关键词：Securities

Administrative Measures on the Split Share Structure Reform of Listed Companies

Circular on Issues relating to the Pilot Reform of Listed Companies Split Share Structure


Our Ref: No. 32 [2005] CSRC



To: Listed Companies, Shareholders of Listed Companies, Sponsors, China Securities Depository & Clearing Co., Ltd.



With a view to carrying out the Guidelines on Promoting Reform, Opening-up and Steady Development of China's Capital Market (No.3 [2004] the State Council), (the “Guidelines”) and addressing the problem of listed companies split share structure, the pilot reform of listed companies split share structure (the “Pilot Reform”) is now formally initiated. The Pilot Reform shall be carried out in accordance with the basic principle set out in the Guidelines---- “Approaches towards this problem (listed companies split share structure) shall conform to the way the securities market works, promote the smooth functioning and development of the securities market, and provide effective protection for investors, especially, the public investors”. Practice policies for the Pilot Reform include Sustained Development of Securities Market, Fairness and Uniformity of Rules, Adequate Negotiation in Developing the Reform Plan, Approval for the Reform Plan by Floating Shareholders, and Gradual Implementations. This Circular provides the following procedures and requirements that should be followed in conducting the Pilot Reform:



1.      To maintain the smooth functioning of the securities market and protect the interests of investors, especially those of public investors, the China Securities Regulatory Commission (the CSRC) shall select the listed companies (the Pilot Company) that are allowed to undertake the Pilot Reform taking into consideration the attitude of listed companies shareholders towards the Pilot Reform as well as sponsors’ recommendations. Shareholders of the selected Pilot Company may formulate specific approaches towards the split share structure problem independently.



2.      The Pilot Company shall make timely, true, precise, and full disclosure of information on the Pilot Reform, and apply for share trading suspension or resumption at appropriate time. Specifically, the Pilot Company shall:

2.1  make an immediate public announcement and apply for share trading    suspension upon the event that the formal decision to undertake the Pilot Reform is reached;

2.2  publish documents relating to the Pilot Reform within two working days upon passing of the Board resolution on the reform plan, i.e. Resolution of the Board of Directors, Opinions of Independent Directors, Prospectus for the Pilot Reform, Opinions of the Sponsor, Notice of the Extraordinary General Meeting in connection with the Pilot Reform (the EGM), and apply for share trading resumption. The Pilot Company shall apply for share trading suspension during the period as of the record date for the EGM until the release of the Result of the EGM.

2.3  publish the Result of the EGM within 2 working days and apply for share trading resumption upon passing of the resolution on the reform plan at the EGM. The Pilot Company may apply to the stock exchange to extend the trading suspension on account of the particular circumstances of the Pilot Reform.



3.      Necessary measures as follows shall be taken to enable participation and exercise of rights by floating shareholders in the EGM:

3.1  Informing floating shareholders of their rights, the time, conditions and forms for exercise of rights in the Notice of the EGM

3.2  Issuing notices of the EGM for at least three times prior to the EGM, and availability of on-line voting facilities

3.3  Solicitations of proxies with respect to the reform plan by independent directors

3.4  Majority votes required for passing the Board resolution on the reform plan-- two-third majority of votes cast by shareholders voting at the EGM, and a two-third majority of votes by floating shareholders voting at the EGM



4.      The Board of the Pilot Company shall engage a sponsor to assist in formulating a reform plan, conduct due diligence, review documents, provide sponsor’s opinions, and assist in the implementation of the reform plan. The sponsor shall designate at least 3 sponsor representatives for the purpose of the Pilot Reform.



5.      Non-floating shareholders of the Pilot Company shall undertake to float their non-floating shares that are granted the listing status (the Shares) in phases, and shall perform disclosure obligations during the course.

5.1  Non-floating shareholders of the Pilot Company shall undertake not to sell or transfer the Shares for a 12-month period from the date their non-floating shares are granted listing status

5.2  Non-floating shareholders who hold 5% or more stakes in the Pilot Company shall undertake to limit the number of the Shares disposed through the secondary market to 5% of the total share capital of the Pilot Company for 12 months and 10% for 24 months following expiry of the12-month trading restriction period set out in paragraph 5.1 of the Circular

5.3  A public announcement shall be made within 3 working days upon the event that the number of the Shares disposed through the secondary market reaches 1% of the total share capital of the Pilot Company. Disposal of the Shares may proceed during the announcement period.



6.      The approval of competent authorities for the disposal of non-floating shares of the Pilot Company, where applicable, shall be obtained and published prior to the convening of the EGM.

7.      The stock exchange and securities depository & clearing company shall establish operating guidelines for the Pilot Reform respectively in line with the requirements in the Circular, and handle the work relating to the listing of the Shares.



The stock exchange shall conduct a compliance review on the Pilot Reform documents submitted by the Pilot Company, and exercise continuous supervision over disclosures in connection with disposal of the Shares by the ex-non-floating shareholders of the Pilot Company.



8.      Directors and shareholders of the Pilot Company shall, in carrying out the Pilot Reform, act with integrity and undertake that, there is no fraud, misleading statements, or material omissions in their disclosures.



Listed companies shall neither undertake the Pilot Reform unless authorized to do so, nor publish misleading information in connection with the Pilot Reform, and shall make prompt clarification on false media reports.



9.      The Pilot Reform sponsor and the sponsor representatives shall exercise diligence in execution of their duties and responsibilities related to the Pilot Reform, and undertake that there is no fraud, misleading statements or material omissions in the Sponsor’s Opinions.



10. The CSRC supervises over the activities and works related to the Pilot Reform, and will take administrative actions against senior management of the Pilot Company, the sponsor and its representatives involved in the Pilot Reform, and listed companies for violation of the requirements set out in the Circular, and abuse of the Pilot Reform for insider trading, market manipulation, or other fraudulent securities transactions. Criminal procedures will be initiated against suspected criminal offences.



11. The Circular shall come into force as of the date of promulgation.



The China Securities Regulatory Commission



(This English version by Shenzhen Securities Information Co., Ltd. is for your reference only. In case any discrepancy exists between the Chinese and English context, the Chinese version shall prevail.)

