LAW OF THE PEOPLE'S REPUBLIC OF
CHINA OF INDUSTRIAL ENTERPRISES OWNED BY THE WHOLE PEOPLE
(Adopted at the First Session of the Seventh National
People's Congress and promulgated by Order No. 3 of the
President of the People's Republic of China on April 13,
1988, and effective as of August 1, 1988)
CONTENTS
CHAPTER I GENERAL PROVISIONS
CHAPTER II THE ESTABLISHMENT, MODIFICATION AND TERMINATION
OF THE
ENTERPRISE
CHAPTER III RIGHTS AND OBLIGATIONS OF THE ENTERPRISE
CHAPTER IV THE FACTORY DIRECTOR
CHAPTER V THE STAFF AND WORKERS AND THE STAFF AND WORKERS'
CONGRESS
CHAPTER VI THE RELATIONSHIP BETWEEN THE ENTERPRISES AND THE
GOVERNMENT
CHAPTER VII LEGAL LIABILITY
CHAPTER VIII SUPPLEMENTARY PROVISIONS
CHAPTER I GENERAL PROVISIONS
Article 1. This Law is formulated in accordance with the
Constitution of the People's Republic of China with a view
to ensuring the consolidation and development of the
economic sector under ownership by the whole people,
defining the rights and obligations of industrial
enterprises owned by the whole people, safeguarding their
lawful rights and interests, enhancing their vitality and
promoting socialist modernization.
Article 2. An industrial enterprise owned by the whole
people (hereinafter referred to as the enterprise) shall be
a socialist commodity production and operation unit which
shall, in accordance with law, make its own managerial
decisions, take full responsibility for its profits and
losses and practise independent accounting.
The property of the enterprise shall be owned by the whole
people, and shall be operated and managed by the enterprise
with the authorization of the state in line with the
principle of the separation of ownership and managerial
authority. The enterprise shall enjoy the rights to possess,
utilize and dispose of, according to law, the property which
the state has authorized it to operate and manage.
The enterprise shall obtain the status of a legal person in
accordance with law and bear civil liability with the
property which the state has authorized it to operate and
manage.
The enterprise may, in accordance with the decision of the
competent department of the government, adopt contract,
leasing or other forms of the system of managerial
responsibility.
Article 3. The fundamental task of the enterprise shall be
the development of commodity production, creation of wealth,
increase of savings and satisfaction of society's growing
material and cultural requirements by acting in line with
state plans and market demands.
Article 4. While achieving socialist material growth, the
enterprise must persistently promote socialist cultural and
ideological progress and build up a contingent of
well-educated and self-disciplined staff and workers with
high ideals and moral integrity.
Article 5. The enterprise must observe the laws and
regulations and keep to the socialist orientation.
Article 6. The enterprise must effectively utilize the
property which the state has authorized it to operate and
manage and realize the multiplication of its assets; the
enterprise must, according to law, pay taxes and fees and
hand in profits.
Article 7. The enterprise shall implement the system whereby
the factory director (manager) assumes overall
responsibility for the work of the enterprise.
The factory director shall exercise functions and powers
according to law, which shall be protected by law.
Article 8. The grassroots organization of the Chinese
Communist Party in the enterprise shall guarantee and
supervise the implementation of the guiding principles and
policies of the Party and the state in the enterprise.
Article 9. The state shall ensure that the staff and workers
enjoy the status of the masters, and the lawful rights and
interests of the staff and workers shall be protected by
law.
Article 10. The enterprise shall, through the staff and
workers' congress and other forms, practise democratic
management.
Article 11. The trade union in the enterprise shall
represent and safeguard the interests of the staff and
workers and conduct its work independently according to law.
The trade union in the enterprise shall organize the staff
and workers for participation in democratic management and
democratic supervision.
The enterprise shall bring into full play the role of the
young staff and workers, the women staff and workers and
scientific and technical personnel.
Article 12. The enterprise must strengthen and improve its
operation and management, implement the economic
responsibility system, promote scientific and technological
progress, practise economy, combat waste, improve economic
results and further its own transformation and development.
Article 13. The enterprise shall implement the principle of
distribution according to work. It may also adopt other
forms of distribution within the scope prescribed by law.
Article 14. The property which the state has authorized the
enterprise to operate and manage shall be protected by law
and shall not be infringed upon.
Article 15. The lawful rights and interests of the
enterprise shall be protected by law and shall not be
infringed upon.
