WORLD TRADE
ORGANIZATIONS/C/N/218
24 December 2002
(02-7096)
Council for Trade in Services Original:  English
NOTIFICATION PURSUANT TO ARTICLE III:3 OF THE
GENERAL AGREEMENT ON TRADE IN SERVICES
The following notification has been received from the delegation of the People's Republic of
China.
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1. Member notifying:
The People's Republic of China
2. Notification under:
Article III, paragraph 3 of the General Agreement on Trade in Services
3. Date of entry into force/duration:
1999/6/25
4. Agency responsible for implementati on and enforcement of the measure:
State Economic and Trade Commission
Ministry of Foreign Trade and Economic Co-operation
For those phase-in products specifically provided for in the Market Access Column of the
distribution sector of the Schedule, other re levant authorities may also be involved.
5. Complete description of the measure* indicating the modes of supply covered, the effect
on trade in services (e.g., restrictions/liberalization measures) and the impact of the
measure on commitments in the Member's schedule and Article II (MFN) exemption
list, if relevant:
Measures on the Trial of Foreign-Invested Merchandising Enterprises
Full text English translation of the measures is attached1.  The English translation is for
reference only and the Chinese version shall be authentic.
6. Members specifically affected, if any:
All Members
7. The texts are available from:
- Enquiry point /g254
- WTO Secretariat /g254
- Other sources (address, fax
and telephone of other body)  /g168
                                                     
* Including international agreements, recognition measures or other types.
1 In English only.S/C/N/218
Page 2
Measures on the Trial of Foreign-Invested Merchandising Enterprises
(Promulgated by the State Economic and Trade Co mmission and the Ministry of Foreign Trade and
Economic Cooperation on June 25th, 1999).
Article 1 These Measures are formulated in order to further open up China to the outside
world, to accelerate the reform and development of the merchandising enterprises, to promote the
construction of the domestic market, and to ensure the healthy and orderly expansion of the trial
experiment of utilizing foreign investment in the merchandising sector, and in accordance with the
Law of the People’s Republic of China on Sino-foreign Joint Equity Enterprises and other relevant
laws and regulations.
Article 2 These Measures apply to Sino-foreign join t equity merchandising enterprises and
Sino-foreign co-operative merchandising enterprises ( referred to as "jointly operated merchandising
enterprises"), which are jointly established within the territory of China by foreign and Chinese
companies and enterprises. Establishment of solely  foreign-owned merchandising enterprises are not
allowed in China for the time being.
Article 3 A jointly operated merchandising enterprise must comply with the merchandising
business development plan of the city where it is located and be able to bring in advanced sales
techniques and management experience, to promote the modernization of merchandising businesses,
to facilitate the export of domestic products, and to produce economic efficiency and social benefits.
Article 4 The State Council takes charge of determination of areas in which jointly operated
merchandising enterprises may be established. At present, these areas are limited to the capital cities
of provinces and autonomous regions, municipalities directly under the central government,
municipalities specifically listed in the State economic plan and the Special Economic Zones (referredto as the "trial areas").
Article 5 Investors of jointly operated merchandising enterprises must meet the following
conditions:
(1) The foreign partner or the major foreign investor among the foreign partners (referred
to as the "foreign partner") must be an enterprise that possesses relatively strong
financial strength, has advanced merchandising management experience, marketingtechniques, a wide international sales network, an established reputation and a
successful business record, and be able to facilitate the export of Chinese products
through the jointly operated merchandising enterprise which is intended to be
established. The foreign partner applying to set up a jointly operated retail business
enterprise must have an average annual sales volume of more than USD 2 billion forthe three (3) years prior to the application, and have assets of more than
USD 300 million for the year prior to the application. The foreign partner applying to
set up a jointly operated wholesale business enterprise must have a average annual
sales volume of more than USD 2.5 billion for the three (3) years prior to the
application, and have assets of more than USD 300 million for the year prior to theapplication.
(2) The Chinese partner or the major Chinese investor among the Chinese partners
(referred to as the "Chinese partner") must operate a circulation enterprise which
possesses relatively strong financial strength and management capacity, and has
assets of more than 50 million yuan (or 30 million yuan for those in central andwestern regions of China) for the year prior to the application. Where the Chinese
partner is a merchandising enterprise, it must have an average annual sales volume of
more than 300 million yuan (or 200 million yuan for enterprises located in the central
or western regions of China) for the three (3) years prior to the application. Where the
Chinese partner is a foreign trade enterprise, it must have an annual self-operatedimport/export sales volume of more than USD 50 million (of which more thanS/C/N/218
Page 3
USD 30 million are from exports) on average for the three (3) years prior to the
application.