Circular on Issues concerning Warrant Investment by Securities Investment Funds in the Split Share Structure Reform


Our Ref: No.138 [2005] CSRC



August 15, 2005



To: fund management companies, fund custodian banks



The warrant scheme has been introduced by some listed companies in the pilot reform of the split share structure of listed companies. Warrants, as a type of securities products, have their own operational features. As to securities investment funds (hereinafter referred to as “fund” which can be a single or a plural, as the case may be), their investment in warrants shall be carried out step by step on a trial basis and further provisions shall be specified in line with market conditions after certain experience is accomplished. Pursuant to the Securities Investment Fund Law of the PRC, Administrative Measures on Operation of Securities Investment Funds and other relevant provisions, the issues concerning pilot warrant investment by fund managers with their fund assets in the split share structure reform are hereby promulgated, with a view of standardizing fund operation and safeguarding the legitimate interests of fund unit holders.



1.      A fund may hold warrants offered as compensation in the split share structure reform, or sell or exercise the said warrants in accordance with relevant rules of the stock exchanges.



2.      A fund may invest, on its own initiative, in the warrants issued in the split share structure reform.



3.      A fund manager to invest in warrants with fund assets as stated in Article 2 of this circular, shall file with the China Securities Regulatory Commission (CSRC) and publicly release the investment plan in compliance with relevant laws and regulations, and pertinent terms in the fund contract. Such investment plan shall include the limit on warrant investment proportion, investment strategy, means of information disclosure and risk control measures and so on, and fully disclose related investment risks.



4.      A fund manager to invest in warrants with fund assets is prohibited from the following circumstances:



4.1  The aggregate amount of warrants a fund purchases in any trading day exceeds 5‰ of the net asset value of the fund in the last trading day.



4.2  The market capitalization of all warrants held by a fund exceeds 3% of the net asset value of the fund.



4.3  All funds under the management of the same fund manager collectively hold more than 10% of a single warrant.



The restrictions on warrant investment proportion in the foregoing Article 4.1, Article 4.2 and Article 4.3 of this circular shall be applicable unless otherwise stipulated by the CSRC.



5.      A fund manager shall formulate a feasible investment plan based on the investment strategy and risk-return characteristics of the fund to invest in warrants, and set the specific investment proportion of warrants within the restrictions as stipulated in Article 4 of this circular.



6.      A fund manager shall have its warrant investment plan adjusted within 10 trading days, in case the investment proportion concerned is not in line with that set forth in Article 4.2, Article 4.3 of this circular and the fund contract or the warrant investment plan for reasons other than the fund manager itself, such as market volatility, change in fund size and consideration paid in the split share structure reform and so on.



7.      A fund manager to invest in warrants with fund assets is prohibited from illegitimate interests with insider information, manipulation of warrant prices or the prices of underlying securities, and interest transfer in warrant investment.



8.      Fund managers and fund custodians shall duly perform the obligations of good faith, care and diligence, establish and improve the management system of warrant investment, and come up with effective risk control measures specifically designed for warrant investment so as to safeguard the legitimate interests of fund unit holders.



The China Securities Regulatory Commission



(This English version by Shenzhen Securities Information Co., Ltd. is for your reference only. In case any discrepancy exists between the Chinese and English context, the Chinese version shall prevail.)

Consultation Paper of the China Securities Regulatory Commission


for the Circular on Issues relating to Acquisition of Public Shares by Controlling Shareholders of Listed Companies under the Reform for Split Share Structure (Exposure Draft )


June 12, 2005

To assist the reform addressing the problem of split share structure of listed companies（the Reform）and protect investors' interests, the China Securities Regulatory Commission (the CSRC ) formulated the Circular on Issues relating to Acquisition of Public Shares by Controlling Shareholders of Listed Companies under the Reform for Split Share Structure (Draft for Consultation)

The Draft Circular has been published on the CSRC website: www.csrc.gov.cn and designated newspapers and magazines in a bid to solicit opinions from the investors and the public.

Please be informed that the comments on the Draft Circular may be forwarded in writing or by email to the Dept. of Listed Company Supervision of the CSRC prior to June 15, 2005.

Contact Information of the Dept. of Listed Company Supervision is as follows:
Fax: 010－88061504
Email: du_dan@csrc.gov.cn
Address: Dept. of Listed Company Supervision of the China Securities Regulatory Commission,
Tower A of Fukai Building
No. 19 Finance Street, Xicheng District
Beijing 100032 PRC

The China Securities Regulatory Commission
Issues relating to Acquisition of Public Shares by Controlling Shareholders of Listed Companies under the Reform
for Split Share Structure

Circular to listed companies,

CC.: Shanghai Stock Exchange, Shenzhen Stock Exchange, China Securities Depository and Clearing Co.,Ltd. and its Shanghai Branch and Shenzhen Branch

June 12, 2005

To take forward the reform addressing the problem of the split share structure of listed companies and maintain market stability, the following provisions are set out to address issues relating to the acquisition of public shares by the controlling shareholders of listed companies under the Reform in accordance with relevant provisions of the Company Law of the PRC and the Securities Law of the PRC:

1. For a listed company to carry out the reform of split share structure, its controlling shareholder may acquire public shares through the secondary market so as to avoid irrational share price fluctuation, to protect the investors’ interests as well as to keep good image of the company.

2. The controlling shareholder shall make simultaneous announcement of the plan for acquisition of public shares (the Acquisition Plan) and the Reform Scheme.

The Acquisition Plan shall cover the purposes & conditions of the intended share acquisition, number of shares to be acquired, and the undertakings to keep the newly acquired shares for at least 6 months following the acquisition.

3. The controlling shareholder shall carry out the Acquisition Plan in 2 months following the approval of the general meeting of the listed company on the Reform Scheme; exemption from a tender offer may be granted to the controlling shareholder in case the intended share acquisition triggers one.

4. The controlling shareholder shall make a public announcement within 2 days the increased shares reaching each 5% of the total share capital of the listed company, and suspend the share acquisition action until such announcement is released.

5. Where shareholding distribution of a listed company changed by the share acquisition of the controlling shareholder no longer meets the listing criteria by the Company Law of the PRC, the responsible shareholder shall implement the one-month plan to maintain the listing status of the company following the 6-month period after the completion of share acquisition.


The China Securities Regulatory Commission

(This English version by Shenzhen Securities Information Co., Ltd. is for your reference only. In case any discrepancy exists between the Chinese and English context, the Chinese version shall prevail.)