CHAPTER II THE ESTABLISHMENT, MODIFICATION AND TERMINATION
OF THE ENTERPRISE
Article 16. The establishment of the enterprise must conform
to the law and the relevant provisions of the State Council,
and the application for the establishment must be submitted
to the government or the competent department of the
government for examination and approval. The enterprise
shall obtain the status of a legal person after it is
approved by, registers itself with and receives a business
license from the administrative authorities for industry and
commerce. The enterprise shall carry out its productive and
operational activities within the approved and registered
scope of operation.
Article 17. An enterprise must meet the following
qualifications for its establishment:
(1) Its products are needed by society;
(2) It has access to the required energy sources, raw and
processed materials, and communication and transportation
facilities;
(3) It possesses a name of its own and premises for
production and operation;
(4) It possesses funds in conformity with state provisions;
(5) It possesses its own organizational structure;
(6) It has a definite scope of operation; and
(7) Other qualifications as provided by the laws and
regulations.
Article 18. The merger of enterprises or the division of an
enterprise shall be subject to approval by the government or
the competent department of the government in accordance
with the provisions of the laws and administrative rules and
regulations.
Article 19. An enterprise shall be terminated for any of the
following reasons:
(1) being abolished due to its violation of the laws and
regulations;
(2) being dissolved by decision of the competent department
of the government made in accordance with the provisions of
the laws and regulations;
(3) being declared bankrupt in accordance with law; or
(4) other reasons.
Article 20. When an enterprise is merged with another
enterprise or other enterprises or when it is divided or
terminated, its property must be protected and its claims
and debts shall be liquidated according to law.
Article 21. The modification of registered items such as the
merger of enterprises and the division or termination of the
enterprise, and the scope of operation shall be subject to
approval by and registration with the administrative
authorities for industry and commerce.
CHAPTER III RIGHTS AND OBLIGATIONS OF THE ENTERPRISE
Article 22. The enterprise shall, under the guidance of
state plans, have the right to arrange on its own the
production of products needed by society or the provision of
services for society.
Article 23. The enterprise shall have the right to request
for the adjustment of mandatory plans when the needed
materials subject to planned allocation are unavailable or
when no arrangements are made for product
sales.
The enterprise shall have the right to accept or reject
production assignments given by any department or unit
outside the mandatory plans.
Article 24. The enterprise shall have the right to sell its
products on its own, except as otherwise stipulated by the
State Council.
An enterprise undertaking production according to a
mandatory plan shall have the right to market for itself
products manufactured in excess of the planned quota and
products it retains as its share under the plan.
Article 25. The enterprise shall have the right to choose
the suppliers for itself and purchase from them materials
needed for production.
Article 26. The enterprise shall have the right to determine
for itself the prices of its products and the charges for
its services, except for those which, as stipulated by the
State Council, are under the control of the price
authorities and the relevant competent departments.
Article 27. The enterprise shall have the right to negotiate
and sign contracts with foreign parties in accordance with
the provisions of the State Council.
The enterprise shall have the right to withdraw and use,
according to the provisions of the State Council, the
foreign exchange revenues it retains as its share.
Article 28. The enterprise shall have the right to budget
and use its retained funds in accordance with the provisions
of the State Council.
Article 29. The enterprise shall have the right, in
accordance with the provisions of the State Council, to
lease out or transfer against compensation the fixed assets
that the state has authorized it to operate and manage, but
the proceeds therefrom must be used for the renewal of
equipment and technical transformation.
Article 30. The enterprise shall have the right to determine
such forms of wages and methods of bonus distribution as are
appropriate to its specific conditions.
Article 31. The enterprise shall have the right to employ or
dismiss its staff members and workers in accordance with the
provisions of the State Council.
Article 32. The enterprise shall have the right to decide on
its organizational structure and the size of its personnel.
Article 33. The enterprise shall have the right to reject
the exaction of its manpower, materials and financial
resources in the form of apportionment by any state organ or
unit. Except as otherwise stipulated by the laws and
regulations, any demand made on the enterprise by any state
organ or unit in any form for the provision of manpower,
materials and financial resources shall be exaction by
apportionment.
Article 34. The enterprise shall have the right, in
accordance with law and the provisions of the State Council,
to engage in joint operations with other enterprises or
institutions, to invest in other enterprises or institutions
and to hold shares in other enterprises. The enterprise
shall have the right to issue bonds in accordance with the
provisions of the State Council.
Article 35. The enterprise must fulfil the mandatory plans.
The enterprise must perform the contracts concluded
according to law.
Article 36. The enterprise must ensure the normal
maintenance of its fixed assets and upgrade and renew its
equipment.
Article 37. The enterprise must observe state provisions
concerning finance, labour and wages,price control, etc.,
and accept supervision by the financial, auditing, labour
and wage, price and other administrative
authorities.
