Regulation on Transforming the Operating Mechanism of Industrial Enterprises Owned by the Whole People (2011Revision)

Regulation on Transforming the Operating Mechanism of Industrial Enterprises Owned by the Whole People (2011Revision) Regulation on Transforming the Operating Mechanism of Industrial Enterprises Owned by the Whole People (Issued by the Order No. 103 of the State Council of the People's Republic of China on July 23, 1992, and revised in accordance with the Decision of the State Council on Abolishing and Amending Some Administrative Regulations on January 8, 2011) Chapter I General Provisions Article 1 This Regulation is formulated according to the Law of the People's Republic of China on the Industrial Enterprises Owned by the Whole People (hereinafter referred to as the Enterprise Law ) for the purpose of promoting the enterprises owned by the whole people (hereinafter referred to as the “Enterprise”) to access to markets, enhancing the vitality of Enterprises and increasing the economic efficiency of Enterprises. Article 2 Objectives for the transformation of operational mechanism of Enterprises are to make Enterprises adapted to market demands, change Enterprises into commodity producing and managing entities that conduct independent business operations, assume sole responsibility for their own profits and losses and have self-development and self-restraint abilities, and also turn Enterprises into enterprise legal persons that can independently enjoy civil rights and assume civil obligations. Article 3 The transformation of operational mechanism of an Enterprise shall comply with the following principles: 1. Adhering to the Party's basic lines; 2. Adhering to the separation of government functions from enterprise management, safeguarding the state's ownership to the Enterprise's properties, realizing the value maintenance and increment of the Enterprise's properties, and fulfilling the Enterprise's management rights; 3. Adhering to the unification of responsibility, right and interest, correctly handling the relationship between the state and the Enterprise and the relationship between the Enterprise and its staff, implementing the principle of distribution according to work, and connecting the earned income of the employees with their labor achievements; 4. Bringing into play the key political role of the CPC grassroots organizations in the Enterprise, adhering to and improving the factory director (manager) responsibility system, and relying wholeheartedly on the working class; 5. Adhering to the combination of the deepening of Enterprise reform, the promotion of Enterprise technological progress and the reinforcement of Enterprise management; and 6. Adhering to the construction of socialist spiritual civilization together with socialist material civilization, and building a working team with lofty ideals, moral integrity, culture and a sense of discipline. Article 4 Focusing on the transformation of operational mechanism of Enterprises, and according to the requirement for sound macro control and relaxed micro control, the government shall transform functions, reform the Enterprise management mode, cultivate and develop the market system, establish and improve the social security system, and carry out the reform of planning, investment, treasury, taxation, finance, price, material, business, foreign trade, personnel, labor and wage, etc. in a coordinated and supporting manner. Article 5 The Party organization, the trade union, the Communist Youth League and other organizations as well as the whole staff of an Enterprise shall work to realize the objective of transforming the Enterprise's operational mechanism and the Enterprise's fundamental task provided by the Enterprise Law . All the relevant social sides shall create conditions for the Enterprise to transform its operational mechanism. Chapter II Enterprise's Operational Rights Article 6 The “Enterprise's operational rights” refers to the Enterprise's rights to possess, utilize and dispose of, according to law, the properties which the state has authorized it to operate and manage (hereinafter referred to as “Enterprise properties”). Article 7 An Enterprise shall exercise operational rights according to the asset management form determined by the state. The asset management form of an Enterprise refers to the form of responsibility system, which regulates the relationship of responsibility, right and interest between the state and the Enterprise and regulates the Enterprise in its operation and management of state-owned assets. The contractual management responsibility system shall be continuously implemented and improved. The government will gradually and experimentally separate profit from tax, unify income tax rates, exempt Enterprises from after-tax burden, realize the repayment of loans after the tax payment; and create conditions for experimental implementation of the shareholding system. Article 8 An Enterprise shall enjoy the production and management decision-making right. An Enterprise shall, guided by national macro plans and market demands, make independent production and management decisions, produce products and provide services for the general public. An Enterprise can independently decide to adjust its production and management scope within its own industry or into another industry; and if the adjustment complies with national industrial policies, the competent government department shall give support, and the administrative department of industry and commerce shall handle the formality for alteration registration therefor. Article 9 An Enterprise shall enjoy the right to fix prices of its products and labor services. For the daily industrial consumables produced by an Enterprise, except some products which are priced by the price administrative department under the State Council and the price administrative departments under the provincial government, the Enterprise shall have the independent pricing right. For the production materials produced by an Enterprise, except a minority of products included in the catalogues of price management issued by the price administrative department under the State Council and the price administrative departments under the provincial government, the Enterprise shall have the independent pricing right. An Enterprise shall have the independent right to fix prices of its processing service, repair and maintenance service, technical cooperation service and other labor services. If there are separate provisions on the pricing of products or labor services in any laws, such provisions shall prevail. Article 10 An Enterprise shall enjoy the product selling right. If an Enterprise produces the products that shall be purchased by a designated entity according to the provisions of the state, it shall be entitled to conclude a contract with the purchasing entity designed by the government. If the purchasing entity fails to purchase products according to the contract, the Enterprise can file a petition with the government or the competent government department and require it to coordinate and solve the problem, or may file a lawsuit with the people's court to ask the purchasing entity to assume the liability for breach of contact according to the provisions in the contract law. If the purchasing entity fails to purchase the products already produced according to the contract, the enterprise can sell them by itself. The products, which are prohibited from being sold on the market as separately provided by any laws or explicitly decided by the state, shall be an exception. Article 11 An Enterprise shall enjoy the material purchasing right. Article 12 An Enterprise shall enjoy the import and export right. An Enterprise can independently choose foreign trade agencies across the country for its engagement in the import and export business, and shall be