall full perform their duties to launch policies and measures to support the sustainable development of those cities and make the works on transformation of development mode as one element of the system for assessing the major officials of the people’s governments of resource-based cities.

16. Give more financial policy supports. More guidance shall be given on transformation of development mode of cities that have exhausted their resources and the effectiveness of use of fiscal transfer payment by the said cities shall be improved. The central budget shall give more funds for treatment of extremely large mining pits and deep gobs in resource-based cities. On appropriation of the special fund for finding alternative resources instead of exhausting mines, more supports shall be given to the cities that have exhausted resources in the old industrial base in northwest China. The resource-based enterprises in the above-said cities are supported to develop and utilize resources outside the region and China.

VI Practically protect ecological environment and vigorously develop green economy

17. Strengthen ecological building. The development of forestry and forest area economy shall be oriented by ecology. The fall of timbers in the state-owned forest areas in northeast China shall be further reduced and efforts shall be made to put forward transformation of economic development mode and promote sustainable economic development in the areas. The natural forest protection project shall continue to be executed, the relevant policies and measures shall be improved and the support efforts shall be heightened. The achievements of vegetation restoration project shall be enhanced and more efforts shall be spent on cultivating, managing and protecting forests. More emphasizes shall be paid to the function of Daxinganling and Xiaoxinganling as ecological screens and the plans for ecological protection and economic transformation of the said areas shall be formulated. The reform of the collective-owned forest right system shall be promoted and the pilots for reform of state-owned forest right system shall be steadily advanced. Efforts shall be made to enhance restoration and protection of natural meadows and construction of ecological projects including comprehensive treatment of soil erosion in black earth area. Organs concerned shall make more endeavors on ecological projects including protection and restoration of wetlands and treatment of desertification and environment of mines, and undertake eco-migration of residents living in the core area of Zalong wetland in Heilongjiang.

18. Take initiatives to promote energy saving and emission reduction. Organs concerned shall fully implement the relevant laws, regulations, plans and industrial policies and enhance control of the total amount of major pollution sources. The expansion of industries that have high energy consumption and cause heavy pollution shall be restricted and small enterprises engaged in coal-based electricity generation, steel, paper making and cement that cause heavy pollution shall be closed down. Focusing on industries of energy, raw materials, equipment manufacturing and agricultural product processing, organs concerned shall enhance management of industrial parks and promote clean production. The low carbon technologies are supported to be developed and applied and the development of circular economy is encouraged. Organs concerned shall spend more efforts in promoting the application of energy-saving technologies and products, develop environmental-friendly structures and green structures that save energies and land, and implement the project of promoting energy-saving products for the public benefits.

19. Enhance treatment of environmental pollution. Organs concerned shall enhance water pollution prevention and treatment of major drainage basins including Songhua River and Liaohe River and support areas in Songhua River Basin to conduct pilots of compensation for discharge amount of major pollutants and transaction of discharge right. More efforts shall be made on construction of wastes and sewage treatment facilities in large cities, promote wastes classification, recycling and clean incineration and gradually raise the standards of charges for treatment of sewage, waste and discharge in urban areas. Industrial pollution shall be under strict monitoring and shall be prevented and treated and the pollution sources from agriculture shall be solved in a comprehensive way. Efforts shall be made to promote the comprehensive treatment of environment in rural areas so as to create a beautiful look of countries.

VII Focus on livelihood of the people and facilitate social causes

20. Create more jobs by all means. Organs concerned shall actually pay more attention to employment, carry out policies for employment of university graduates, immigrant workers from rural areas and groups having difficulties to find jobs, and ensure stability of employment situation. The said organs shall well exert the functions of governmental investment and major construction projects on promoting employment, vigorously create more jobs for persons needing special care, and try to help at least one person in a family that nobody has a job find job. Policies and measures for supporting entrepreneurs shall be proactively carried out to create more jobs. The enterprises engaged in service industry and nonpublic economy and small and medium sized enterprises are encouraged to create more jobs. Enterprises in difficult operation are guided and supported to adopt flexible employment and working hours and give training to employees while not reduce jobs as much as they can do.

21. Actively improve social security system. Efforts shall be made to promote the comprehensive planning at the provincial level for endowment insurance of employees in urban areas and properly raise the standards of basic retirement pensions of people retired from enterprises. The system of the minimum living guarantee for people in rural and urban areas shall be improved. Organs concerned shall energetically promote the pilots of new endowment insurance in rural areas and extend the coverage of rural cooperative medical insurance. Works on social insurance of farmers whose farms have been expropriated shall be well done. Organs concerned shall improve the policies and regulations on employment injury insurance, expand the coverage of such insurance and solve the issues of making the treatment of persons who suffered employment injuries before implementation of the said insurance to be subject to comprehensive management of employment injury insurance.

22. Solve outstanding livelihood issues including housing and heating in winter. Works on handling letters and calls from the public shall be well done and more efforts shall be made on solving livelihood issues with high public concerns. Efforts shall be heightened on construction of tenements and affordable housing in urban areas and reconstruction of squatter settlements in state-owned forest areas, dilapidated houses in state-owned reclamation area, dilapidated houses in rural areas and dilapidated school houses as well as squatter settlements in mining areas. Supports shall be given to reconstruction of squatter settlements in urban areas. Organs concerned shall give more supports to the combined heat and power development project carried out in extremely cold areas in Northeast Region, speed up reconstruction of concentrated heat supply networks in cities in Northeast Region and solve issues of heat supply for families receiving social welfare support in urban areas. The program of development-oriented poverty reduction shall be promoted in rural areas to help more poverty-stricken people to increase incomes.

23. Facilitate education, health and other social causes. Organs concerned shall study and promote reform of educations of all kinds, improve educational quality and provide human resource support for revitalizing the old industrial base. The organs concerned shall give full play to the advantage of cluster of universities and colleges in Northeast Region and improve the level of major institutions for higher learning. Contents of vocational education and school sizes shall be properly decided by consideration of optimization and upgrading of industrial structure in the old industrial base. More supports shall be given to vocational education practice bases and improvement of basic abilities of vocational education. Organs concerned shall promote the reform of medical care system, quicken the establishment of the basic medical insurance system covering people in urban and rural areas, establish a sound medical care service system at the community level and expand the coverage of medical insurance for workers and residents in urban area.

VIII Deepen regional cooperation and promote economic integration in the region

24. Facilitate regional integration. The Northeast Region is encouraged to conduct cross-province economic cooperation, promote reasonable flow of factors for production and improve the level of integrated development. Recently, cooperation on integration on aspect of tourism, logistics, transport and science and technology shall be conducted at first. Organs concerned shall fully implement the Plan for Revitalizing Northeast Region, do good job of urging and inspecting the execution of tasks prescribed in the said Plan, and speed up the construction of major infrastructure described in the Plan. The industrial matchmaking and reasonable division of work between the east region of Inner Mongolia and three provinces in Northeast Region shall be promoted. The tax policies to support the adjustment and reconstruction of the old industrial bases including Northeast Region shall be studied.

25. Establish a cooperation system in Northeast China. The negotiation system of administrative chiefs of four provinces (autonomous region) in Northeast Region shall be established to research issues concerning coordination in construction of major cross province infrastructure projects, layout of industries and regional coordinated development, and propose opinions on major issues concerning adjustment and reconstruction of the old industrial base on a regular basis.

IX Deepen reform and opening up and vitalize social and economic development

26. Deepen reform of state-owned enterprises. Organs concerned to promote the reform of state-owned enterprises, make endeavors to establish a sound modern corporation system and rejuvenate the economy in the old industrial base. During enterprise restructuring, organs concerned shall insist on handling issues according to procedures prescribed in laws and regulations, make transparent practices, actually safeguard legitimate rights and interests of employees and prevent loss of state-owned assets. People’s governments at all levels in Northeast Region shall promote works on pilots of reform of collective-owned plants set up by large state-owned enterprises and the relevant departments shall make a summary of the previous works and improve policies for those pilots. The issues concerning medical insurance, employment injury insurance and social insurance of the retirees from enterprises directly under the central government or delegated to local government that have closed down according to policies and from local enterprises that have gone bankruptcy according to law shall be properly handled. The disposal of bad bank loans concerning the equipment manufacturing industry in Northeast Region shall be finished as soon as possible. The reform of state-owned enterprises engaged in industries of grain, commerce and trade, construction, agricultural cultivation, forestry and culture shall be quickened.

27. Advance reform in other fields. The areas in Northeast Region that meet requirements to conduct national support reform pilots shall be decided as soon as possible. The fiscal management system shall be reformed and the finance of counties shall be subject to the direct administration of the province. The establishment of the basic finance guarantee system at the county level shall be studied. Efforts shall be made to improve the policies for enterprise bond issuance and explore diversified approaches of improving enterprise bond credit. More efforts shall be spent in developing diversified new rural financial institutions and promoting innovation of financial products and services in rural areas. The development of agricultural insurance shall be quickened, pilots and risks shall be expanded, and subsidies from central government shall be increased. A sound market for transfer of land use rights in rural areas and transaction of factors for forestry shall be established, so as to regulate administration and enhance efforts on service. Organs concerned shall check administrative charges imposed on enterprises, carry out policies and measures for enterprises that meet requirements to delay their payment of premiums of social insurance, and on reduction of fee rate and expansion of the expenditure scope of unemployment insurance funds, and reduce the burdens of enterprises. The reform of urban heat supply system and rural water conservancy administration system shall be promoted.