Article 38. The enterprise must guarantee the quality of its
products and services and be responsible to users and
consumers.
Article 39. The enterprise must raise labour efficiency,
economize the use of energy and of raw and processed
materials and strive to reduce costs.
Article 40. The enterprise must strengthen its security
work, maintain the order of production and protect state
property.
Article 41. The enterprise must implement the system of safe
production, improve labour conditions, do good work in
labour protection and environmental protection, and carry on
production in a safe and civilized manner.
Article 42. The enterprise shall strengthen ideological and
political education, legal education, national defence
education, scientific and cultural education as well as
technical and vocational training so as to raise the quality
of its staff and workers.
Article 43. The enterprise shall support its staff and
workers in scientific research, invention and creation and
activities for technical innovation, for making
rationalization proposals and for socialist labour
emulation, and reward them for such endeavours.
CHAPTER IV THE FACTORY DIRECTOR
Article 44. Except as otherwise stipulated by the State
Council, the selection of the factory director shall be made
by the competent department of the government in the light
of the specific conditions of the enterprise by one of the
following methods:
(1) appointment by the competent department of the
government or choice of an applicant on a competitive basis
by the same department; or
(2) election by the staff and workers' congress of the
enterprise. With respect to the person to be appointed or
the applicant to be chosen as factory director by the
competent department of the government, the opinions of the
staff and workers shall be solicited, with respect to the
person elected as factory director by the staff and workers'
congress of the enterprise, his appointment shall be
reported to the competent department of the government for
approval.
The removal or dismissal of the factory director appointed
or chosen from applicants by the competent department of the
government shall be decided upon by such department, while
the opinions of representatives of the staff and workers
shall be solicited; the recall of the factory director
elected by the staff and workers' congress of the enterprise
shall be decided by such congress and reported to the
competent department of the government for approval.
Article 45. The factory director shall be the legal
representative of the enterprise.
The enterprise shall establish a system of production,
operation and management headed by the factory director. The
factory director shall occupy the central position in the
enterprise and assume overall responsibility for building up
a materially developed and culturally and ideologically
advanced enterprise.
The factory director shall exercise leadership in the
production, operation and management of the enterprise by
exercising the following functions and powers:
(1) to decide on the various plans of the enterprise or
report them for examination and approval in accordance with
law and the provisions of the State Council;
(2) to decide on the administrative setup of the enterprise;
(3) to propose to the competent department of the
government the appointment or removal, employment or
dismissal of leading administrative cadres at the level of a
vice-director of the factory, except as otherwise stipulated
by law and the provisions of the State Council;
(4) to appoint or remove, employ or dismiss the
intermediate-level leading administrative cadres of the
enterprise, except as otherwise stipulated by
law;
(5) to propose plans for wage adjustment and bonus
distribution and important rules and regulations, and refer
them to the staff and workers' congress for examination and
approval; to propose programmes for the use of the welfare
fund and make suggestions regarding such other matters as
are important for the well-being and benefits of the staff
and workers, and to refer them to the staff and workers'
congress for deliberation and decision; and
(6) to reward or punish the staff members and workers
according to law; to submit to the competent department of
the government proposals for rewarding or punishing leading
administrative cadres at the level of a vice-director of the
factory.
Article 46. The factory director must rely on the staff
members and workers for the fulfilment of the obligations of
the enterprise prescribed in this Law, support the work of
the staff and workers' congress, the trade union and other
public organizations, and implement the decisions made
according to law by the staff and workers' congress.
Article 47. The enterprise shall establish a management
committee or some other forms of organization to assist the
factory director in making decisions on important issues of
the enterprise. The management committee, with the factory
director as its chairman, shall be composed of leading
persons in charge of various aspects of the enterprise and
representatives of the staff and workers.
The important issues as mentioned in the preceding paragraph
shall include:
(1) the policy of operation, long-term and annual plans,
programmes for capital construction and major technical
transformation, plans for the training of the staff and
workers, plans for wage adjustment, programmes for the
distribution and use of the retained funds and programmes
for contract and leasing systems of managerial
responsibility.
(2) the size of the personnel of the enterprise whose wages
are counted as cost of the enterprise and the establishment
and adjustment of administrative organs; and
(3) programmes for the formulation, revision and abrogation
of major rules and regulations.
Proposals for discussion of the foregoing important issues
shall all be made by the factory director.
Article 48. Factory directors who have made outstanding
achievements in leading the enterprises in fulfilling their
plans, raising product or service quality, improving
economic results or promoting cultural and ideological
progress shall be rewarded by the competent department of
the government.
