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 legitimate rights and interests of investors.
Article 2 These provisions shall apply to the projects of Sino-foreign equity joint ventures, Sino-foreign contractual joint ventures, wholly foreign owned enterprises (hereafter referred to as "foreign investment enterprises"), as well as to other forms of foreign investment (hereafter referred to as "foreign investment projects") within the territory of the People's Republic of China.
Article 3 The State Development Planning Commission (SDPC), the State Economy and Trade Commission (SETC) and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC), in conjunction with the concerned ministries of the State Council, shall formulate Catalogue for the Guidance of Foreign Investment Industries and Catalogue of Advantaged Industries for Foreign Investment in Mid-west China, and promulgate these Catalogues after approval of the State Council.
According to practical circumstance that partial adjustment need to be made to these Catalogues, SETC, SDPC and MOFTEC, in conjunction with the concerned ministries of the State Council shall make revision and promulgation in time.
Catalogue for the Guidance of Foreign Investment Industries and Catalogue of Advantaged Industries for Foreign Investment in Mid-west China shall be the basis for the guidance of examination and approval of foreign investment projects and for the policy application of foreign investment enterprises.
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 Catalogue for the Guidance of Foreign Investment Industries. Those permitted foreign investment projects which do not belong to the above three categories are not to be listed in Catalogue for the Guidance of Foreign Investment Industries.
Article 5 Those foreign investment projects under one of the following circumstances shall be listed as encouraged foreign investment projects:
1. Projects for new agricultural technology, comprehensive agricultural development and for energy, transportation and key raw materials industries;
2. Projects for new and high technology, advanced applicable technology which can improve performance of products and increase techno-economic efficiency of enterprises or produce new equipment and new material that domestic capacity is deficient.
3. Projects that meet market demands, and can promote the quality of products, enter into new markets or strengthen the competing capability of products in international markets;
4. Projects adopting new technology and new equipment for saving energy and raw materials, for comprehensive utilization of resources and renewable resources, and for prevention environment pollution;
5. Projects that can make full use of man power and resource advantage in mid-west region and are in accordance with the State's industrial policies;
6. Other cases that are regulated by laws and administrative regulations of the State.
Article 6 Those foreign investment projects under one of the following circumstances shall be listed as restricted foreign investment projects:
1. Projects adopting out-of-date technologies;
2. Projects unfavorable to resource-saving and ecological environment improvement;
3. Projects for prospecting and/or mining specified mineral resources protected by laws and regulations of the State;
4. Projects in those industries that shall be opened gradually;
5. Other cases that are regulated by laws and administrative regulations of the State.
Article 7 Those foreign investment projects under one of 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 environment, destroy natural resources or impair the health of human beings;
3. Projects that occupy large amounts of arable land, unfavorable to protection and development of land resources;
4. Projects that endanger the safety of military facility and its performance;
5. Projects that adopt the unique craftsmanship or technology of our country to make products;
6. Other cases that are regulated by laws and administrative regulations of the State.
Article 8 "Equity joint venture and contractual joint venture only" or "Chinese partners shall hold the majority of shares" or "Chinese partners shall hold relative majority of shares" may be regulated for certain foreign investment projects in Catalogue for the Guidance of Foreign Investment Industries.
"Equity joint venture and contractual joint venture only" means that such projects shall be conducted in forms of Chinese-foreign equity joint venture and Chinese-foreign contractual joint venture only; "Chinese partner shall hold the majority of shares" means that the sum of shares held by Chinese investor(s) of such a project shall be 51% of the total or up; "Chinese partner shall hold the relative majority of shares" means that the sum of shares held by Chinese investor(s) of such a project shall greater than the shares held by any single foreign investor in the project.
Article 9 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 with approval, if they are engaged in the construction and operation of infrastructure facilities related to energy, transportation and urban utility sectors (coal, oil, natural gas, power, railway, highway, port, airport, urban road, sewerage treatment and garbage disposal, etc.), which need a large amount of investment and a long payoff period.