Approved by the State Council on June 7, 1995, and promulgated by the State Planning Commission, the State Economic and Trade Commission and the Ministry of Foreign Trade and Economy Cooperation on June 20, 1995.

Article 1 These provisions are formulated according to the related legal provisions on foreign investment and requirements of industrial policies of the State in order to guide the direction of foreign investment, to make foreign investment in accordance with the plan of the national economy and social development of our country, and to serve the purpose of protecting the legitimate rights and interests of the investors.

Article 2 These provisions shall apply to the projects of Sino-foreign joint ventures, Sino-foreign cooperative enterprises, wholly foreign owned enterprises , as well as to other forms of foreign investment (hereinafter referred to as "foreign investment projects" ) within the territory of China.

Article 3 The State Planning Commission in conjunction with the concerned departments of the State Council shall compile at regular intervals and revise in time and promulgate after approval of the State Council the Catalogue for the Guidance of Foreign investment industries according to these provisions and the development of the country' s economy and technology.
  Catalogue for the Guidance of Foreign Investment Industries shall be the basis for the guidance of examination and approval of foreign investment proj ects .

Article 4 Foreign investment projects shall be classified into four categories: encouraged, permitted, restricted and prohibited projects. Foreign investment projects belonging to encouraged, restricted and prohibited categories are listed in the Catalogue for the Guidance of Foreign Investment Industries. Those permitted investment projects which do not belong to the above three categories are not to be listed in the Catalogue for the Guidance of Foreign Investment Industries. The Catalogue for the Guidance of Foreign Investment Industries may list that foreign investment projects such as wholly foreign-owned enterprises are not allowed and that the State assets shall take the holding or leading position in the enterprises.

Aricle 5 Those foreign investment projects under the following circumstances shall be listed as encouraged foreign investment projects:

1.Projects for new agricultural technology and comprehensive agricultural development and for construction in energy, transportation and key raw materials industries ;

2. Projects of new and high technology, advanced technology which can improve performance of products, save energy and raw materials, and increase techno-economic efficiency of enterprises or produce new equipments or new materials that meet the demands of the market for which the domestic production capacity is deficient;

3. Projects that meet the demands of the international market, and can promote the quality of projects, enter into new markets, expand overseas sales, and increase exportation;

4.Projects adopting new technology and equipments for comprehensive utilization of resources and renewable resources, and for prevention of environment pollution ;

5. Projects that can make fuil use of the man power and resource advantage in the Mid-West region and are in accordance with the State's industrial policies;

6.Other projects that are encouraged by laws and administrative regulations of the State .

Article 6 Those investment projects under the following circumstances shall be listed as restricted investment projects:

1. Projects involving technology that has been developed within or has been introduced into the country, and the production capacity can meet the demands of the domestic market ;

2. Projects in industries by the State for experiment to introduce foreign investment or industries under the monopolized sales of the State;

3. Projects for exploring or mining rare or precious mineral resources,

4. Projects involving industries that need the State's overall planning ;

5.Other projects that are restricted by laws and administrative regulations of the State .

The Foreign investment projects belonging to the restricted category are further classified into Resticted Group A and Restricted Group B according to the industrial policies and the need for macroeconomic control of the State.

Article 7 Those foreign investment projects under the following circumstances shall be listed as prohibited foreign investment projects:

1.Projects that endanger the safety of the State or damage social and public interests;

2. Projects that pollute the environment, destroy natural resources or impair the health of human beings;

3. Projects that occupy large amounts of arable land, unfavorable for protection and development of land resources, or endanger the safety of military facility and its performance;

4. Projects that utilize the unique craftsmanship or technology of the country to make projects;

5.Other projects that are prohibited by laws and administrative regulations of the State .

  The foreign investment projects stipulated in the previous paragraph are not allowed to be sponsored out by any company, enterprise, either economy organization or individual.

Article 8 Encouraged foreign investment projects apart from the preferential terms stipulated in the relevant laws or administrative regulations of the State, may enlarge their scope of business operation with aproval, if they are engaged in the construction and operation of infrastucture facilities related to energy or transportation (coal, electric power, local railway, highway, port) which need a large amount of investment and a long payoff period .