Circular of the Ministry of Finance and the State Administration of Taxation on Taxation Policy for the Pilot Reform of Split Share Structure


Our Ref: Cai Shui No.103 [2005]
June 13, 2005

To: the departments of finance/ finance bureaus in provinces, autonomous regions, municipalities directly under the central government and the central-planning listed cities, state taxation bureaus, local taxation bureaus, the Finance Bureau of Xinjiang Production and Construction Corps, and the financial supervision offices of the Ministry of Finance in provinces, autonomous regions, municipalities directly under the central government and the central-planning listed cities

With a view to boosting the capital market and a full circulation of stock market and accomplishing the pilot reform of split share structure, issues concerning the taxation policy for the forgoing pilot reform, approved by the State Council, are hereby promulgated as follows:

1. The stamp tax shall be temporarily exempted on share transactions arising from consideration paid by holders of non-tradable shares to holders of tradable shares in the reform of split share structure.

2. Holders of tradable shares shall be temporarily exempted from enterprise and individual income tax on shares and cash proceeds paid by holders of non-tradable shares as consideration in the reform of split share structure.

3. The foregoing provision shall come into effect as of the date of promulgation.

The China Securities Regulatory Commission

(This English version by Shenzhen Securities Information Co., Ltd. is for your reference only. In case any discrepancy exists between the Chinese and English context, the Chinese version shall prevail.)

Drafting Notes on the Administrative Measures on the Split Share Structure Reform of Listed Companies (Exposure Draft)


1.      Drafting background



On August 23, 2005, the China Securities Regulatory Commission (CSRC), State-Owned Assets Supervision and Administration Commission of the State Council, Ministry of Finance, People's Bank of China and Ministry of Commerce jointly promulgated the Guidance Opinions on the Split Share Structure Reform of Listed Companies (hereinafter referred to as the “Guidance Opinions”). The Guidance Opinions specifies that the CSRC shall enact the Administrative Measures on the Split Share Structure Reform of Listed Companies to standardize the split share structure reform and protect the legitimate interests of investors, especially of public investors in compliance with an “open, fair and just” operational procedure and regulatory requirements.



In accordance with the Company Law of the PRC, Securities Law of the PRC, Guidelines of the State Council for Promoting the Reform and Opening-up and Sustained Development of the Capital Market, the Guidance Opinions and other laws, regulations and policies, the CSRC has drafted the Administrative Measures on the Split Share Structure Reform of Listed Companies (Exposure Draft) (hereinafter referred to as the “Administrative Measures”), and hereby solicits opinions from the public.



2.      Adjustment and improvement in the pilot system



The Administrative Measures adheres basically to the operational procedure adopted in the pilot phase. To advance the split share structure reform on an active, steady and orderly basis and maintain consistency of the essential system in the pilot phase, the CSRC has appropriately adjusted, supplemented and improved the procedure standards and policy orientation involving the following two aspects, after summing up the pilot experience and widely soliciting opinions from the public:



2.1 to further standardize the operational procedure, including the following five respects:



2.1.1 Reform motion

To achieve more practicability for the split share structure reform, the prerequisite for carrying out the reform plan in the pilot phase that “all non-tradable shareholders shall reach a consensus” has been adjusted to” a shareholder/shareholders holding individually/collectively more than two-thirds of the non-tradable shares of a listed company shall propose a reform motion”.



2.1.2      Collegiate system

In line with the Guidance Opinions, the split share structure reform is specifically designed to float the non-tradable shares of A-share listed companies and to balance the interests of shareholders via a negotiation mechanism. The Administrative Measures redefines the “extraordinary general meeting” system adopted in the pilot phase as the “relevant shareholders’ meeting of A-share market”.



2.1.3      Schedule of negotiation between non-tradable shareholders and tradable shareholders

The negotiation between non-tradable shareholders and tradable shareholders shall commence as of the date when the announcement to convene the relevant shareholders’ meeting is publicly disclosed, instead of starting from the original issue date of the announcement to pilot the split share structure reform, thus shortening the reform period to around 30 days.



2.1.4 Revision of the reform plan

Pursuant to the Standard Opinions on General meeting of Shareholders, the reform plan could formerly be revised within 15 days before the extraordinary general meeting is held in the pilot phase. Now the reform plan shall no longer be revised after the negotiation results are publicly released and the share trading of the listed company is resumed. Such adjustment is made in a bid to ensure adequate negotiation, maintain stability of the reform plan and avoid information asymmetry.



2.1.5 Suspension arrangement

The practice that a listed may choose to have its share trading resumed after it publicly releases the resolution on extraordinary general meeting in the pilot phase has been canceled whereas the suspension arrangement has been retained for the negotiation period and another period from the next day of the record date for the relevant shareholders’ meeting to the date when the prescribed reform procedure is concluded.



2.2 to further clarify policy orientation

The Circular on Issues concerning the Pilot Reform of the Split Share Structure of Listed Companies and the Circular on Issues concerning the Pilot Reform of the Split Share Structure of the Second Batch of Listed Companies that were promulgated in the pilot phase focus on standardizing the basic operational procedure without specific policy orientation for the reform plan and relevant main players. In line with the Guidance Opinions, the Administrative Measures provides relevant policy orientation clarifying the formulation of the reform plan and the issues involving the coming reform based on the experience accomplished in the pilot phase:



2.2.1 to specify that both the current and long-term interests of shareholders shall be presented in the reform plan, which shall embrace the measures to stabilize the stock price, withdrawal of the non-tradable shareholders in disagreements from the consideration plan and so on. In the mean time, the Administrative Measures also provides the path for combined operation of the split share structure reform and asset restructuring;



2.2.2 to intensify the responsibilities of sponsors;



2.2.3 to clearly define the basic requirements and regulatory measures governing the consideration undertakings of non-tradable shareholders.



Based on the opinions from the public, the CSRC will further revise the Administrative Measures on the Split Share Structure Reform of Listed Companies (Exposure Draft), which will be duly put into practice.



The China Securities Regulatory Commission



(This English version by Shenzhen Securities Information Co., Ltd. is for your reference only. In case any discrepancy exists between the Chinese and English context, the Chinese version shall prevail.)

Guidance Notes on the Split Share Structure Reform of Listed Companies


August 23, 2005




To,

Provincial People’s Governments

People’s Governments of Autonomous Regions

People’s Governments of Municipalities Directly under the Central Government

Relevant Departments under the State Council




Since the promulgation of the Guidelines on Promoting Reform, Opening-up and Sustained Development of China’s Capital Market  (No.3 [2004] the State Council) (the Guidelines of the State Council), significant progress has been made in the reform and institution building for China’s capital market as evidenced by improvements in functioning mechanism and operational environment of the market as well as the fact that problems of fundamental and institutional nature hindering effective functioning of China’s capital market are being resolved. With the tremendous support from relevant departments and regional People’s Governments, the reform on split share structure of listed companies (the Share Reform), led by the State Council, has gone through its experimental stage and is now ready for extensive implementation pursuant to the requirement of the State Council, i.e. “ The split share structure problem shall be dealt with in a dynamic and prudent manner.”  Previous warning-up work on the Share Reform has prepared the market for such an upgrading of reform as the general principles and specific practices adopted in the previous pilot Share Reform has been widely accepted by the market, and expectations of the regulator and the market towards the results of the Share Reform are beginning to converge.




