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.
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 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 24. The enterprise shall have the right to choose the
suppliers for itself and purchase from them materials needed for
production.
Article 25. 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 26. 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 27. The enterprise shall have the right to budget and
use its retained funds in accordance with the provisions of the State
Council.
Article 28. 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 29. 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 30. 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 31. The enterprise shall have the right to decide
on its organizational structure and the size of its personnel.
Article 32. 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 33. 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 34. The enterprise must perform the contracts concluded according to law.
Article 35. The enterprise must ensure the normal maintenance
of its fixed assets and upgrade and renew its equipment.
Article 36. 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 37. The enterprise must guarantee the quality of its
products and services and be responsible to users and consumers.
Article 38. The enterprise must raise labour efficiency,
economize the use of energy and of raw and processed materials and
strive to reduce costs.
Article 49. The enterprise must strengthen its security work,
maintain the order of production and protect state property.
Article 40. 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 41. 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 42. 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 43. 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 44. 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 45. 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 46. 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 47. 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 48. 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 40. 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 50. 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 51. 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 52. 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 53. 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 54. 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 55. 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 56. 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 57. 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 58. 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 59. 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 60. 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 61. 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 62. 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 ofArticle 158 of the Criminal Law of the People’s Republic of China.
CHAPTER VIII SUPPLEMENTARY PROVISIONS
Article 63. 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 64. 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 65. The State Council shall, in accordance with
this Law, formulate rules for implementation.
Article 66. 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 67. This Law shall come into force as of August 1, 1988.