Article 9 Restricted foreign investment projects must comply with the relevant laws and administrative regultions of the State, as well as the following stipulations :

1. Sino-foreign joint venture projects belonging to the restricted category must have the operational termination period of the enterprises agreed upon.

2. In Restricted Foreign Investment Projects (Group A),the fixed asset investment by the Chinese party shall be the funds of his or her own assets owned by the Chinese party.

  Article 10 Encouraged or permitted foreign investment projects shall be submitted for examination and approval, or put on file according to the existing procedures and measures.
      Projects belonging to the restricted foreign investment ( Group A) are subject to examination and approval or should be put on record according to existing procedures and measures. Among the restricted foreign investmentprojects (Group A), those whose investment is lower than the competence limit stipulated by the State Council and therefore are not subject to examination or approval by the State Council shall be examined and approved by respectively the planning departments or departments in charge of enterprises' technical transforination in the provinces, autonomous regions,municipalities directly under the Central Govermment, or city of direct planning by the State according to the construction nature of the projects and shall not be allowed to be delegated to the lower levels.
      For restricted foreign investment projects ( Group B) , whose investment is lower than the competence limit stipulated by the State Council and therefore are not subject to examination or approval by the State Concil, the projects shall be subject to approval and examination by the relevant industry administrative departments of the State Council; and the feasibility study reports of these projects shall be subject to examination and approval respectively by the planning departments or departments in charge of enterprises' technical transformation in the provinces, autonomous regions, municipalities directly under the Central Government, or city of direct planning by the State, and shall be submitted to the State Planning Commission or the State Economic and Trade Commission for the record. The authority of examination and approval of this category of projects shall not be allowed to be delegated to the lower levels. For projects belonging to or higher than the competence limit stipulated by the State Council shall be examined and approved according to the procedures and measures of the current stipulations .
      Foreign investment projects that involve issues of quota or license shall apply to the competent departments of foreign trade and economic cooperation for quota or license.If laws or administrative regulations have otherwise stipulations concerning the procedures and measures of examination and approval of foreign investment projects, stipulations of those laws or administrative regulations shall be followed.

Article 11 Restricted foreign investment projects (Group A) within the category provided in subparagraph 1 of Article 6, may be deemed as permitted foreign investment projects, and not subject to the restriction of Article 9 of these provisions with approval, if the export sales of products amount to over 70 percent of the total sales of products. Restrictions can be appropriately eased to the above mentioned foreign investment projects that can really make full use of the advantage of resources in the Mid-East region, and conform to the country' s industrial policies of the State.

Article 12 Examination and approval organs of higher levels shall cancel the foreign investment projects that are examined and approved in violation of these provisions within 30 days after receiving the recorded files of the concerned projects. The contracts and articles of association shall be invalid.The enterprise registration organs shall not register these projects, or shall cancel the registration. And the Customs shall not handle import or export foimalities for these projects .

Article 13 The relevant parties of foreign investment projects who have obtained approval of project proposals through swindle or other illicit means shall be investigated for legal responsibility in the light of the seriousness of cases according to law. The examination and approval organs shall cancel the approval of the projects, and relevant competent units should deal with these projects correspondingly according to the law.

Article 14 Staff of examination and approval organs who abuse their power, engage in malpractice for personal gains, neglect their duties, or examine and approve certain projects beyond their competence shall be given administrative sanctions. If the violation is so severe as to constitute a crime, they shall be investigated and affixed criminal responsibility according to law.

Article 15 Investment projects sponsored by overseas Chinese and investors from regions of Hong Kong, Macao, and Taiwan shall be handled by reference of these Provisions.

Article 16 These provisions shall be implemented by the State Planning Commission, and the Ministry of Foreign Trade and Economic Cooperation.

Article 17 These provisions shall enter into force as of the date of promulgation .

NOTE: In case of differences of interpretation, the text in the English language should be considered as the text of reference.