To further take forward the Share Reform, Guidance notes are provided as follows:




Section 1 Significance of the Share Reform



1. To fully carry out the Guidelines of the State Council and to improve the functioning mechanism of China’s capital market, we need to start from issues that are of institutional and fundamental nature, and concentrate on improving the functioning of capital market so as to boost return on investment, direct-financing capability, and resource allocation efficiency. In particular, promotion of a sound capital market with full spectrum of securities instruments, high-quality listed companies, well-regulated securities companies, and a sound legal framework shall work for two purposes: first, it may help to mitigate problems inherent in an emerging market including absence of market elements, poorly built market institution, disorder in operations, and inadequate regulations; Second, it provides an opportunity to address historical problems developed in the process of China’s structural transformation including split share structure of listed companies to reduce potential risks and pave the way for a bright future of the capital market.




2. The split share structure refers to the existence of both tradable shares on the stock exchange and a large volume of non-tradable shares owned by the state and legally defined entities in A-share market. It was a peculiar problem developed in the process of China’s economic structural transformation and has flawed the capital market in forms of distorted pricing mechanism, resource allocation inefficiency, invalidation of the market share price as an innate factor that promote efficiency and limit the power of the substantial shareholders and management of listed companies, lack of common interest as the basis for corporate governance, the price discrepancy between negotiated non-tradable share transfer and competitive quotation of tradable shares, deficient market condition for exercise of capital operations, etc. On the whole, the split share structure has been acting as a major counterforce against the sound development, opening-up and reform of capital market. Dynamic reform must be conducted to eliminate such a split share structure.




3. The Share Reform is intended to address historical problems, and more importantly, to enhance market institution and market functioning mechanism. It shall be recognized as one of the vital moves to carry out the Guidelines of the State Council and set the stage for subsequent capital market reforms and institutional innovations. Therefore, the Share Reform, protection of market stability, and promotion of functioning and the opening-up of the market shall be planned as a whole. “Listed companies may undertake the Share Reform one by one while only the one that is ready may set to undertake the Share Reform. ” The Share Reform shall proceed step by step, leveraging interests of parties involved while mobilizing all positive factors to promote market stability and healthy development by using the Share Reform as a great chance to enhance listed companies’ value, regulation of securities companies’ operations, market institution building and market system, and innovations in securities products.




4. The Share Reform is designed to float the former non-tradable shares rather than for the purpose of unloading state-owned shares through the open market. Neither the authorities intend to cash the state-owned shares in listed companies through domestic capital market. The controlling shareholder of the state-controlled listed company shall determine a reasonable minimum stake in the listed company under its control in light of the national layout and structural adjustment strategy with respect to the public sector economy. State capital shall be persistently maintained to the extent that it holds dominant control and acts as the leading force in sectors that are vital to the national economy and public welfare, as well as in the state-controlled listed companies that are fundamental and the pillar for the national economy. Where necessary, the state-owned shareholders may increase its stake in such listed companies through buying shares in the open market. Meanwhile, Controlling shareholders of other ordinary listed companies are responsible for the continuing operation and sustained development of listed companies. The regulator shall adopt appropriate institutional arrangements or technological devices to tempo the entrance of non-tradable shares into the market.




Section 2 General Principles of the Share Reform




5. Taking forward the Share Reform prudently – the Share Reform shall be conducted in a way that is consistent with maintenance of market stability and market development while more efforts need to be applied to the following aspects -- clearer illustration of where the Share Reform is heading, coordinating and instructing, establishing sound legal framework for the Share Reform and sound market infrastructure, and improving market environment for reform and development. In all, we must mobilize all positive factors to push along execution of tasks put forward by the Guidelines of the State Council and strive to bring the capital market a fresh start towards a track of healthy development.




6.  Compliance with the Guidelines of the State Council  -- “ The problem of listed companies split share structure shall be approached in a manner that is consistent with the way the securities market works, maintenance of the market stability and development, and protection of the legitimate interests of investors, especially public investors”.




To observe the way the market works, we shall treat the market-based decision-making and pricing mechanism among other market forces, along with policy support from the government, as the leading engine for reforms in the listed companies.




To maintain the market stability and development, we shall tempo the velocity and intensiveness of reform in proportion to the capacity of the market to endure changes brought by the reform as well as the current stage and character of the reform, leverage works on capital market reform in light of the latest market mechanisms and impact of the reform on the market, and reconcile the set of applicable policies and measures concerning capital market reform. In this way, a mutual beneficial relationship can be formed between the market reform and the market stability.




To protect the interests of investors, especially public investors, effective procedures and policies shall be adopted to ensure that general public investors are kept well informed, given the access to participating and voting in the Share Reform so as to form a share reform scheme that would re-unite interests of non-tradable shareholders and tradable shareholders, and stabilize share price expectations following completion of the Share Reform.




Section 3 Operating Principles of the Share Reform



7. Coordinated Organization. The China Securities Regulatory Commission (the CSRC) shall formulate the Regulations on the Split Share structure Reform of Listed Companies with a view to regulating the Share Reform in a transparent, fair and equitable manner, as well as protecting the interests of investors, especially public investors. Relevant departments under the State Council shall support and do their part in the Share Reform, establishing policies that promote stability and healthy development of the capital market, while making adjustment to reconcile the set of regulations concerning state-owned assets management, assessment of corporate performance, accounting, credit policy, foreign investment, etc. that are related to the Share Reform. The Regional People’s Government, as the major coordinator in individual share reform undergoing in its territory, shall lead the work on specific share reform in light of local circumstances and resource advantages, and consider possible impact of the Share Reform on listed companies structure optimization, local economic development and social stability.




8. Independent decision-making with respect to specific share reform scheme to suit circumstances. Non-tradable shareholders of the listed company shall consult floating A-shareholders on the share reform scheme that is fit for specific circumstances of individual listed company pursuant to applicable laws, regulations and measures on the Share Reform. The share reform scheme shall be determined through classified voting at the Share Reform meeting of interested A-shareholders conducted under the same procedures as a general shareholder meeting. The compensation program contained in the share reform scheme is a good approach to balance the interest between non-tradable shareholders and tradable shareholders and shall be continuously fine tuned in practice.