28. Further open up to the outside world. Liaoning coastal economic area and Changchun-Jilin-Tumen River economic area shall be more open to the outside. The Guidelines for Plan on Cooperation between the Old Industrial Bases Including Northeast China and Fareast Area of Russia is urged to be concluded and put into action. The formulation and implementation of the plan for protection and development of Heixiazi Island shall be quickened. Organs concerned shall combine the works on opening-up of coastal and border areas, development of overseas resources, regional economic cooperation and taking of domestic and overseas transferred industries and support areas that meet requirements to set up border trade centers, economic cooperation centers, export-oriented processing zones and imported resources processing zones. Organs concerned shall make researches on establishment of China-Russia local cooperative development fund to support the implementation of the projects stipulated in the guidelines for plan of cooperation between local areas of China and Russia. The overseas ports may be utilized to conduct cooperation on cross-border transport of domestic commodities, and the channels for joint sea-and-rail transport in Heilongjiang and Jilin shall be kept for normal operation. Organs concerned shall vigorously make institutional innovation of administration of special zones under customs’ monitoring, quicken the construction of Dalian Northeast Asian International Shipping Hub with Dalian Dayaowan Bonded Zone as the core, Suifenhe Comprehensive Bonded Zone and Shenyang Bonded Logistics Center, and facilitate bonded logistics and processing industry in the Northeast Region. The pilots for settlement of trade in goods in RMB may be conducted. The Northeast Region is encouraged to enhance economic and trade cooperation with Hong Kong, Macao and Taiwan.

Revitalization of the old industrial bases including Northeast China is a long-term hard task. The People’s governments at all levels in this region, other regions and the relevant departments under the State Council shall fully carry out the scientific outlook on development, free minds to make innovation, and cooperate with each other to put all policies into effect. They shall promote the old industrial bases including Northeast Region to step on a new stage when countering global financial crisis and speed up to build its new growth powerhouse with unique advantages and competitiveness, so as to make contributions to national economic growth.

State Council

Sept. 9, 2009

Promotion of further Opening-up of the Old Industrial Bases in Northeast China

All the people’s governments of provinces, autonomous regions and municipalities directly under the central government, all the ministries and commissions of the State Council and all the organs directly under the State Council.

Further opening-up is an important component of the strategy to revitalize the old industrial bases in Northeast China, and also an important approach to its realization. In accordance with the “Opinions of the Central Committee of CPC and the State Council on the Implementation of Revitalization Strategy of the Old Industrial Bases in Northeast China” (Zhong Fa [2003] No. 11) and in consideration of the actual conditions of Northeast China region, the opinions for implementation of its further opening-up have been approved by the State council and are hereby presented as follows:

  1. We shall encourage foreign investment to participate in the restructuring and transformation of state-owned enterprises, so as to accelerate structural and mechanism innovation.
    1. In accordance with the requirements of carrying out the strategic adjustment in state-owned economy, we shall explore and extend new modes of utilizing foreign investment, encourage foreign investment to participate in the restructuring and transformation of state-owned enterprises, promote structural and mechanism innovation, and reinforce the adaptive ability of state-owned enterprises in old industrial bases to market economy.
    2. We shall encourage foreign investors, through methods such as merger, shareholding, to participate in the restructuring and transformation of state-owned enterprises. The taxes owed by the enterprises which are historical accumulations and have become really uncollectible can be exempted with the approval of the State Council in accordance with specific regulations. We shall encourage qualified foreign-invested stockholding companies to go public in the capital markets in China and overseas.
    3. We shall actively explore the effective ways to vitalize state-owned assets. We shall permit foreign-invested enterprises to purchase the bad creditor’s rights and shareholder’s rights from financial property management companies and to reshuffle and dispose of their properties in accordance with relevant laws.
    4. We shall continue to improve the social security environment for the development of foreign-invested enterprises. Foreign investors, after their merger of state-owned enterprises, shall deal with the issues such as labor relations, laying off employees for economic reasons and social security in compliance with current laws, regulations and rules and the principle of national treatment.
    5. We shall further regulate and promote the merger and reshuffle of domestic enterprises by foreign investors. We shall establish a healthy property right exchange mechanism in Northeast China, so as to create a convenient and normative environment to facilitate foreign investors in their investment through modes like merger and shareholding. Merger of state-owned enterprises by foreign investors shall be subject to asset assessment carried out in compliance with the relevant Chinese laws and policies, and the price of asset exchange shall be determined by the results of asset assessment recorded in or approved by relevant departments or bureaus.
  2. We shall strengthen the policy guidance to push forward the technological advancement of key industries and enterprises.
    1. We shall, on the present basis, bringing into full play of comparative advantages and aiming at the improved overall quality and core competitiveness, actively introduce foreign investment to accelerate the technological advancement of key industries and enterprises, enhance the assimilation and absorption of introduced technologies, and improve self-driven innovation capabilities and boost industrial upgradation.
    2. We shall support foreign investment in key industries and enterprises. We shall actively guide foreign investment to national key industries, such as modern agriculture, equipment manufacturing, chemistry, hi-tech industry and agricultural products processing and accelerate development in supporting industries, so as to build modern industrial bases with stronger competitiveness. The state government will give preferential treatment to Northeast China in the distribution and arrangement of key projects in the above-said industries and give policy-based loan for the introduction of important key technologies and equipments, with reduced percentage of capital funds as approved for key projects. Foreign investment in key projects which have been approved by the State to build with T-bonds can have the approved discount government loans, subsidies and reduced amount of capital funds of the original projects, and can increase their stockholding rights transferred from Chinese state-owned enterprises upon approval.
    3. We shall extend the application of the Catalog of Priority Industry for Foreign Investments. The application of “Catalog of Priority Industry for Foreign Investments in Central and Western Areas” is extended to Liaoning Province (Jilin and Heilongjiang Provinces have already been included). Any foreign investment projects in Northeast China which are in conformity with the Catalog are eligible for the preferential policy in import taxes for the category of encouraged foreign investment.
    4. We shall encourage foreign investment in hi-tech industries and R&D centers. We encourage multinational corporations, in the form of sole investment or joint venture with local enterprises, science and research institutions or higher education institutions, to establish R&D centers in Northeast China. In addition to eligibility for the preferential policies stipulated in the “Notice of the State Council Concerning the Adjustment in the Taxation Policy of Import Equipment” (Guo Fa [1997] No. 37) and “Notice of the General Office of the State Council forwarding the Opinions of the Ministry of the Foreign Economic and Trade Concerning the Further Encouragement of Foreign Investment” (Guo Ban Fa [1999] No. 73), approved foreign-invested enterprises’ technological centers are also eligible for exemption of import duties and import value-added taxes in accordance with current regulations for the self-use consumptive materials, reagents, sample equipments, sample products which are not available in China.
    5. We shall encourage foreign investments in continual industry and substitutive industry. The State will, through priority arrangements in the distribution of productivity of key projects, encourage and guide foreign investment to the deep processing and continual industry projects in the resources-exhausted cities of Northeast China, and also bring into full play and make comprehensive use of existing resources, talents and productive capacities, so as to push forward the transition of these cities.
  3. We shall further extend the areas of opening-up and exert efforts to improve the level of development of the service industry.
    1. We shall adapt ourselves to the needs of the new situations in the opening-up process, of the development of advantageous industries in old industrial bases, of the change in the functions of cities and of the promotion of employment, and at the same time actively introduce foreign investment to upgrade the traditional service industry and focus on developing modern service industry, in order to push forward the opening-up in the sector of service industry.
    2. We shall encourage foreign investment in the construction of urban public facilities. Under the condition of the establishment by city governments of an effective supervising mechanism and the guarantee of public interest and security, the restriction on the shareholding percentage of foreign investment can be lessened in the construction and operation of gas, heating and water supply and drainage network. Foreign investor can become the controlling party when approved.
    3. We shall extend the opening-up of the financial service industry. In accordance with the commitment to WTO in opening up financial service sector, we shall further extend the opening-up of banking industry and accelerate the development of financial services in securities, futures and insurance. Priority permits will be granted to sub-branches and operations by foreign banks in Northeast China. Foreign financial organizations are encouraged to join stock in local city commercial banks and participate in the restructuring and reshuffle of rural credit cooperatives. Foreign insurance companies, which have advantage in areas such as supplementary pension and agricultural insurance, are encouraged to begin their operations in Northeast China. Priority permits are also granted to joint venture securities companies, securities investment and fund management companies, insurance brokers companies and foreign insurance companies which operate in Northeast China.
    4. We shall encourage foreign investment in transportation industry. The shareholding percentage of foreign investment, in operations such as in railway passenger and cargo transportation, cross-border and within-border road transportation, regular or irregular international freight and international multimodal container transportation, can be raised upon approval. Foreign investment is also encouraged in air transportation and general aviation.
    5. We shall extend the pilot scope of foreign-invested logistics enterprises. It can be extended to the provinces of Liaoning, Jilin and Heilongjiang.
  4. We shall bring into full play the regional advantages to promote the healthy development of regional economic cooperation.
    1. We shall, by taking advantage of the geographic position of Northeast China region and implementing the “going global” strategy, deepen the cooperation and development with bordering states in energy sources, raw materials and mineral resources. We shall actively engage in regional economic cooperation, explore international market, bring along the export of commodities, technologies and labor. We shall continue to render support to Northeast region in their building of the platform of cooperation with bordering states in international trade, investment, science and technology and tourism.
    2. We shall give more impetus to the frontier trade development in Northeast China. We shall study and develop policies conducive to the development of frontier trade, simplifying procedures in aspects such as export tax rebate, administration of import and export commodities and personnel exchanges, while strengthening the administration. We shall improve and extend the use of Renminbi in frontier trade settlement, so as to facilitate trade and investment. A pilot plan is to be carried out in Northeast China for export tax rebate in Renminbi for small amount export trade.
    3. We shall strengthen the economic and technological cooperation with Northeastern Asian region to push forward the development and opening-up of frontier region. We shall continue to expand the international cooperation and development of Tumenjiang area, actively exploring new modes of development and opening-up in frontier region. We shall accelerate the construction of frontier economic cooperation zone, frontier trade zone and export processing zone, enabling Heihe, Suifenghe (Dongning), Huichun and Dandong to become areas that assume the functions of logistics, trade, import and export processing and international trade and tourism.
    4. We shall encourage investment and development abroad in the forms of joint venture, cooperation and merger. We shall, through further studying relevant policies and improving the policy supporting system, increase the support in the subsidies to the initial cost of overseas key development projects by enterprises in Northeast China and discount loans to them, and make priority arrangements for the import of their products.
    5. We shall encourage qualified enterprises to participate in international tender and contracting international cooperation projects. For the manufacturing and processing projects and technological cooperation projects in overseas construction contract and overseas investment that can bring along export of equipment and labor, the current supportive measures, such as discount loans, loans on favorable terms and the market expansion cost in terms of overseas exhibition and advertisement, will be further strengthened and expanded.
    6. We shall accelerate the development of Dalian as an international shipping center in Northeaster Asia. We shall lay more emphasis on the construction of port facilities and the further opening-up of Dalian port, so as to enhance its capacity in absorbing foreign investment and assembling basic shipping elements. We shall expand the scope of the pilot plan of interaction between free trade zone and port. We shall render policy support and give priority examination and approval to foreign-invested large-scale port projects, near-port industry in encouraged category, and logistics projects.
  5. We shall create a favorable development environment to safeguard an accelerated opening-up.
    1. We shall make efforts to utilize more international loans on favorable terms in adding to infrastructure construction and development in social undertakings such as environmental protection, education and public health. We shall continue to shift the government functions and improve service awareness and service standard, so as to provide convenient favorable environment for foreign-invested enterprises in carrying out their business activities.
    2. We shall further improve the development level of existing development zones. We shall push forward the construction of innovation system in Northeast region, characterized by self-driven innovation under the circumstance of opening-up, in Northeast region in order to improve the capability of self-driven innovation of existing development zones. When their approved panning areas have been fully utilized, the national level development zones and the provincial development zones that have good potential of development, distinctive industrial features and are of high driving power can, in accordance with the requirements of improvement and rectification of land market, determine on a reasonable land-use scale after going through required procedures. Northeast region is encouraged to draw upon successful experiences of other regions to build new-type industrial parks and modern manufacturing bases in cooperation with the EU and its members or other developed countries on the basis of existing development zones with good infrastructure.
    3. We shall push forward the construction of infrastructural facilities. The State government will make more capital input for the infrastructural facilities of harbors, frontier ports, bridges, frontier cities and frontier farms, accelerating the construction of railway passage project in east part of Northeast China and the integrated construction of road, harbor and port with Russia and the road, harbor and trade zone with DPRK, so as to push forward the implementation of cooperation projects aboard. The State government will, in carrying out its plan of international aid, make priority arrangements for the construction projects of infrastructural facilities such as transportation, harbors and airports linking frontier ports in Northeast region.
    4. We shall encourage foreign investors to establish joint venture vocational training institutions. In accordance with the “Regulations of the People’s Republic of China on Chinese-Foreign Cooperation in Running Schools”, foreign investors are encouraged to cooperate with Chinese higher education and vocational education institutions in establishing advanced vocational education institution for training various vocational professional talents and international business personnel. In such an activity, they are eligible for the same treatment given to other Chinese vocational education institutions, except stipulated otherwise in other laws and regulations. In the meantime, other departments and bureaus concerned shall actively study the preferential tax policy concerning the exemption of import tax on their import of articles for purpose of research and education. Any experiment and training bases that are qualified to receive financial support from the central government are eligible for unified supportive policies.
    5. We shall encourage the Northeast region to introduce talented people from overseas and to make avail of studying abroad programs to foster the most-wanted talents for Northeast region. We shall increase the fund allocation to Northeast region for the recruitment of foreign experts and sending personnel abroad for training, and support qualified departments and units in conducting extensive international talent exchange and cooperation. We shall, by actively applying and availing the World Bank loans and other international cooperation programs and introducing high-quality educational resources, push forward the Sino-foreign cooperation in running schools and boosting the development of education in Northwest China.
    6. We shall establish a healthy service system for the introduction of foreign investment by small and medium-sized enterprises. Foreign investors are encouraged to establish guarantee agencies in the form of Sino-foreign joint venture, aiming pertinently at providing for small and medium-sized enterprises services such as financing guarantee, information consultancy and legal assistance.
    7. We shall attach great importance to the organization and implementation of extension of opening-up. The extension of opening-up in Northeast China is a systematic undertaking as well as a long-term task, of which great importance should be attached in terms of the leadership and implementation. All relevant departments of the State Council and the People’s Governments of the three provinces in Northeast China shall formulate detailed rules for implementation in accordance with these implementary opinions. The Office of the Leading Group for Revitalizing Northeast China and Other Old Industrial Bases shall establish an effective coordination mechanism with relevant departments of the State Council and the three provinces in Northeast China, in an endeavor to bring about the actual implementation of all policies through consolidated coordination.
    8. The above-said policies are also applicable to enterprises from the regions of Hong Kong, Macau and Taiwan, and other economic organizations and individuals participating in the revitalization of old industrial bases in Northeast China.

General Office of the State Council

June 30, 2005

Opinions of CPC Liaoning Provincial Committee and Liaoning Provincial People’s Government on the Implementation of Further Opening-up

[Liao Wei Fa 2005 No. 24]

In order to implement the Opinions of the General Office of the State Council on Implementing the Promotion of Further Opening-up of the Old Industrial Bases in Northeast China (Guo Ban Fa [2005] No. 36), seize the opportunities of revitalizing the old industrial bases in Northeast China and the opening-up in the coastline areas, and implement the opening-up policy in Liaoning Province in a comprehensive and broad way, Liaoning Province hereby puts forward the following opinions based on the practical situation.