CHAPTER V THE STAFF AND WORKERS AND THE STAFF AND WORKERS'
CONGRESS
Article 49. The staff and workers of the enterprise shall
have the right to participate in its democratic management;
the right to put forward opinions and suggestions concerning
its production and work; the right to enjoy, according to
law, labour protection, labour insurance, rest and vacation;
and the right to report the true situation to state organs
and make criticisms and charges against the leading cadres
of the enterprise. Women staff and workers shall have the
right to enjoy special labour protection and labour
insurance in accordance with the provisions of the
state.
Article 50. The staff and workers should approach their work
as the masters of the country that they are, observe labour
discipline and the rules and regulations, and fulfil their
tasks in production and work.
Article 51. The staff and workers' congress shall be the
basic form for the practice of democratic management in the
enterprise and the organ for the staff and workers to
exercise their powers of democratic management.
The working organ of the staff and workers' congress shall
be the trade union committee of the enterprise. The trade
union committee of the enterprise shall be responsible for
the day-to-day work of the staff and workers' congress.
Article 52. The staff and workers' congress shall exercise
the following functions and powers:
(1) to hear and deliberate the factory director's reports on
the policy of operation, long-term and annual plans,
programmes for capital construction and major technical
transformation, plans for the training of the staff and
workers, programmes for the distribution and use of the
retained funds and programmes for contract and leasing
systems of managerial responsibility, and to put forward
opinions and suggestions;
(2) to examine and endorse or to reject the enterprise's
programmes for wage adjustment, programmes for bonus
distribution, measures for labour protection, measures for
awards and penalties and other important rules and
regulations;
(3) to deliberate and decide on the programmes for the use
of the staff and workers' welfare fund, programmes for the
allocation of the staff and workers' housing and other
important matters concerning the well-being and benefits of
the staff and workers;
(4) to evaluate and supervise the leading administrative
cadres at various levels of the enterprise and put forward
suggestions for rewarding or punishing them and for their
appointment or removal; and
(5) to elect, by decision of the competent department of the
government, the factory director and report to such
department for approval.
Article 53. Democratic management shall be practised in
workshops through the general meetings of the staff and
workers, through the staff and workers representative groups
or through other forms; the workers shall participate
directly in the democratic management of shifts and groups.
Article 54. The staff and workers' congress shall support
the factory director in exercising his functions and powers
according to law and shall educate the staff and workers for
the fulfilment of their obligations specified in this Law.
CHAPTER VI THE RELATIONSHIP BETWEEN THE ENTERPRISES AND THE
GOVERNMENT
Article 55. The government or the competent department of
the government shall, in accordance with the provisions of
the State Council, issue unified mandatory plans to the
enterprises, ensure the supply of materials which are
subject to planned allocation and needed by the enterprises
for the fulfilment of mandatory plans, examine and approve
plans submitted by the enterprises for capital construction
and major technical transformation, appoint or remove,
reward or punish factory directors, appoint or remove,
reward or punish leading administrative cadres at the level
of a vice-director of a factory, as proposed by factory
directors, and examine and train leading administrative
cadres at the factory level.
Article 56. The relevant departments of the government
shall, in conformity with the objective that the state
regulates the market and the market guides the enterprises,
provide services for the enterprises and exercise
administration and supervision over the enterprises in line
with their respective functions and in accordance with the
provisions of the laws and regulations. These departments
shall:
(1) formulate and adjust industrial policies, and guide the
enterprises in working out their development plans;
(2) provide advice and information for the enterprises to
make their operational decisions;
(3) coordinate the relations between the enterprises and
other units;
(4) safeguard the normal production order of the
enterprises, and protect from infringement the state
property operated and managed by the enterprises; and
(5) gradually improve the public facilities related to the
enterprises
Article 57. The local governments at or above the county
level in the locality of an enterprise shall provide it with
the needed materials which are subject to local planning and
control, coordinate the relations between the enterprises
and other units in the locality, and strive to run well the
public welfare undertakings related to the enterprises.
Article 58. No state organ or unit shall be permitted to
encroach on the right which the enterprise enjoys according
to law to make its own decisions in operation and
management, or to exact manpower, materials or financial
resources from the enterprise by way of apportionment, or to
demand the establishment of an organ by the enterprise or to
determine the size of the personnel of an organ.
CHAPTER VII LEGAL LIABILITY
Article 59. Whoever has conducted productive and operational
activities in the name of an enterprise in violation of the
provisions of Article 16 of this Law, without prior
examination and approval by the government or the competent
department of the government and without approval by and
registration with the administrative authorities for
industry and commerce, shall be ordered to suspend his
business operations, and his illegal earnings shall be
confiscated.