9. Maintenance of market stability and long-term development of listed companies. The listed company and its substantial shareholders are encouraged to take steps to stabilize the price expectation towards its shares, and to make comprehensive arrangements to improve company performance and growth potential. Regulatory authorities and stock exchange shall strengthen the coordination and supervision over specific implementation measures and corresponding arrangements relating to individual share reform scheme provided that independence of the interested parties is kept intact in negotiating and determining specific share reform scheme. 




10. Observing the way the market works, and establishing market institution that facilitates resolution of the split share structure problem. When the time is ripe, a free float system may be adopted where future IPOs would not contain portion of non-tradable shares while the split share structure in some listed companies may still remains. Existing listed companies that have completed the Share Reform will be given the priority to refinancing application, and the approval for implementation of stock incentive scheme, while the authority will revise the supervision regime for refinancing activities that would serve to boost refinancing efficiency. Specific implementation and assessment measures, along with corresponding supervision regime concerning the management stock incentive scheme of listed companies shall be adopted separately by the securities regulatory departments jointly with other relevant departments. Likewise, listed companies contemplating A-share listing on a foreign exchange or A-share listed companies seeking spin-off and separate listing abroad will be permitted to proceed with such plans on condition that the share reform is completed. The negotiated non-tradable share transfer in listed companies shall be handled with additional arrangements with regard to the Share Reform, or in tandem with the Share Reform.



11. Properly dealing with the specific share reform of listed companies under peculiar situation. For the listed company with H-shares, B-shares, and A-shares outstanding, the solution for the split share structure shall be negotiated between A-shareholders involved; for the A-share listed company in banking sector with foreign stake and the Certificate of Approval for Establishment of Enterprise with Foreign Investment share, its share reform scheme is subject to the approval of competent departments under the State Council pursuant to relevant laws and regulations in addition to the approval of the share reform meeting of interested A-shareholders. Change in the foreign stake shall, in principle, not annul the preferential policies previously granted to the subject listed company. Foreign shareholders may reduce its shares in the listed company upon the expiry of lock-up period in accordance with relevant regulations and specific measures that are to be separately adopted by the department of commerce and securities regulatory department under the State Council jointly with other relevant departments. For the listed company posting poor financial results, injection of good assets, assumption of debts etc. are suggested as viable approaches towards the split share structure problem.







Section 4 Stringent Administration of the Share Reform




12. The Listed company and its board of directors shall strictly follow the procedures provided in the Regulations of the Split Share Structure of the Listed Companies in carrying out the Share Reform and performing relevant information disclosure obligations to keep the investors well-informed of important matters concerning the Share Reform, and enable the investors, especially public investors to participate and vote in the Share Reform. Investors are encouraged to take active part in the Share Reform and lawfully exercise shareholders rights. Non-floating shareholders are required to strictly comply with their undertakings made in relation to the Share Reform, and shall be held accountable for failing to fulfill their undertakings.



13. The sponsor and its representatives involved shall act with integrity, impartiality, and diligence in performing their sponsor work in relation to the Share Reform, which includes taking necessary steps to attain a thorough understanding of the general state of the company, coordinating activities relating to the specific share reform, conducting necessary inquiries, assisting the listed company and the interested shareholders in establishing a viable share reform scheme that suits specific situations, urging performance of  disclosure obligations, and coaching compliance with the undertakings made in relation to the Share Reform. Regulatory measures will be taken against the sponsor and its representatives for failing to duly perform the sponsor responsibilities in relation to the Share Reform.




14. Institutional investors, i.e. fund management companies, securities companies, insurance companies and asset management companies etc. shall take active part in the Share Reform, and defend the rights of investors, especially public investors, as well as sustained development of the market. Disciplinary actions will be taken against those institutional investors for such misconducts as interfering into the decision-making on the part of other investors, manipulating the voting results of the Share Reform meeting of interested A-shareholders, or abusing the dominant shareholding position to seek interest exchange.




15. The stock exchange, as a self-disciplinary organization with closer contact with the market, more flexibilities, and larger capacity in coordinating innovations in the market institution and instruments, is in a better position to co-ordinate and instruct specific implementation method and the combination of measures for individual share reform scheme, and work with securities depository & clearing agencies to provide technical support for innovations adopted in individual share reform schemes during the reform period, as well as innovations in market institution and instruments after the Share Reform is concluded.




16. The authorities will strengthen supervisions on the listed company and its controlling shareholders, sponsors, fund management companies involved in the Share Reform, as well as the connected person and senior managements of the above institutions in a bid to deter and punish fraudulent activities, insider trading and market manipulation in connection with the Share Reform.




17. The media shall guide the public opinions on the Share Reform towards right direction with objective, positive and full coverage on the significance, progress, and latest events relating to the Share Reform in accordance with relevant news reporting disciplines. 




Section 5 Promotion of Sustained Development of the Capital Market

By Mobilizing Every Positive Factor




18. The Share Reform provides a great chance for the listed company to improve its corporate governance structure and governance standard, while effectively eliminate or deter such misconducts as appropriation of funds of the listed company by its controlling shareholder or de facto controllers, illicit extension of loan guarantees, connected transactions that are not based on arm’s length basis and unfair for the listed company. After settlement of the split share structure problem, large corporation with sound performance is encouraged to seek an overall listing by means of private placement through the listed company under its control. Corporate restructuring in the form of mergers and acquisitions, all-stock transactions, share considerations are suggested as good ways to enhance competitiveness and strength of listed companies.




19. Share secured loans, short-term financing bonds or debentures, among other commercial instruments, may be issued to finance the purchase of additional shares in listed companies by substantial shareholders. The Share Reform may be conducted in tandem with works on securities companies restructuring and expansion of alternative financing sources for securities companies. Specifically, securities companies are encouraged to engage in a combination of fund-raising activities on a commercial basis to improve its liquidity, corporate governance, and internal risk control mechanism. The regulator shall seek to strengthen industry supervision, facilitate securities sector resource consolidation through cautious handling of restructuring or going-out-of-business with respect to securities companies with high-risk profile, and expansion of high quality securities companies.




20. Innovation activities in securities trading mechanism and instrument as follows shall be encouraged - introduction of separate stock index containing stocks that have completed the Share Reform, R&D on index derivatives, improvement of negotiated share transfer and block trade system, introduction of warrant or other instruments in IPOs and re-financing activities to balance the market supply and demand, etc.