  1. General Requirements of Opening-up
  2. Recognize clearly new opportunities in opening-up. Developing an open economy is an objective requirement of adapting to the economic globalization, and also an inevitable choice of promoting the economic development in Liaoning Province. Liaoning Province shall seize the opportunity of global industrial restructuring and industrial transfer in coastal areas in inland China, adhere to the “Scientific Development Concept”, take advantage of its location, resources, industry and technologies to boost reform, restructure, development and revitalization through innovation of systems and mechanisms.
  3. Explicit the objectives of opening-up policy. The quality and level of utilizing foreign investment shall be improved comprehensively and the growth of foreign trade shall be fundamentally changed. The independent innovation capabilities of high-tech and equipment manufacturing industries shall be enhanced. Industrial agglomeration shall be formed, driven by leading enterprises. The economic and social development of Liaoning Province will lead to a comprehensive, coordinated and sustainable path by bringing the advantages of coastal cities and port-vicinity industries into play. Within a short period of time, efforts shall be made to further improve the investment environment. Economic competitiveness shall be upgraded significantly. The level of opening-up of the national economy will be enhanced and the contribution of foreign trade to the economic growth will increase significantly.
  4. Explicit the general requirements of the opening-up. Aiming at building new national industrial base and important growth area, Liaoning shall expand the level of opening-up with emphasis in a comprehensive and broader way on building Liaoning into a province with strong economy. Everyone in Liaoning shall change his/her conventional mindset and strengthen the sense of urgency, responsibility and mission. CPC committees, governments and other fields and all departments shall take “Three Favorables” (whether it promotes the growth of the productive forces in a socialist society, whether increases the overall strength of the socialist state, whether raises the people’s living standards) as a fundamental measure, break with conservative views of status quo bias, negative, self-reclusive and narrow-minded, get rid of all the obstacles to the economic development and promote development of the open economy in Liaoning more effectively.
  5. Strategic Pattern of Opening-Up
  6. Increase the level of opening-up in all aspects. Resources shall be shared by coastal cities and inland cities in Liaoning Province and form new opening-up pattern featured by mutual reliance, mutual support, clear emphasis and overall promotion. Led by open economic development in Dalian, the opening pace of the Liaodong Peninsula shall be accelerated. Backed up by the central cities of Liaoning, the Northeast Asia Shipping Center shall be established as soon as possible. Relying on Dandong and Jinzhou, a more comprehensive opening-up pattern will be formed, in harmony with Liaodong Peninsula.
  7. Speed up the building up of Dalian as Northeast Asian International Shipping Centre. Speed up the construction of coastal ports and integrate port resources. Based on the principles of unified planning, reasonable distribution, professional labor division, coordinated development and benefit sharing, Liaoning Province shall break the administrative regional restrictions. With Dalian Port as the core and supported by Dandong Port, Jinzhou Port, Yingkou Port and Huludao Port, a port alliance shall be set up accordingly. Railways, highways as well as collection and delivery systems stretching to the inland cities in the province must be constructed well. Efforts shall also be made to increase international liners and air routes.
  8. Promote the development of the coastal economic belt. Speed up the industrial restructuring and upgrading in coastal areas to promote the development of coastal cities and port-vicinity industries. Efforts shall be made to complete a coastal highway network, integrate coastal land resources, develop processing trade, promote the construction of small towns and townships and build up the coastal economic belt of high internationalization, emerging industry clusters and beautiful scenery in Liaoning Province.
  9. Expand the pilot scope of collaboration between ports and the bonded areas to Changxing Island, Dandong, Jinzhou, Yingkou and other ports gradually. Develop the functions of international transit, international distribution, international procurement and international trade in the Dalian Port Zone as soon as possible, and promote the construction of the free trade zone on the Dagushan Peninsula. Linked by railways and highways with the central cities of Shenyang, Changchun and Harbin, as well as traffic hubs such as Dandong, Yingkou, Manzhouli and Tongliao, Liaoning Province shall establish the logistics system in Northeast China, logistics distribution center and bonded logistics park, realize import and export customs clearance on the spot, which will help the ports in the province to become the gateway to the Northeast Logistic Network. Expand the functions and roles of the port and speed up the construction of “inland port” in the hinterland cities in Northeast China.
  10. Increase the role of the megalopolis in Liaoning Province in industrial agglomeration. Shenyang shall be built into the economic centre of Northeast China to become the leading area for cooperation in Northeast Asia. Based on its industrial characteristics and resource advantages, central cities in Liaoning Province shall integrate resources, optimize structure, implement cross development strategy so as to form a united economic system. These cities shall also set examples for others in introducing multinational enterprises and leading projects, developing high-tech industries and optimizing foreign capital.
  11. Jinzhou and Huludao shall take advantage of the ports, speed up opening-up, and drive the economic development of inland cities in Liaoning Province. Panjin shall make full use of the advantages of the leading industries of petrochemical and fine chemicals, integrate resources, and increase the level of openness. Fuxin and Chaoyang shall combine the advantage in resources, utilize foreign and domestic funds, and develop cereal processing and food industry. In this way the overall opening-up pattern will be formed in western Liaoning Province.
  12. Open wider to other domestic cities to promote domestic economic cooperation. Taking advantage of industry, technology and ports resources; cities in Liaoning shall expand the economic cooperation and technical communication with other cities in the Northeast region, around Bohai Sea Rim Economic Zone, and coastal provinces of China. Encourage research institutions and enterprises to invest and cooperate with Liaoning through capital, patents, technology and brand name products, and attract technology and management talents from all kinds of fields and all around nation to establish businesses in Liaoning.
  13. Upgrade the Role of Leading Areas Comprehensively
  14. System and mechanism innovation shall be conducted in all kinds of development zone. Under the new situation, development zones shall carry new connotations. Management systems shall be renewed to broaden development space. Earnestly following the Regulations for Economic and Technical Development Zones in Liaoning Province, the development zones above provincial level shall act as leaders during the opening-up process. These zones, where featured industry parks, parks of foreign countries and research parks plan to set-up, shall implement a relatively closed administration system to guarantee fast and sustained development. New export processing zones and provincial development zones shall be established. Shenyang Equipment Manufacturing Park and Changxing Island Port-Vicinity Industrial Park shall be constructed as soon as possible. Liaoning shall also strive to establish free trade zones with great potential to satisfy economic development. Dalian and Shenyang Export Processing Zone, Shenyang (Zhangshi) Export Processing Zone, Yingkou Singapore Industrial Park shall be properly developed and the declaration and construction of export processing zones shall be escalated. Shenyang Finance and Trade Development Zone shall vigorously develop modern service industries and form industrial concentration so as to become the financial centre of Northeast China. Jinzhou Economic Development Zone shall upgrade its economic capacity and quality and create favorable conditions for its shift to national status.
  15. Improve policy systems of development zones through effective guidance. According to the actual development situation and related policies of China, Liaoning Province shall redefine the land use scale to meet the actual demands of development zones above a provincial level. The compensation fees of new land for construction shall be refunded after collection. Apart from the amount paid to the State, the remainder collected by Liaoning Province shall be refunded to the development zones for designated use. Liaoning shall give its support to development zones above provincial level. Land to be used for attracting foreign capital in development zones shall be approved as soon as it is declared. As for development zones above provincial level outside the central cities, the municipal administration for city planning shall set up affiliated institutions for independent land examination and approval so as to increase efficiency. Well-developed zones can establish sub-zones to enlarge their effect through brand build-up and rich experience in resources and management. Administration service fees shall be regulated and the fees collected by Liaoning Province shall be phased out for zones above provincial level, thus producing an “investment lowland effect”.
  16. Broaden Investment Fields and Improve the Quality and Level of Foreign Investment Attraction
  17. Encourage the participation of foreign capital in the restructuring of state-owned enterprises by mergers and acquisitions, equity participation. Apart from fields in which foreign investment is prohibited by related laws and regulations of China, the restriction on share-holding proportions of state-owned enterprises in Liaoning shall be lifted. Where foreign investors merge with a state-owned enterprise, hold shares, or have joint shares in restructuring a state-owned enterprise, the tax arrears can be exempt if approved. The province’s administrations of property rights shall make vigorous efforts to seek foreign strategic investors and together with tax administrations define the state-owned enterprises that have tax arrears to gain support from the State. Liaoning Province shall encourage foreign companies to buy out distressed debt and stock of financial asset management companies and restructure and dispose assets thereof. Foreign companies merging with state-owned enterprises shall strictly follow China’s laws and regulations when dealing with labour relationships, staff reductions and social welfare. Enterprises absorbing foreign capital shall, according to the Opinions of Liaoning Provincial People’s Government on Further Reform of State-owned Enterprises (Liao Zheng Fa [2005] No.15), enjoy more benefits in capital evaluation, procedure changing, personnel resettlement, technology transfer, product development and domestic equipment purchasing. A loan interest subsidy and the amount of capital subsidy of state-owned enterprises already possessing national bonds or key projects supported by provincial financial departments shall not be changed. At the same time, they could be transferred to stocks of China’s state-owned enterprises if approved.
  18. Based on the industrial development, the contents of foreign invested superior industries in Liaoning shall be compiled. Projects meeting the requirements of the Catalogue of Priority Industries for Foreign Investment in the Central and Western Regions shall enjoy preferential tax benefits. Foreign investment in high-tech industries as well as in research and development centers shall be encouraged. Besides preferential tax benefits, tariffs and value-added taxes shall be exempt when investors import materials, substances and samples from foreign countries. Foreign investors shall also be encouraged to invest in continuous and substitutive industries.
  19. Highlight foreign investment priorities. Positively guide foreign investors to enter the industries of modern agriculture, equipment manufacturing, chemicals, high technologies and agricultural product processing. Speed up the development of supporting industries. The attention of foreign investors shall be directed to infrastructure so as to realize diversified investment and market-based operations. Efforts to introduce advanced technology, equipment, management experience and talents, especially state-of-the-art navigation and ship building technologies as well as famous brands, shall be strengthened for the purpose of fostering mass high-tech industry and driving the reconstruction of key industries and enterprises. Innovation in technology and products shall also be made so as to enhance core competitiveness. Encourage foreign investors to establish research centers, headquarters and investment companies.
  20. Innovate the modes of investment attraction. An innovative mode guided by the government with the assistance of related agencies shall be founded. Based on industrial parks, this enterprise-oriented mode shall be operated by professionals. More effort shall be put in the development of agencies engaging in investment attraction so as to reduce costs and improve efficiency. Liaoning Province shall strive to expand the channels of investment attraction, such as industry chains, mergers and acquisitions, increasing capital, listing and financing, the internet, agencies etc. The enterprises in the province are being encouraged to list overseas. Enterprises having absorbed foreign stock and capital shall be treated as well as foreign investors are in Liaoning Province. Professionals shall be sent to main areas and countries, for instance, Europe, the Americas, Japan, Korea and Singapore to positively attract local capital. Cities in Liaoning can establish institutions of such kind abroad by virtue of the roles of friendship cities, embassies, overseas Chinese and compatriots from Hong Kong, Macao and Taiwan. Attention shall also be paid to the roles of attorneys in order to improve the rate of contract performance and reduce managing risk.
  21. Speed up Conversion of Growth Patterns of Foreign Trade
  22. Invigorate trade through science and technology in an all-around way. While putting such policies into operation, Liaoning Province shall adjust and optimize structures of products to be exported. More effort shall be paid to technology renewal, research of exported products and the reform of traditional industries by using electro-mechanical and high-tech products. Liaoning shall give attention to fostering and supporting key export enterprises possessing core technologies and independent intellectual property rights and owning famous brands. E-business and other advanced trade modes shall be popularized to push ahead information-based construction. The structure of imported products shall be optimized. Import of energy, raw materials, advanced technologies and key equipment shall also be enhanced.
  23. Vigorously promote the transformation and upgrading of processing trade. The quality and level of processing trades shall be improved through vigorously developing technology-intensive and high value-added processing projects. Positive efforts will also be made to take on foreign manufacturing transfer and service outsourcing so as to drive the development of modern processing trades. Liaoning will make active efforts to improve the level and added value of traditional trade products, thus driving processing trades to extend research, sales and after-sales service. By means of technology spin-offs, OEM and ODM shall be gradually substituted by self-initiated brands.