entitled to participate in talks with foreign dealers. An Enterprise can, according to the state provisions on foreign exchange control, independently use the retained foreign exchange and conduct the foreign exchange swap business. No department or entity may transfer at the same level or withhold the foreign exchange retained by the Enterprise; nor may it withhold RMB currencies that shall be returned to the Enterprise after the Enterprise has handed over foreign exchange with compensation. An Enterprise can, according to the provisions of the state, undertake projects abroad, carry out technological cooperation or provide other labor services. An Enterprise can, according to the provisions of the state, import equipment and materials for its own use. Upon approval of the competent government department, a qualified Enterprise shall enjoy the import and export operating right, which shall not be held back by any entities or departments. An Enterprise with the import and export operating right shall enjoy the same treatments as those to foreign trade enterprises in the aspects of getting import and export quotas and licenses, etc. An Enterprise with the import and export operating right shall be entitled to determine, based on its business needs, the quota of operating personnel that will regularly enter or exit the territory, and shall report the name list to the competent government department for approval. For the entry and exist of the personnel that will regularly enter or exit the territory, the competent government department will implement the method of one-off approval and being valid for many times within that year. Upon authorization of the State Council, an Enterprise with the import and export operating right can examine and approve the personnel of exit or invite relevant foreigners to China for commercial activities by itself, and report relevant matters to the foreign affairs administrative department for direct handling of the entry and exit formalities. An Enterprise can, based on its actual needs for foreign businesses, independently use its own foreign exchange for arranging its operating personnel to exit the territory. Article 13 An Enterprise shall enjoy the investment decision-making right. According to the laws and the relevant provisions of the State Council, an Enterprise shall be entitled to use its retained capital, real objects, land use right, industrial property right and non-patent technology, etc. for investment into domestic enterprises and public institutions across the country and in different sectors, or for purchase or holding of shares in any other enterprises. Upon approval of the competent government department, the Enterprise can make investment or launch enterprises abroad. An Enterprise shall abide by national industrial policies, industrial and regional development plans, use its retained capital and the capital it has raised for productive construction. If an Enterprise can meet construction and production conditions by itself, the Enterprise can decide to initiate a project on its own, and report the project to the competent government department for archival purpose and accept supervision thereof. The competent government department shall, according to the capital assessment certificate issued by a registered accounting firm or audit firm, issue a document on approval of the Enterprise's project initiation. After the administrative departments of land management, urban planning, urban construction and environmental protection, etc. have handled relevant formalities, the Enterprise can decide to start construction on its own. If an Enterprise plans to engage in productive construction but can not independently meet construction and production conditions or needs government investment, it shall give a report to the competent government department for approval. If an Enterprise plans to engage in productive construction but needs bank loans or needs to issue bonds to the general public, according to the relevant provisions of the state, the Enterprise shall give a report to the competent government department and the bank for joint examination and approval or shall give a report to the bank for examination and approval. If foreign loans need to be used, the Enterprise shall give a report to the competent government department for examination and approval. An Enterprise can, based on its economic efficiency and affordability, increase the new product development fund, and report it to the treasury department for archival purpose. According to the provisions on depreciation of fixed assets as uniformly formulated by the state, the Enterprise shall be entitled to select concrete depreciation methods and determine the extent of accelerated depreciation. Article 14 An Enterprise shall enjoy the right to dominate the retained capital. On the premise of value maintenance and increment of properties, an Enterprise shall be entitled to determine proportions and purposes of various funds among the retained after-tax profits by itself, and give a report to the competent government department for archival purpose. An Enterprise can use the production development fund for purchase of fixed assets, implementation of technological transformation, development of new products or supplementation of working capital, or can use the production development fund for technological transformation or productive investment jointly with depreciation charges, overhaul charges and other productive capital. An Enterprise shall be entitled to reject the gratuitous transfer of its retained capital or the mandatory order for additionally turning over profits by using depreciation charges and overhaul charges as required by any departments or entities, unless it is otherwise specially determined by the State Council. Article 15 An Enterprise shall enjoy the asset disposing right. For general fixed assets, an Enterprise can decide by itself to lease them out, mortgage or transfer them with compensation based on the needs for business operations; and for key equipment, complete sets of equipment or important buildings, an Enterprise can lease them out, mortgage or transfer them with compensation upon approval of the competent government department, unless it is otherwise provided by any laws or administrative regulations. For the income from disposal of productive fixed assets, an Enterprise shall use all of them for equipment replacement and technical transformation. To dispose of fixed assets, an Enterprise shall carry out evaluation according to the relevant provisions of the state. Article 16 An Enterprise shall enjoy the right of joint venture and merger: An Enterprise shall be entitled to engage in a joint venture with any other enterprises or public institutions according to the following methods: 1. Forming, jointly with any other enterprises or public institutions, a new economic entity, which can be registered and obtain the legal person status upon approval of the competent government department if the requirements for independent assumption of civil liability and becoming a legal person are satisfied; 2. Engaging in business jointly with any other enterprises or public institutions, in which all the parties to the joint venture shall assume their respective civil liabilities according to their proportions of capital contributions or the stipulations in the agreement; and 3. Concluding a joint venture contract with any other enterprises or public institutions to specify rights and obligations of all the parties. All the parties to the joint venture shall independently conduct operation and assume civil liability. An Enterprise can, on the principle of free will and compensation, merge any other enterprises and report the merger to the competent government department for archival purpose. Article 17 An Enterprise shall enjoy the right of la......