21. Favorable tax policies shall be established to boost securities investment by the general public. To develop institutional investors for the market, we shall endorse entrance of the corporate annuity into the market, boost investment by social security funds and the qualified foreign institutional investors, and deregulate investment limit on insurance companies or other large institutional investors. In respect of matters concerning strategic investments in China’s listed companies by foreign investors after the Share Reform is concluded, the securities supervisory departments and departments of commerce under the State Council shall work with relevant departments to formulate relevant regulations and policies.




22. Current legal regime for the Share Reform needs to be revised and improved.

Existing laws, mainly the Securities Law, the Company Law and the Criminal Law, need revision while works must be done to develop and formulate Regulations on Supervision of Securities Companies, Regulations on Risk Handling for Securities Companies, Regulations on Supervision of Listed Companies, etc; Policies and rules that are not conducive to the dynamic and prudent advancing of the Share Reform must be adjusted while adopting measures to deal with new situations and issues arising from the Share Reform when appropriate. The regulators will endeavor to improve supervision method and enforcement effectiveness with a view to making room for market growth and innovation, as well as to providing a sound legal environment for the reform and opening-up of China’s capital market.







The China Securities Regulatory Commission

The State-owned Assets Supervision and Administration Commission

The Ministry of Finance

The People's Bank of China

The Ministry of Commerce




(This English version by Shenzhen Securities Information Co., Ltd. is for your reference only. In case any discrepancy exists between the Chinese and English context, the Chinese version shall prevail.)

The Legislation Law of the People's Republic of China


Adopted by the 3rd Session of the Ninth National People's Congress on March 15, 2000

Table of Contents

Chapter One: General Provisions

Chapter Two: National law

Section One Scope of Lawmaking Authority

Section Two The Legislative Process of the National People's Congress

Section Three The Legislative Process of the Standing Committee of the National People's Congress

Section Four Interpretation of National law

Section Five Other Provisions

Chapter Three: Administrative Regulations

Chapter Four: Local Decrees, Autonomous Decrees, and Rules

Section One Local Decrees, Autonomous Decrees, and Special Decrees

Section Two Administrative and Local Rules

Chapter Five: Scope of Application and Filing

Chapter Six: Supplementary Provisions

Chapter One: General Provisions

Article 1 This Law is enacted in accordance with the Constitution in order to standardize lawmaking activities, to perfect state legislative institution, to establish and perfect our socialist legal system with Chinese characteristics, to safeguard and develop socialist democracy, to promote the governance of the country through legal mechanism, and to build a socialist country under the rule of law.

Article 2 The enactment, amendment and repeal of any national law, administrative regulation, local decree, autonomous decree and special decree shall be governed by this Law. The enactment, amendment and repeal of administrative rules promulgated by agencies under the State Council and local rules promulgated by local governments shall be carried out in accordance with the relevant provisions of this Law.

Article 3 Lawmaking shall adhere to the basic principles of the Constitution, and shall be centered around economic development, and shall adhere to the socialist road, adhere to the democratic dictatorship by the people, adhere to the leadership by the Chinese Communist Party, and adhere to the theory of Marxism, Leninism and Mao Zedong thoughts and Dengxiaoping theory, and adhere to the reform and opening to the outside world.

Article 4 Lawmaking shall comply with legally prescribed scope of authority and procedure, and shall serve the national interests and safeguard the uniformity and dignity of our socialist legal system.

Article 5 Lawmaking shall reflect the will of the people, promote socialist democracy, and ensure that people are able to participate in the lawmaking process through various channels.

Article 6 Lawmaking shall be based on actual circumstances, and shall, in a scientific and reasonable manner, prescribe the rights and obligations of citizens, legal persons and other organizations, and the powers and duties of state organs.

Chapter Two: National law

Section One Scope of Lawmaking Authority

Article 7 The National People's Congress and Standing Committee thereof shall exercise state legislative power.

The National People's Congress enacts and amends criminal, civil, and state organic laws and other basic laws.

The Standing Committee of National People's Congress enacts and amends laws other than those to be enacted by the National People's Congress; while the National People's Congress is not in session, the Standing Committee thereof partially amends and supplements national law enacted by the National People's Congress, provided that any amendment or supplement may not contravene the basic principles of such national law.

Article 8 Only national law may be enacted in respect of matters relating to:

(i) state sovereignty;

(ii) the establishment, organization and authority of various people's congresses, people's governments, people's courts and people's procuratorates;

(iii) autonomy system of ethnic regions, system of special administrative region, and system of autonomy at the grass-root level;

(iv) crimes and criminal sanctions;

(v) the deprivation of the political rights of a citizen, or compulsory measures and penalties involving restriction of personal freedom;

(vi) expropriation of non-state assets;

(vii) fundamental civil institutions;

(viii) fundamental economic system and basic fiscal, tax, customs, financial and foreign trade systems;

(ix) litigation and arbitration system;

(x) other matters the regulation of which must be carried out through enactment of national law by the National People's Congress or the Standing Committee thereof.

Article 9 In the event that no national law has been enacted in respect of a matter enumerated in Article 8 hereof, the National People's Congress and the Standing Committee thereof have the power to make a decision to enable the State Council to enact administrative regulations in respect of part of the matters concerned for the time being, except where the matter relates to crime and criminal sanctions, the deprivation of a citizen's political rights, compulsory measure and penalty restricting the personal freedom of a citizen, and the judicial system.

Article 10 An enabling decision shall specify the objective and scope of the authorization. The enabled body shall exercise such power in strict compliance with the objectives and scope of authorization. The enabled body may not re-delegate its authority to any other body.

Article11 For a matter covered by an enabling decision, if the conditions are ripe for the enactment of a national law, the National People's Congress or the Standing Committee thereof shall enact a national law in a timely manner. Upon enactment of the national law, the relevant authority for lawmaking in respect of the matter shall be terminated.

Section Two The Legislative Process of the National People's Congress

Article 12 The presidium of the National People's Congress may introduce a bill to the National People's Congress for deliberation in its current session.

The State Council, the Central Military Committee, the Supreme People's Court, the Supreme People's Procuratorate, and the various special committees of the National People's Congress may introduce a bill to the National People's Congress, which shall be put onto the agenda of the current session by a decision of the presidium.

Article 13 A delegation, or delegates of at least 30 people acting jointly, may introduce a bill to the National People's Congress, and the presidium shall decide whether to put such bill onto the agenda of the current session, or whether to refer such bill to the relevant special committee for deliberation, and such special committee shall make a recommendation as to whether such bill shall be put onto the agenda of the current session, whereupon the presidium shall decide whether to do so. In the course of deliberation of the bill, the special committee may invite the bill sponsor to the deliberation session to give comments.