  24. Intensify brand construction of products to be exported. Related departments of Liaoning Province will formulate the Guidance of the Development Export Brand in Liaoning Province to direct enterprises to make plans for brand construction, develop exported brands, register trade marks overseas, promote brands and apply for patents, international quality standard assessments and product access permission. Key export enterprises possessing core technologies, independent intellectual property rights and own famous brands shall be given more help and support. Exporting enterprises shall be funded to develop new products, apply for the assessment of quality systems, register foreign trade marks and patents, deliver product information and commercials and participate in foreign professional exhibitions and promotion conferences.
  25. Actively support the export of agricultural products. We shall earmark more capital to increase the amount of agricultural and aquatic products to be exported. Key enterprises involved in exporting agricultural and aquatic products shall be supported and policies of tax rebates for exported products shall be completed. Liaoning Province shall develop the agriculture conforming to international agricultural standards through improving systems of input, production and processing. A number of high-level leading enterprises and high quality exporting bases of shall be set up. Exchanges in agricultural economy and technology with foreign countries shall be enhanced so as to promote new technology and products as well as abilities and leveling of deep processing of agricultural products.
  26. Exploit international markets. Traditional markets in Hong Kong, Taiwan, Japan, Korea and Southeast Asia shall be consolidated and the markets in EU and North America shall be developed in depth. Emerging markets in Russia, India, the Middle East and Latin America shall be vigorously exploited. Using the opportunity of canceling quota, facilitate local textile and apparel enterprises to enter the high-end markets of Europe and America. Large circulating enterprises shall be supported to establish sales networks to drive the export of domestic products. Measures against foreign trade barriers shall be formulated by establishing pre-warning mechanisms for exported bulk products and supporting enterprises to answer suits against anti-dumping. Investigations about industrial impairment shall be enhanced and also pre-warning mechanisms for imported products shall be set up so as to protect the legal rights of enterprises in the province and the security of the industrial economy.
  27. Expand frontier trade. Dandong shall vigorously develop a pilot tax refund scheme for exported products in small frontier trade to be settled in RMB. The procedures of tax rebating for exported products, the administration of imported and exported products and personnel exchanges shall be simplified to facilitate trade and investing activities. The functions of the Dandong Border Cooperation Zone shall be improved to make Dandong home to logistics distribution, the processing of exported and imported products, international trade activities and tourism.
  28. Carrying Out the Strategies of “Go Global”
  29. Speed up the pace of “go global”. Cooperation with neighboring countries on energy, raw materials and mineral resources shall be continuously deepened. While actively participating in regional economic cooperation, Liaoning shall also encourage enterprises to provide supports to or independently assume cooperative projects. During cooperation, international trade friction and barriers shall be minimized. The enterprises in the province are supported to exploit minerals, oil and gas, forests and fishery abroad, with Russia and Australia as the primary areas. Support shall be given to local enterprises to enter into business abroad in ways of mergers and acquisitions, change of stock rights and being listed abroad. Production bases, research centre and sales networks shall be established to satisfy the development of enterprises in foreign countries. Liaoning shall lend more support to large enterprises to found factories or undertake overseas projects with their own capital. Such projects will help the exportation of technologies, workers, machines and electronic products as well as the sale of complete sets of equipment. The construction of professional bases accommodating local workers assigned shall be quickened.
  30. Innovate employment and service mechanisms of “go global” projects. The policy systems of “go global ” will be soon constituted and improved. More help shall be devoted to overseas projects related to energy and processing trades, project contracts and base establishments for staff training. A safety warning system against overseas investment and contract staff as well as systems preventing risk and dealing with emergencies shall be founded at the same time. A service network promoting overseas investment and information exchange shall be improved. Local international talent banks will provide human resources. The general achievement evaluation system for overseas investment shall be further improved through better coordination and supervision.
  31. Properly implement national supporting policies for overseas development. More support shall be given to production and processing projects as well as technology cooperative projects to drive the export of equipment and Chinese workers. Provincial support shall be centered on loan interest subsidies, preferential loans and subsidies for overseas exhibitions. These effective measures will give a push for the enterprises in the province to develop abroad by means of joint venture, cooperation as well as mergers and acquisitions.
  32. Expand Opening-Up of the Service Industry
  33. Enlarge and deepen the opening-up of the business and the service sector. Modern forms of circulation and organization such as chain operation, logistic distribution and e-business shall be vigorously developed. Transnational business groups shall be encouraged to set up purchasing centers in Liaoning for export. Shenyang, Dalian, Yingkou, Dandong and other central cities and coastal areas shall be deemed as major attractions of the province for foreign investors to engage in logistics. Trans-national enterprises and foreign logistics companies shall be encouraged to participate in the development and construction of logistic parks and distribution centers in Liaoning. Local traditional industries of wholesaling, retailing, storage as well as food and beverage shall be reformed by adopting advanced international technologies and management methods. Large amount of foreign capital shall be channeled to small and medium cities as well as rural areas so as to promote the development of urban community business and rural commerce.
  34. Encourage foreign investment in the transportation industry. The proportion limit on foreign capital, which is involved in railway passenger and freight transport, domestic and international road transport, regular and irregular international sea transport as well as international container and inter-modal transport, shall be extended after approval. This policy may also apply to investment by foreign investors and preferential loans by the World Bank and the Asian Development Bank into the construction of urban gas and heat supply, urban water supply and drainage pipelines, communications infrastructure, air navigation and general aviation.
  35. Encourage foreign investment in financial markets. Liaoning Province shall make efforts to attract foreign banks, security and insurance institutions and all kinds of funding and financial agencies to establish institutions or subsidiaries, as well as to set up equity or contractual joint financial ventures. The application of foreign capital banks to establish institutions and start up business shall be given approval priority. Overseas strategic investors shall be encouraged to push the reform and reconstruction of urban commercial banks. Liaoning Rural Credit Union shall speed up the introduction of foreign capital and the reform in property right systems. Foreign capital insurance companies with advantages in pensions shall be supported to enter Liaoning Province. Foreign capital companies with advantages shall be encouraged to establish insurance institutions for beginning a new system of rural cooperative medical insurance featuring benefits and risk sharing. Liaoning Province shall strive to found wholly or jointly invested professional agricultural insurance companies.
  36. Support direct financing of state-owned, private and foreign-funded enterprises in capital markets at home and abroad. A library about candidate enterprises to be listed shall be established. Strength shall be devoted to finding and fostering these potential enterprises and giving them necessary guidance. A promotion platform for enterprises to be listed shall be built up. Enterprises investing in Liaoning with capital acquired by initially going listed or absorbing financial capital overseas shall enjoy preferential policies or treatment according to their investment volume. The Dalian Commodity Exchange shall be encouraged to strengthen its communication and cooperation with foreign countries to develop future markets and create new futures categories.
  37. Encourage foreign investors to cooperate with relevant institutions in Liaoning Province in setting up vocational training institutions. Unless otherwise stipulated by the laws and regulations of China, foreign investors cooperating with local institutions of higher education and vocational training in founding higher education or vocational training institutions to foster vocational technicians, international businesspeople, shall be treated the same as other vocational education institutions in China.
  38. Comprehensively Improve the Soft Environment
  39. Create a favorable open environment. Governments and administrations at all levels shall change working styles, improve service quality and increase work efficiency for establishing a service-oriented government of honesty. The departments of law enforcement shall conform to open and regular examination and approval procedures and avoid arbitrary behaviors when examining companies. Policies of salaries and bones based on charging and penalties shall be stopped. Efforts shall be made to create a fair and transparent legal environment and a stable policy environment, where comprehensive services will be provided, talents will be treated favorably and people can lead a high quality life.
  40. Promote the “Governmental System of Keeping the Public Informed” in all relevant departments. Administrations playing the roles of examination and approval shall make public their application procedures, working processes, required materials and time limits. The primary responsibility system (the first person consulted being held responsible), the service commitment system and the system of notifying on site as well as completing formalities within a limited period shall be implemented throughout the province. Government departments shall provide “one-stop” services to improve work efficiency and service quality. At the same time, in case an office provides material lists and document samples necessary for examination and approval, it shall clearly state its suggestions and requirements for modification on the application materials and perform the examination and approval of all formalities at one time. As for foreign projects within local approval authority, the feasibility report for the project proposal foreign-funded enterprises shall be remitted. Special favors shall be given to foreign influential projects in procedure transaction, land use and supporting infrastructure. Joint meeting systems for projects invested by foreigners shall be built up accordingly. Liaoning Provincial People’s Government shall hold and preside over a joint meeting to discuss and make resolutions for major projects requiring coordination. All the departments in all areas of the province shall promptly execute the decisions made at the meeting.
  41. Create a favorable environment to attract foreign investors. Importance shall be attached to foreign-funded enterprises that have been established or under construction. Favorable construction and development conditions shall be developed in accordance with contracts and agreements, with a view to guaranteeing smooth establishment and healthy development. Administrations serving foreign-funded enterprises shall, with the principle of providing services, hold regular seminars to listen to opinions and suggestions of foreign investors to solve any problems of their concern. The complaints of foreign investors shall be properly handled. Governments and juridical departments shall actively cooperate with each other to successfully deal with complaints filed by foreign investors. Major complaints shall be directly submitted to related departments, even to provincial and municipal leaders. A hierarchical responsibility system for complaints and a system of one person being responsible for one case shall be implemented. Different kinds of complaints shall be dealt with seriously within a limited period and the solutions shall be fed back to foreigner investor promptly.
  42. Improve the service and speed of customs clearance. Customs clearance procedures shall be simplified by providing such services as “early customs declaration”, “customs declaration by appointment” and holiday services. Service awareness shall be enhanced and port functions shall be strengthened to cover inland areas. Both the construction of customs clearance procedures and a public information platform shall be expedited to reduce related costs involved in customs clearance. In this way, the overall service quality and efficiency of customs clearance can be tremendously improved.
  43. Establish a healthy and civilized human environment and living environment. Activities shall be organized to enhance public awareness of creating a favorable investment environment. A pleasant living environment shall be created in Liaoning Province for foreign investors. “Communities for foreign investors” shall be planned and built in the areas with large numbers of foreign-funded enterprises. A package of services shall be provided for foreign investors, which involve education of their children, health care, SATV, culture and entertainment.
  44. Perfect Industry-supporting Systems
  45. Establish supporting service systems for industrial development. Industries shall be clustered to form industry chains and supporting systems with features of the province. The advantages of local industries and the requirements of foreign-funded enterprises shall be earnestly analyzed based on which enterprises can guide and encourage small and medium enterprises to make vigorous efforts to support related facilities for leading industries with a view to forming industrial clusters. A coordinated project library as well as a public information communication network shall be established for the purpose of realizing reconstruction and integration of production factors and resources. In order to boost industrial clusters, Liaoning Provincial People’s Government shall provide capital aid to small and medium enterprises for support of large enterprises and major projects. Small and medium enterprises as well as private companies may, by virtue of loan guarantees and subsidies for loan interest, develop supported industries for large enterprises and key projects. In this way, industry and product chains will be extended and industrial clusters will be formed.
  46. Introduce foreign capital to develop and perfect service systems for small and medium enterprises. Encourage and attract foreign investors in the establishment of service systems for small and medium enterprises by means of foreign sole ownership, joint venture, capital investment, and equity participation. The system may include financial guarantee, information consulting, technological service, talent training and legal service. Cooperation with foreign investors in capital shall be encouraged to set up guarantee institutions to provide the services aforesaid to small and medium enterprises. Cooperation shall be developed with listed financial institutions overseas to promote small and medium enterprises to list abroad. For this aim, preliminary guidance shall be provided for foreign investors. The systems of capital subsidies and legal aid for anti-dumping shall be founded and the related institutions providing such services shall be accordingly built up. Small and medium enterprises shall be encouraged to respond to anti-dumping claims.
  47. Further Improve Guarantee Mechanism of Opening-up