An enterprise that practises fraud in dealing with the
registration authorities and conceals the true situation
from them shall be given a warning or punished with a fine;
where the circumstances are serious, its business license
shall be revoked.
The administrative punishment prescribed in this Article
shall be decided upon by the administrative authorities for
industry and commerce at or above the county level. If the
party in question refuses to accept the decision on
punishment in the form of a fine, the suspension of
operations, the confiscation of illegal earnings or the
revocation of the business license, it may file a suit in a
court within 15 days of receiving the notification on the
decision; if no suit is filed by the time limit and the
decision is not complied with, the authorities that made the
decision on punishment may apply to the court for compulsory
enforcement.
Article 60. An enterprise that produces and sells
substandard products and thereby causes property damage or
physical injury to users and consumers shall be liable for
damages; if a crime is constituted, the person or persons
directly responsible shall be investigated for criminal
responsibility according to law.
An enterprise whose product quality does not conform to the
terms agreed upon in the economic contract shall be liable
for breach of contract.
Article 61. If a decision of the government or the relevant
department of the government violates the provisions of
Article 58 of this Law, the enterprise shall have the right
to apply to the authorities that made the decision for
rescission. If no rescission is granted, the enterprise
shall have the right to appeal to the authorities at the
level next higher to the authorities that made the decision
or to a supervisory department of the government. The
authorities that accepts the appeal shall make a ruling and
notify the enterprise of it within 30 days of receiving the
appeal.
Article 62. Any leading cadre of the enterprise, who
violates the lawful rights and interests of the staff and
workers by abusing his power, where the circumstances are
serious, shall be given an administrative sanction by the
competent department of the government; any leading cadre of
the enterprise who retaliates against and frames up charges
against staff members or workers by abusing his power and
using his public office for private ends shall be
investigated for criminal responsibility in accordance with
the provisions of Article 146 of the Criminal Law of the
People's Republic of China.
Article 63. Any leading cadre of the enterprise or of the
relevant department of the government who, due to faults in
his work, causes relatively heavy losses to the enterprise
and the state, shall be given an administrative sanction by
the competent department of the government or the relevant
state organ at a higher level.
Any leading cadre of the enterprise or of the relevant
department of the government who, due to neglect of duty,
causes the property of the enterprise or the interests of
the state and the people to suffer heavy losses, shall be
investigated for criminal responsibility in accordance with
the provisions of Article 187 of the Criminal Law of the
People's Republic of China.
Article 64. Whoever obstructs, without resorting to violence
or threat, the enterprise leaders from carrying out their
functions according to law, shall be punished by the public
security organ in the locality of the enterprise in
accordance with the provisions of Article 19 of the
Regulations of the People's Republic of China on
Administrative Penalties for Public Security; whoever by
means of violence or threat obstructs the enterprise leaders
from carrying out their functions according to law shall be
investigated for criminal responsibility in accordance with
the provisions of Article 157 of the Criminal Law of the
People's Republic of China.
Whoever disturbs the order of the enterprise, thereby making
it impossible for production, business operations and work
to go on smoothly, but has not caused serious losses, shall
be punished by the public security organ in the locality of
the enterprise in accordance with the provisions of Article
19 of the Regulations of the People's Republic of China on
Administrative Penalties for Public Security; if the
circumstances are so serious that production, business
operations and work cannot be carried on and serious losses
are caused, he shall be investigated for criminal
responsibility in accordance with the provisions of Article
158 of the Criminal Law of the People's Republic of China.
CHAPTER VIII SUPPLEMENTARY PROVISIONS
Article 65. The principles of this Law shall be applicable
to enterprises owned by the whole people in communications
and transportation, the postal and telecommunications
service, geological exploration, construction and
installation, commerce, foreign trade, materials supply,
agriculture, forestry and water conservancy.
Article 66. If the enterprise implements the contract and
leasing systems of managerial responsibility, the party
awarding the contract and the contractor, the lessor and the
lessee, with regard to their respective rights and
obligations, shall implement the relevant provisions of the
State Council, apart from abiding by the provisions of this
Law.
With respect to the system of leadership in jointly operated
enterprises, large-scale associated enterprises and stock
enterprises, the relevant provisions of the State Council
shall be implemented.
Article 67. The State Council shall, in accordance with this
Law, formulate rules for implementation.
Article 68. The standing committees of the people's
congresses of the autonomous regions may, in accordance with
the principles of this Law and the Law of the People's
Republic of China on Regional National Autonomy and in the
light of the special features of their respective
localities, formulate rules for implementation and report
them to the Standing Committee of the National People's
Congress for the record.
Article 69. This Law shall come into force as of August 1,
1988.
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