Article 14 While the National People's Congress is in recess, a bill to be introduced to it may first be submitted to the Standing Committee thereof, which shall such bill to the National People's Congress by way of a decision after it has deliberated on it in accordance with the relevant procedures set forth in Section 3 of Chapter 2 hereof, and the Standing Committee or the bill sponsor shall brief the plenary session.

Article 15 For a bill which the Standing Committee has decided to submit to the upcoming session of the National People's Congress for deliberation, the draft law shall be distributed to the delegates one month prior to the commencement of the session.

Article 16 For a bill which has been put on the agenda of the current session of the National People's Congress, the plenary session shall be briefed by the bill sponsor, whereupon the delegations shall begin deliberation.

In the course of deliberation of the bill by the delegations, the bill sponsor shall send representatives to hear comments and answer questions.

In the course of deliberation of the bill by the delegations, upon request by a delegation, the relevant agency or organization shall send representatives to brief the delegation.

Article 17 A bill which has been put on the agenda of the current session of the National People's Congress shall be deliberated by the relevant special committee, which shall submit its deliberation opinions to the presidium, and such opinions shall be printed and distributed to the delegates attending the session.

Article 18 For a bill which has been put on the agenda of the current session of the National People's Congress, after gathering the deliberation opinions delivered by the delegations and the relevant special committee, the Legislative Committee shall conduct a uniform deliberation, and afterwards shall deliver to the presidium a deliberation report and the amended draft law, and the deliberation report shall contain explanations of the major differences of opinions, and after the presidium has deliberated and passed the deliberation report and the amended draft law, they shall be printed and circulated to the delegates attending the session.

Article 19 For a bill which has been put on the agenda of the current session of the National People's Congress, where necessary, the executive chairman of the presidium may call a session of the delegation leaders to hear the deliberation opinions of the various delegations on major matters covered by the bill and conduct discussions, and shall report to the presidium the status of the discussion and the opinions expressed. The executive chairman of the presidium may also call a session of the relevant delegates elected by various delegations to discuss major special issues involved in the bill, and shall report to the presidium the status of the discussion and the opinions expressed.

Article 20 If before a bill which has been put on the agenda of the current session of the National People's Congress is brought to a vote, its sponsor requests for its withdrawal, the bill sponsor shall explain the reason for the withdrawal, and subject to consent by the presidium, a report shall be made to the plenary session, whereupon deliberation on the bill shall terminate.

Article 21 Where in the course of deliberating a bill, major issues are encountered, upon motion brought by the presidium and decided upon by the plenary session, the Standing Committee may be authorized to conduction further deliberation based on the opinions of the delegates, and the Standing Committee shall report its decision to the next session of the National People's Congress; the Standing Committee may also be authorized to conduct further deliberation and prepare an amendment plan, to be submitted to the next session of the National People's Congress for deliberation and decision.

Article 22 After deliberation by the delegations, the amended draft law shall be further amended by the Legislative Committee based on the deliberating opinions of the delegations, and the Legislative Committee shall present a voting version of the draft law to be submitted by the presidium to the plenary session for voting, and such version shall be adopted if it receives affirmative votes from more than half of all delegates.

Article 23 A national law enacted by the National People's Congress shall be promulgated by way of a presidential order signed by the state president.

Section Three The Legislative Process of the Standing Committee of the National People's Congress

Article 24 The Chairman's Committee may introduce a bill to the Standing Committee for deliberation during its current session.

The State Council, the Central Military Committee, the Supreme People's Court, the Supreme People's Procuratorate, the various special committees of the Standing Committee may introduce a bill to the Standing Committee, and the Chairman's Committee shall make a decision to put the bill on the agenda of the upcoming session of the Standing Committee, or first refer it to the relevant special committee for deliberation, and a report on it shall be submitted by the special committee, whereupon the Chairman's Committee will decide to put it on the agenda of the upcoming session of the Standing Committee. If the Chairman's Committee is of the opinion that there are material issues outstanding in respect of the bill which require further study, it may advise that the bill sponsor revise and improve the bill before it is introduced to the Standing Committee.

Article 25 Ten or more members of the Standing Committee acting jointly, may introduce a bill to the Standing Committee, and the Chairman's Committee shall decide whether to put it on the agenda of the Standing Committee's session, or whether to refer it to the relevant special committee for deliberation and recommendation before deciding to put it on the agenda. Where such bill is not put on the agenda of the Standing Committee session, the Chairman's Committee shall make a report to the Standing Committee session or give an explanation to the bill sponsor.

In the course of deliberation, the special committee may invite the bill sponsor to the session to give comments.

Article 26 For a bill which has been put on the agenda of the session of the Standing Committee, unless special circumstances arise, the draft law shall be distributed to the members of the Standing Committee seven days prior to commencement of the session.

Article 27 A bill which has been put on the agenda of the Standing Committee session shall in general be deliberated three times in the current session of the Standing Committee before being voted on.

During the first deliberation of the bill at the current Standing Committee session, the bill sponsor shall brief the plenary session, whereupon preliminary deliberation shall be conducted by divided group sessions.

During the second deliberation of the bill at the current Standing Committee session, the Legislative Committee shall brief the plenary session on the status of amendment and major issues in respect of the draft law, whereupon further deliberation shall be conducted by divided group sessions.

During the third deliberation of the bill at the current Standing Committee session, the Legislative Committee shall give a report to the plenary session on the result of the deliberation on the draft law, whereupon deliberation on the amended draft law shall be conducted by divided group sessions.

In the course of deliberation, if necessary, the Standing Committee may convene a joint group session or a plenary session to discuss the major issues of the draft law.

Article 28 For a bill which has been put on the agenda of the session of the Standing Committee, if a preponderant consensus is formed, it may be brought to a vote after two deliberations by the session of the Standing Committee; for a bill which partially amends a national law, if a preponderant consensus is formed, it may be brought to a vote after one deliberation by the session of the Standing Committee.

Article 29 In the course of deliberation by the subgroups of the Standing Committee, the bill sponsor shall send representatives to the deliberating sessions to hear comments and answer questions. In the course of deliberation by the subgroups of the Standing Committee, if requested by a subgroup, the relevant agency or organization shall send representatives to brief the subgroup.

Article 30 A bill which has been put on the agenda of the Standing Committee session shall be deliberated by the relevant special committee, which shall present its deliberation opinions, which shall be printed and distributed to members attending the Standing Committee session.