Intensify the guidance on opening-up. CPC committees and governments at all levels shall make every effort to determine the guidelines, objectives and measures pertaining to opening-up which require the attention of top leaders of the Party and Governments. All cities in Liaoning Province shall improve effective examination, evaluation and incentive systems of an open economy. Based on its development, effective cadre performance can be appraised. All functional departments shall consolidate their consciousness of opening-up and work hard to successfully organize related activities.

Establish a joint-meeting system on opening-up. Governments at all levels shall set up a joint meeting on opening-up organized by chief leaders of governments and attended by related administrations. The meeting shall focus on coordination and direction in planning, policy implementation, project promotion and response to complaints from foreign investors. A team led by chief leaders of the CPC committees and governments responsible for opening-up shall set up promptly. As a standing institution, a foreign affairs office for opening-up shall be established. To satisfy the requirements of a market economy, governments and departments at all levels shall promote the reform and innovation of administration systems featuring rational relationships, clear responsibilities, simplified hierarchies and high levels of efficiency. All functional departments shall, based on reality, formulate and improve measures and make concerted efforts to fulfill the task.

Intensify external publicity. A unified plan for external publicity shall be developed. The media shall help Liaoning Province to build a fresh new image to attract foreign investors. High-quality promotional materials shall be designed and published to emphasize the province’s new image as an old industrial base in Northeast China. This attractive brand will make Liaoning Province better known and more influential at home and abroad.

Earnestly implement all policies related to opening-up. Objectives and tasks of opening-up shall be analyzed in a scientific and rational way. Related departments of all cities of Liaoning Province shall carefully research measures released in these suggestions and work hard to put them into practice. Related functional departments shall constitute appraisal and bonus distribution methods for opening-up activities. Appraisal regarding the quality of services of related departments, all kinds of development zones and parks of all levels shall be directly associated with evaluating the performance of CPC committees and governments at all levels. A pleasant atmosphere for mind emancipation and sound development shall be created to protect and arouse the initiative of all walks of life. Effective measures shall be taken to bring the level of the opening-up to a new height and expedite the rejuvenation of the old industrial bases in Liaoning Province.

Several Opinions of Liaoning Provincial People’s Government on the Policies for Further Opening-up of Key Coastal Areas for Economic Development

[Liao Zheng Fa 2006 No.3]

All the municipal people’s governments, all the departments and commissions of the Provincial People’s Government and all the organs directly under the Provincial People’s Government:

In accordance with the strategic plan formulated by the Provincial Committee of the CPC and the Provincial People’s Government on the development of the coastal economic belt and the “Five Points and One Line”, efforts will be focused on the following five areas (hereinafter referred to as the five key areas) in the opening-up process in the future: Dalian Changxing Island Harbor Industrial Zone, Liaoning (Yingkou) Coastal Industrial Base, Liaoxi (Western Liaoning) Jinzhou Bay Coastal Economic Zone (including Jinzhou Xihai Industrial Zone and Huludao Beigang (North Port) Industrial Zone), Liaoning Dandong Industrial Park, and Dalian Zhuanghe Huayuankou Industrial Park. To expedite the development of the coastal economic belt, the following new preferential policies will be implemented in the five key areas as from Jan 1, 2006 for two consecutive years:

  1. 70 percent incremental return will be given for the value-added tax, business tax, corporate income tax, personal income tax, and housing property tax paid to the provincial financial authorities by the five key areas on the basis of the figures of 2005, for infrastructure construction and the development of leading industries.
  2. Hi-tech industries recognized by relevant authorities in the five key areas will pay corporate income tax at a rate of 15 percent.
  3. The domestic-funded high-tech enterprises in the five key areas will be exempt from corporate income tax for two consecutive years, from the first profitable year.
  4. Liaoning Provincial Credit Guarantee Center for SMEs will give priority to providing guarantees for the bank loans applied for by the eligible enterprises in the five key areas.
  5. Discount loans of a certain duration will be granted by the provincial financial authorities for the technical transformation and service projects in the five key areas in such industries as equipment manufacturing, raw material processing, fine chemicals, agricultural products deep processing, textiles, pharmaceuticals.
  6. The foreign trade and export-oriented enterprises in the five key areas will be subsidized by the SME International Market Development Fund in carrying out quality system certification, making product publicity and promotion, and participating in international professional exhibitions.
  7. Priority will be given to the development of enterprises in the export processing bases established in the five key areas. The foreign trade development fund for the old industrial bases in Northeast China will be allocated mainly for intellectual property rights purchasing, export product upgrading, new product research and development, overseas product registration and information dissemination, agricultural product development and cultivation.
  8. All the enterprises in the five key areas (including those under construction and newly established) are exempt from administrative fees. Administrative fees involving enterprises for state administration will be borne by the five key areas or municipal financial authorities; the enterprises are exempt from administrative fees for provincial administration. The stipulation is also applicable to the new administrative fees involving enterprises during the implementation of the preferential policies.
  9. The five key areas have the economic management authority of provincial economic and technological development zones.
  10. The principles of “government leadership, market operation, effective financing, and progressive development” will be implemented. Efforts will be made to guide China Development Bank and other financial institutions to set up financing platforms and define priorities and financing modes. Financial institutions shall actively develop the key projects in the five key areas by adopting the following measures: 1. Participating in project planning and feasibility study; 2. Conducting technical support and financing support; 3. Performing government credit and corporate credit.
  11. “Enclaves” enjoying preferential policies will be demarcated within Liaoxi (Western Liaoning) Jinzhou Bay Coastal Economic Zone. Places of certain area (enclaves) may be provided for Chaoyang and Fuxin by Jinzhou and Huludao within their respective regions. In addition to the preferential policy stipulated in Article 1, enterprises in the “enclaves” will enjoy 100 percent incremental return, with the two cities (the cities providing and utilizing the “enclave”) each sharing 50 percent.
  12. As for the content involving Dalian in the above policies, Dalian Municipal People’s Government will formulate implementation methods by referring to related provincial policies. The other cities may formulate encouragement and support policies in line with their specific conditions.