Article 6 A jointly operated merchandising enterprise shall meet the following conditions:
(1) Comply with relevant laws, regulations and relevant provisions.(2) Comply with merchandising business deve lopment plan of the city where it is
located.
(3) Where the jointly operated merchandising is engaged in retail business, it must have a
registered capital of no less than 50 million yuan, or no less than 30 million yuan if
the enterprise is located in the central or western regions. Where it is a jointly
operated merchandising enterprise engaged in wholesales business, it must have a
registered capital of no less than 80 million yuan, or no less than 60 million yuan ifthe enterprise is located in the central or western regions.
(4) If the jointly operated merchandising enterprise conducts its business through more
than three (3) chain-stores (except those convenient stores, specialized stores and
stores for monopolized commodities), the ratio of investment contribution by the
Chinese partner must constitute at least 51 per cent of the total investment. Where ajointly operated merchandising enterprise has a sound operation record, its foreign
partner has purchased large quantities of Chinese products and the enterprise is able
to increase exports of domestic Chinese products through the foreign partner’s global
sales network, the foreign partner in the jointly operated chain store merchandising
enterprise may, subject to the approval of the State Council, be permitted to holdcontrolling shares of the said enterprise. For a jointly operated merchandising
enterprise with three (3) chain-stores or fewer and other convenient stores, specialized
stores and stores for monopolized commodities which operate in the form of chain-
stores, the ratio of investment contributi on by the Chinese partner must not be less
than 35 per cent of the total investment. For a jointly operated merchandisingenterprise conducting wholesale business (i ncluding retailers engaging in wholesale
business simultaneously), the ratio of investment contribution by the Chinese partner
must reach 51 per cent or more of the total investment.
(5) Branches of jointly operated merchandising enterprises are only permitted to operate
under the direct chain-store operation method according to which the foreign partner
and the Chinese partner have a direct investment and direct control. Other forms of
chain-store operation methods such as free chain stores or franchise chain-store, etc,are not allowed to develop at present.
(6) The period of operation for a jointly operated merchandising enterprise should not
exceed thirty (30) years, and not exceed forty (40) years where the enterprise is
located in central or western regions of China.
Article 7 Where a foreign partner signs a contract with a jointly operated merchandising
enterprise for the use of the foreign partner’s trademark and trade name or for the transfer of
technology, the total amount of relevant fees charged by the foreign partner should not exceed 0.3 per
cent of the total annual sales volume (not including value-added tax) of the jointly operated
merchandising enterprise, and the period for the collection of such fees should not be longer than ten(10) years.
Article 8 The following procedures shall be carried out when applying for the establishment of
a jointly operated merchandising enterprise:
The Chinese partner should submit a feasibility study report (serving as a project
proposal) and other relevant documents to the local economic and trade commission
(the economic commission, and the planning and economic commission, the same
hereinafter). The local economic and trade commission will, jointly with the local
departments in charge of domestic trade, submit the feasibility study report and otherdocuments to the State Economic and Trade Commission in accordance withS/C/N/218
Page 4
prescribed procedures. The State Economic and Trade Commission will, upon
consultation with the MOFTEC, conduct a final review and grant approval. After the
feasibility study report (serving as a project proposal) has been approved, the local
foreign trade and economic cooperation department shall submit the contract and the
articles of association to the MOFTEC in accordance with prescribed procedures. TheMOFTEC will conduct final examination of and approval for the contracts and
articles of association. Where approval for the establishment of a jointly operated
merchandising enterprise has been granted, the jointly operated merchandising
enterprise must, with the Foreign Investment Enterprise Approval Certificate issued
by the MOFTEC, carry out the registration procedures with the state industrial and
commerce department within one (1) month from the date of receipt of the approval
certificate.
Article 9 When applying for the establishment of a jointly operated merchandising enterprise,
the following documents must be submitted:
(1) Application documents for the examination and approval of feasibility study which
include:
(i) the feasibility study report (serving as the project proposal) prepared jointly
by all the joint operation parties;
(ii) the bank creditworthiness certificate, the registration certificates
(photocopies), and the identification certificates of the legal representatives
(photocopies) of all joint operation parties;
(iii) the assets/debts statement and revenue-loss statement of joint operation
parties for the past three (3)years audited by certified accountants;
(iv) (where the Chinese partner uses state-owned assets as investment
contribution), the confirmation document for the appraisal report made by a
state-owned assets management depart ment on the state-owned assets to be
used by the Chinese partner for investment;
(v) a list of commodities which the proposed jointly operated merchandising
enterprise will operate; and
(vi) other relevant documents.