Appendix: Demarcation of Key Coastal Areas for Economic Development

January 21, 2006

Demarcation of Key Coastal Areas for Economic Development

The key coastal areas for economic development are as follows: 1. Along the Bohai Sea: Dalian Changxing Island Harbor Industrial Zone, Liaoning (Yingkou) Coastal Industrial Base, and Liaoxi (Western Liaoning) Jinzhou Bay Coastal Economic Zone (including Jinzhou Xihai Industrial Zone and Huludao Beigang (North Port) Industrial Zone); 2. Along the Yellow Sea: Liaoning Dandong Industrial Park and Dalian Zhuanghe Huayuankou Industrial Park.

  1. Dalian Changxing Island Harbor Industrial Zone

The planned area and the area in the initial phase of Dalian Changxing Island Harbor Industrial Zone are 129.7 sq km and 50 sq km respectively.

  1. Liaoning (Yingkou) Coastal Industrial Base

Liaoning (Yingkou) Coastal Industrial Base is located to the south of the city’s Minxing River, to the north of the north tributary of the Daqing River, and to the west of Zhuanglin Road. The planned area and the area in the initial phase are 120 sq km and 20 sq km respectively.

  1. Liaoxi (Western Liaoning) Jinzhou Bay Coastal Economic Zone
  2. Jinzhou Xihai Industrial Zone

Jinzhou Xihai Industrial Zone is located in Jinzhou along the Jinzhou Bay. The industrial zone is to the south of Kunshan Road and to the north of the Port of Jinzhou. To the east and the west of the industrial zone are Huludao and Bohai Street respectively. The planned area is 22.76 sq km.

  1. Huludao Beigang (North Port) Industrial Zone

Huludao Beigang (North Port) Industrial Zone is located to the north of Jinhu (Jinzhou-Huludao) Feeder Railway and to the east of the Lianshan River. The Grand Coastal Freeway runs through the industrial zone. The planned area and the area in the initial phase are 21.87 sq km and 16.87 sq km respectively.

  1. Liaoning Dandong Industrial Park

Liaoning Dandong Industrial Park is located 10 km to the east of the Port of Dadong along Yalu River Avenue. The planned area and the area in the initial phase are 30 sq km and 18.6 sq km respectively.

  1. Dalian Zhuanghe Huayuankou Industrial Park

Dalian Zhuanghe Huayuankou Industrial Park is located in Mingyang Township, Zhuanghe (county-level city), Dalian. The planned area and the area in the initial phase are 50 sq km and 15 sq km respectively.

Income Tax Law of the People’s Republic of China on Enterprises with Foreign Investement and Foreign Enterprises

The Income Tax Law of the People’s Republic of China on Enterprises with Foreign Investment and Foreign Enterprises was adopted at the Fourth Session of the Seventh National People’s congress on April 9, 1991. This law is promulgated now and will be effective as of July 1, 1991.

President of the People’s Republic of China: Yang Shangkun

April 9,1991

Article 1

Income tax shall be paid in accordance with the provisions of this Law by enterprises with foreign investment within the territory of the People’s Republic of China on their income derived from production, business operations and other sources.

Income tax shall be paid in accordance with the provisions of this Law by foreign enterprises on their income derived from production, business operations and other sources within the territory of the People’s Republic of China.

Article 2

“Enterprises with foreign investment” referred to in this Law mean Chinese-foreign equity joint ventures, Chinese-foreign contractual joint ventures and foreign-capital enterprises that are established in China.

“Foreign enterprises” referred to in this Law mean foreign companies, enterprises and other economic organizations which have establishments or places in China and engage in production or business operations, and which, though without establishments or places in China, have income from sources within China.

Article 3

Any enterprise with foreign investment which establishes its head office in China shall pay its income tax on its income derived from sources inside and outside China. Any foreign enterprise shall pay its income tax on its income derived from sources within China.

Article 4

The taxable income of an enterprise with foreign investment and an establishment or a place set up in China to engage in production or business operations by a foreign enterprise, shall be the amount remaining from its gross income in a tax year after the costs, expenses and losses have been deducted.

Article 5

The income tax on enterprises with foreign investment and the income tax which shall be paid by foreign enterprises on the income of their establishments or places set up in China to engage in production or business operations shall be computed on the taxable income at the rate of thirty percent, and local income tax shall be computed on the taxable income at the rate of three percent.

Article 6

The State shall, in accordance with the industrial policies, guide the orientation of foreign investment and encourage the establishment of enterprises with foreign investment which adopt advanced technology and equipment and export all or greater part of their products.

Article 7

The income tax on enterprises with foreign investment established in Special Economic Zones, foreign enterprises which have establishments or places in Special Economic Zones engaged in production or business operations, and on enterprises with foreign investment of a production nature in Economic and Technological Development Zones, shall be levied at the reduced rate of fifteen percent.

The income tax on enterprises with foreign investment of a production nature established in coastal economic open zones or in the old urban districts of cities where the Special Economic Zones or the Economic and Technological Development Zones are located, shall be levied at the reduced rate of twenty-four percent.

The income tax on enterprises with foreign investment in coastal economic open zones, in the old urban districts of cities where the Special Economic Zones or the Economic and Technological Development Zones are located or in other regions defined by the State Council, within the scope of energy, communications, harbor, wharf or other projects encouraged by the State, may be levied at the reduced rate of fifteen percent. The specific measures shall be drawn up by the State Council.

Article 8

Any enterprise with foreign investment of a production nature scheduled to operate for a period of not less than ten years shall, from the year beginning to make profit, be exempted from income tax in the first and second years and allowed a fifty percent reduction in the third to fifth years. However, the exemption from or reduction of income tax on enterprises with foreign investment engaged in the exploitation of resources such as petroleum, natural gas, rare metals, and precious metals shall be regulated separately by the State Council. Enterprises with foreign investment which have actually operated for a period of less than ten years shall repay the amount of income tax exempted or reduced already.

The relevant regulations, promulgated by the State Council before the entry into force of this Law, which provide preferential treatment of exemption from or reduction of income tax on enterprises engaged in energy, communications, harbor, wharf and other major projects of a production nature for a period longer than that specified in the preceding paragraph, or which provide preferential treatment of exemption from or reduction of income tax on enterprises engaged in major projects of a non-production nature, shall remain applicable after this Law enters into force.

Any enterprise with foreign investment which is engaged in agriculture, forestry or animal husbandry and any other enterprise with foreign investment which is established in remote underdeveloped areas may, upon approval by the competent department for tax affairs under the State Council of an application filed by the enterprise, be allowed a fifteen to thirty percent reduction of the amount of income tax payable for a period of another ten years following the expiration of the period for tax exemption or reduction as provided for in the preceding two paragraphs.

After this Law enters into force, any modification to the provisions of the preceding three paragraphs of this Article on the exemption from or reduction of income tax on enterprises shall be submitted by the State Council to the Standing Committee of the National People’s Congress for decision.

Article 9

The exemption from or reduction of local income tax on any enterprise with foreign investment which operates in an industry or undertakes a project encouraged by the State shall, in accordance with the actual situation, be at the discretion of the people’s government of the relevant province, autonomous region or municipality directly under the Central Government.

Article 10

Any foreign investor of an enterprise with foreign investment which reinvests its share of profit obtained from the enterprise directly into that enterprise by increasing its registered capital, or uses the profit as capital investment to establish other enterprises with foreign investment to operate for a period of not less than five years shall, upon approval by the tax authorities of an application filed by the investor, be refunded forty percent of the income tax already paid on the reinvested amount. Where regulations of the State Council provide otherwise in respect of preferential treatment, such provisions shall apply. If the investor withdraws its reinvestment before the expiration of a period of five years, it shall repay the refunded tax.

Article 11

Losses incurred in a tax year by any enterprise with foreign investment and by an establishment or a place set up in China by a foreign enterprise to engage in production or business operations may be made up by the income of the following tax year. Should the income of the following tax year be insufficient to make up for the said losses, the balance may be made up by its income of the further subsequent year, and so on, over a period not exceeding five years.

Article 12

Any enterprise with foreign investment shall be allowed, when filing a consolidated income tax return, to deduct from the amount of tax payable the foreign income tax already paid abroad in respect of the income derived from sources outside China. The deductible amount shall, however, not exceed the amount of income tax otherwise payable under this Law in respect of the income derived from sources outside China.