(2) Application documents for examination and approval of contracts and articles of
association include:
(i) application documents for examination and approval of the feasibility study
and the approval document;
(ii) contracts and articles of association of the proposed jointly operated
merchandising enterprise, jointly signed by representatives authorized by the
joint operation parties;
(iii) a list of import and export commodities;(iv) a list of the members of the board of directors of the jointly operated
merchandising enterprise intended to be established, and letters for the
appointment of directors by the joint operation parties;
(v) the notification of preliminary approval of the name of the intended
enterprise, issued by the State Administration of Industry and Commerce; and
(vi) other relevant documents.
Article 10 Where a state-owned circulation enterprise invests in jointly operated merchandising
enterprise, it must, in accordance with the provisio ns of the Management Measures for the Appraisal
of State-owned Assets, have its tangible and inta ngible assets to be used as its contribution
scientifically and fairly appraised by an asset appraisal agency certified by the state owned assets
management department. The appraisal result shall, upon the confirmation of the state-owned asset
management department at the provincial level and above, be the basis for the valuation of the state-
owned asset to be invested.S/C/N/218
Page 5
Article 11 Where an established jointly operated merchandising enterprise applies to
simultaneously operate a wholesale business, to set up branches or to change business partners, the
MOFTEC will, upon the consent of the State Economic and Trade Commission, examine and approve
the application. Application for any other alterations of a jointly operated merchandising enterprise
will be submitted to the original approving authority in accordance with relevant provisions onforeign-invested enterprises. When making an  application, the jointly operated merchandising
enterprise must submit the following documents.
(1) An application;
(2) A report on the operational status of the enterprise;
(3) A capital verification report;
(4) Reports on the enterprise ’s export situation and their evidence;
(5) Relevant resolutions of the board of directors;
(6) Agreement on the alteration of the contracts and the articles of association; and(7) Other relevant documents.
The jointly operated merchandising enterprise must carry out registration procedures with the State
Administration of Industry and Commerce within a month from the date the altered contracts and
articles of association have been approved.
Article 12 Business scope of jointly operated merchandising enterprises:
(1) The business scope of jointly operated merchandising enterprises engaged in retail
business includes:
(i) conducting retail businesses (including those operating on commission or on
consignment);
(ii) organizing the export of domestic products;(iii) conducting import and export business for self-managed commodities;  and
(iv) providing auxiliary services.
(2) The business scope of jointly operated merchandising enterprises engaged in
wholesale business.
Conducting domestic wholesale of domestic products and imported products under self management,
and organizing the exporting of domestic products.
Article 13 A jointly operated merchandising enterprise engaged in a retail business may, upon
approval, operate a wholesale business simultaneously.
Article 14 A jointly operated merchandising enterprise must not be involved in an import and
export agency business.
Article 15 When dealing with commodities that are go verned by special state regulations, or
dealing with import and export commodities that are subject to quotas or license controls, a jointly
operated merchandising enterprise must carry out the procedures for examination and approval in
accordance with the relevant provisions of the State.
The total amount of annual commodity imports of a jointly operated merchandising enterprise must
not exceed 30 per cent of the sales volume of the same year of the said enterprise.
Article 16 Jointly operated merchandising enterprises must abide by the laws and regulations of
the People’s Republic of China, and be subject to the jurisdiction of the Chinese laws and regulations.
Chinese laws and regulations protect the normal operation and legal rights of jointly operated
merchandising enterprises.
Any violation of Chinese laws and regulations by a jointly operated merchandising enterprise will be
handled in accordance with the laws and regulations of China.S/C/N/218
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Article 17 All regions must strictly implement the provisions of these Measures in the
establishment of jointly operated merchandising enterprises. Violation of the provisions of these
Measures will be jointly investigated into and punished by the State Economic and Trade
Commission, the MOFTEC and the State Administ ration of Industry and Commerce. The economic
and trade commissions and the foreign trade and economic cooperation departments in all regionsshall, in conjunction with other relevant department, pursue the trial in a timely fashion,
conscientiously summaries the trial experience, and properly resolve problems arising from the trial.
Article 18 The State Economic and Trade Commission, the MOFTEC, the State Administration
of Industry and Commerce or its authorized bodies are responsible for the supervision and
administration of the foreign-invested merchandising enterprises.
Article 19 Investors from Hong Kong, Macao and Taiwan intending to establish jointly operated
merchandising enterprises in China’s mainland shall refer to these Measures.
Article 20 The State Economic and Trade Commission and the MOFTEC are responsible for the
interpretation of these Measures.
Article 21 These Measures shall take effect as of the date of promulgation.
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