Article 13

The payment or receipt of charges or fees in business transactions between an enterprise with foreign investment or an establishment or a place set up in China by a foreign enterprise to engage in production or business operations, and its associated enterprises, shall be made in the same manner as the payment or receipt of charges or fees in business transactions between independent enterprises. Where the payment or receipt of charges or fees is not made in the same manner as in business transactions between independent enterprises and results in a reduction of the taxable income, the tax authorities shall have the right to make reasonable adjustment.

Article 14

Where an enterprise with foreign investment or an establishment or a place set up in China by a foreign enterprise to engage in production or business operations is established, moves to a new site, merges with another enterprise, breaks up, winds up or makes a change in any of the main entries of registration, it shall present the relevant documents to and go through tax registration or a change or cancellation in registration with the local tax authorities after the relevant event is registered, or a change or cancellation in registration is made with the administrative agency for industry and commerce.

Article 15

Income tax on enterprises and local income tax shall be computed on an annual basis and paid in advance in quarterly installments. Such payments shall be made within fifteen days from the end of each quarter and the final settlement shall be made within five months from the end of each tax year. Any excess payment shall be refunded and any deficiency shall be repaid.

Article 16

Any enterprise with foreign investment and any establishment or place set up in China by a foreign enterprise to engage in production or business operations shall file its quarterly provisional income tax return in respect of advance payments with the local tax authorities within the period for each advance payment of tax, and it shall file an annual income tax return together with the final accounting statements within four months from the end of the tax year.

Article 17

Any enterprise with foreign investment and any establishment or place set up in China by a foreign enterprise to engage in production or business operations shall report its financial and accounting systems to the local tax authorities for reference. All accounting records must be complete and accurate, with legitimate vouchers as the basis for entries.

If the financial and accounting bases adopted by an enterprise with foreign investment and an establishment or a place set up in China by a foreign enterprise to engage in production or business operations contradict the relevant regulations on tax of the State Council, tax payment shall be computed in accordance with the relevant regulations on tax of the State Council.

Article 18

When any enterprise with foreign investment goes into liquidation, and if the balance of its net assets or the balance of its remaining property after deduction of the enterprise’s undistributed profit, various funds and liquidation expenses exceeds the enterprise’s paid-in capital, the excess portion shall be liquidation income on which income tax shall be paid in accordance with the provisions of this Law.

Article 19

Any foreign enterprise which has no establishment or place in China but derives profit, interest, rental, royalty and other income from sources in China, or though it has an establishment or a place in China, the said income is not effectively connected with such establishment or place, shall pay an income tax of twenty percent on such income.

For the payment of income tax in accordance with the provisions of the preceding paragraph, the income beneficiary shall be the taxpayer and the payer shall be the withholding agent. The tax shall be withheld from the amount of each payment by the payer. The withholding agent shall, within five days, turn the amount of taxes withheld on each payment over to the State Treasury and submit a withholding income tax return to the local tax authorities.

Income tax shall be exempted or reduced on the following income:

the profit derived by a foreign investor from an enterprise with foreign investment shall be exempted from income tax;

income from interest on loans made to the Chinese government or Chinese State banks by international financial organizations shall be exempted from income tax;

income from interest on loans made at a preferential interest rate to Chinese State banks by foreign banks shall be exempted from income tax; and

income tax of the royalty received for the supply of technical know-how in scientific research, exploitation of energy resources, development of the communications industries, agricultural, forestry and animal husbandry production, and the development of important technologies may, upon approval by the competent department for tax affairs under the State Council, be levied at the reduced rate of ten percent. Where the technology supplied is advanced or the terms are preferential, exemption from income tax may be allowed.

Apart from the aforesaid provisions of this Article, if preferential treatment in respect of reduction of or exemption from income tax on profit, interest, rental, royalty and other income is required, it shall be regulated by the State Council.

Article 20

The tax authorities shall have the right to inspect the financial, accounting and tax affairs of enterprises with foreign investment and establishments or places set up in China by foreign enterprises to engage in production or business operations, and have the right to inspect tax withholding of the withholding agent and its payment of the withheld tax into the State Treasury. The entities and the withholding agents being so inspected must report the facts and provide relevant information. They may not refuse to report or conceal any facts.

When making an inspection, the tax officials shall produce their identity documents and be responsible for confidentiality.

Article 21

Income tax payable according to this Law shall be computed in terms of Renminbi (RMB). Income in foreign currency shall be converted into Renminbi according to the exchange rate quoted by the State exchange control authorities for purposes of tax payment.

Article 22

If any taxpayer fails to pay tax within the prescribed time limit, or if the withholding agent fails to turn over the tax withheld within the prescribed time limit, the tax authorities shall, in addition to setting a new time limit for tax payment, impose a surcharge for overdue payment, equal to 0.2 percent of the overdue tax for each day in arrears, starting from the first day the payment becomes overdue.

Article 23

The tax authorities shall set a new time limit for registration or submission of documents and may impose a fine of five thousand yuan or less on any taxpayer or withholding agent which fails to go through tax registration or make a change or cancellation in registration with the tax authorities within the prescribed time limit, or fails to submit income tax return, final accounting statements or withholding income tax return to the tax authorities within the prescribed time limit, or fails to report its financial and accounting systems to the tax authorities for reference.

Where the tax authorities have set a new time limit for registration or submission of documents, they shall impose a fine of ten thousand yuan or less on the taxpayer or withholding agent which again fails to meet the time limit for going through registration or making a change in registration with the tax authorities, or for submitting income tax return, final accounting statements or withholding income tax return to the tax authorities. Where the circumstances are serious, the legal representative and the person directly responsible shall be investigated for criminal responsibility by applying the provisions of Article 121 of the Criminal Law.

Article 24

Where the withholding agent fails to fulfill its obligation to withhold tax as provided in this Law, and does not withhold or withholds an amount less than that should have been withheld, the tax authorities shall set a time limit for the payment of the amount of tax that should have been withheld, and may impose a fine up to but not exceeding one hundred percent of the amount of tax that should have been withheld.

Where the withholding agent fails to turn the tax withheld over to the State Treasury within the prescribed time limit, the tax authorities shall set a time limit for turning over the taxes and may impose a fine of five thousand yuan or less on the withholding agent; if the withholding agent fails to meet the time limit again, the tax authorities shall pursue the taxes according to law and may impose a fine of ten thousand yuan or less on the withholding agent. If the circumstances are serious, the legal representative and the person directly responsible shall be investigated for criminal responsibility by applying the provisions of Article 121 of the Criminal Law.

Article 25

Where any person evades tax by deception or concealment or fails to pay tax within the time limit prescribed by this Law and, after the tax authorities pursued the payment of tax, fails again to pay it within the prescribed time limit, the tax authorities shall, in addition to recovering the tax which should have been paid, impose a fine up to but not exceeding five hundred percent of the amount of tax which should have been paid. Where the circumstances are serious, the legal representative and the person directly responsible shall be investigated for criminal responsibility in accordance with the provisions of Article 121 of the Criminal Law.

Article 26

Any enterprise with foreign investment, foreign enterprise or withholding agent, in case of a dispute with the tax authorities on payment of tax, must pay tax according to the relevant regulations first. Thereafter, the taxpayer or withholding agent may, within sixty days from the date of receipt of the tax payment certificate issued by the tax authorities, apply to the tax authorities at the next higher level for reconsideration. The higher tax authorities shall make a decision within sixty days after receipt of the application for reconsideration. If the taxpayer or withholding agent is not satisfied with the decision, it may institute legal proceedings in the people’s court within fifteen days from the date of receipt of the notification on decision made after reconsideration.

If the party concerned is not satisfied with the decision on punishment by the tax authorities, it may, within fifteen days from the date of receipt of the notification on punishment, apply for reconsideration to the tax authorities at the next higher level than that which made the decision on punishment. Where the party is not satisfied with the decision made after reconsideration, it may institute legal proceedings in the people’s court within fifteen days from the date of receipt of the decision made after reconsideration. The party concerned may, however, directly institute legal proceedings in the people’s court within fifteen days from the date of receipt of the notification on punishment. If the party concerned neither applies for reconsideration to the higher tax authorities, nor institutes legal proceedings in the people’s court within the time limit, nor complies with the decision on punishment, the tax authorities which made the decision on punishment may apply to the people’s court for compulsory execution.

Article 27

Where any enterprise with foreign investment which was established before the promulgation of this Law would, in accordance with the provisions of this Law, otherwise be subject to higher tax rates or enjoy less preferential treatment of tax exemption or reduction than before the entry into force of this Law, in respect to such enterprise, within its approved period of operation, the law and relevant regulations of the State Council in effect before the entry into force of this Law shall apply. If any such enterprise has no approved period of operation, the law and relevant regulations of the State Council in effect before the entry into force of this Law shall apply within the period prescribed by the State Council. Specific measures shall be drawn up by the State Council.

Article 28

Where the provisions of a tax agreement concluded between the government of the People’s Republic of China and a foreign government are different from the provisions of this Law, the provisions of the agreement shall prevail.

Article 29

Rules for implementation shall be formulated by the State Council in accordance with this Law.

Article 30

This Law shall enter into force on July 1, 1991. The Income Tax Law of the People’s Republic of China on Chinese-foreign Equity Joint Ventures and the Income Tax Law of the People’s Republic of China on Foreign Enterprises shall be annulled as of the same date.

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