In the course of deliberation, the relevant special committee may invite members of other special committees to the session to give comments.

Article 31 For a bill which has been put on the agenda of the session of the Standing Committee, the Legislative Committee shall conduct uniform deliberation based on the opinions expressed by the members of the Standing Committee, the deliberation opinions delivered by the relevant special committee and concerned constituents, and thereafter it shall give a report on the status of amendment or deliver a deliberation result report and the amended draft law, and the status report or deliberation result report shall contain notes on the major difference of opinions. Where a major deliberation opinion by a relevant special committee has not bee adopted, the Legislative Committee shall give an explanation in its status report or deliberation result report. If a major deliberation opinion expressed by a relevant special committee is not adopted, the Legislative Committee shall also report back to the special committee.

In the course of deliberation, the Legislative Committee may invite members of the relevant special committee to the session to give comments.

Article 32 In the course of deliberation, a special committee shall convene a plenary session to conduct the deliberation, and where necessary, it may request that the relevant agency or organization send its relevant person in charge to brief the session.

Article 33 Where there is a difference of opinion among the special committees on a major matter covered by the draft law, they shall report such difference to the Chairman's Committee.

Article 34 For a bill which has been put on the agenda of the session of the Standing Committee, the relevant special committee and the office of operation of the Standing Committee shall hear the opinions of the concerned constituents. In gathering opinions, various methods may be adopted, such as panel discussion, feasibility study meeting, hearing, etc.

The Standing Committee's office of operation shall distribute the draft law to the relevant agency, organization and experts for comments, and shall compile such comments and present them to the Legislative Committee and the relevant special committee, and where necessary, it shall distribute them to the current session of the Standing Committee.

Article 35 For a major bill which has been put on the agenda of the session of the Standing Committee, upon decision by the Chairman's Committee, the draft law may be presented to the public for comments. The comments presented by the various agencies, organizations and citizens shall be submitted to the office of operation of the Standing Committee.

Article 36 For a bill which has been put on the agenda of the session of the Standing Committee, the office of operation of the Standing Committee shall collect and compile the comments made by the subgroups during deliberation, as well as comments made by concerned constituents, and where necessary, it shall distribute them to the current session of the Standing Committee.

Article 37 If the sponsor of a bill which has been put on the agenda of the session of the Standing Committee requests for withdrawal of such bill before it is brought to a vote, the bill sponsor shall give an explanation, and subject to consent by the Chairman's Committee, a report shall be made to the Standing Committee, whereupon the deliberation on the bill shall terminate.

Article 38 If, after three deliberations by the Standing Committee session, a bill still has major issues which require further study, upon a motion brought by the Chairman's Committee, and upon approval by the joint group session or the plenary session, voting on the bill may be postponed, whereupon the bill shall be submitted to the Legislative Committee and the relevant special committee for further deliberation.

Article 39 For a bill which has been put on the agenda of the session of the Standing Committee, if deliberation on the bill has been postponed for two years due to major differences among the concerned constituents on major issues such as the necessity or feasibility of enacting such bill, or voting was postponed and the bill has not been put on the agenda of the session of the Standing Committee for two years, the Chairman's Committee shall make a report to the Standing Committee, whereupon deliberation on the bill shall terminate.

Article 40 Upon deliberation of the draft law by the Standing Committee session, the Legislative Committee shall make further amendment based on the comments made during deliberation by members of the Standing Committee, and shall present a voting version of the draft law, and the Chairman's Committee shall bring the draft law for a vote by the plenary session of the Standing Committee, whereupon such bill shall be enacted if more than half of the votes cast by the members of the Standing Committee are affirmative.

Article 41 A national law passed by the National People's Congress shall be promulgated by way of a presidential order signed by the state president.

Section Four Interpretations of National law

Article 42 The power to interpret a national law shall vest in the Standing Committee of National People's Congress.

The Standing Committee of National People's Congress shall give interpretation to a national law in any of the following circumstances:

(i) the specific meaning of a provision of such legislation requires further clarification;

(ii) a new situation arises after enactment of such legislation, thereby requiring clarification of the basis of its application.

Article 43 The State Council, the Central Military Committee, the Supreme People's Court, the Supreme People's Procuratorate, the various special committees of the Standing Committee and the Standing Committee of the People's Congress of various provinces, autonomous regions and municipality directly under the central government may make a request for legislative interpretation to the Standing Committee of National People's Congress.

Article 44 The office of operation of the Standing Committee shall research and prepare draft legislative interpretation, and shall be put on the agenda of the upcoming session of the Standing Committee upon decision by the Chairman's Committee.

Article 45 After deliberation by the session of the Standing Committee, the draft legislative interpretation shall be deliberated and amended by the Legislative Committee based on comments made by members of the Standing Committee, and it shall submit a voting version of the draft legislative interpretation.

Article 46 The voting version of the draft legislative interpretation shall be adopted if affirmed by more than half of all members of the Standing Committee, and shall be promulgated by the Standing Committee by way of a public announcement.

Article 47 Legislative interpretations issued by the Standing Committee of National People's Congress shall have the same force as national law.

Section Five Other Provisions

Article 48 In introducing a bill, the bill sponsor shall at the same time submit the draft law and the accompanying commentaries, and shall also provide the necessary materials. Commentaries to the draft law shall also explain the necessity for its enactment and its main content.

Article 49 For a bill introduced to the National People's Congress and its Standing Committee, the bill sponsor is entitled to withdraw the bill before it is put on the agenda.

Article 50 Where a bill introduced to the National People's Congress and its Standing Committee has been voted on by the plenary session and fails to pass, if the bill sponsor deems it necessary to enact such legislation, he may re-introduce it in accordance with legally prescribed procedures, and the presidium or the Chairman's Committee shall decide whether it shall be put on the agenda; specifically, if a bill fails to be adopted by the National People's Congress, it shall be re-introduced to the National People's Congress for deliberation and decision.

Article 51 A law shall specify a date for its implementation.

Article 52 The presidential order for promulgation of the law shall set forth the enactment organ, the date of adoption and the date of implementation.

Upon signing and promulgation, the law shall be published on the Bulletin of the Standing Committee of National People's Congress and nationally circulated newspapers in a timely manner.

The version of the law printed on the Bulletin of the Standing Committee of National People's Congress shall be the standard version.

Article 53 The procedure for amendment and repeal of national law shall be governed by the provisions of this Chapter.

Where a law is partially amended or repealed, a new version shall be published.

Article 54 Where necessary as required by its content, a law may adopt a structure consisting of Parts, Chapters, Sections, Articles, Paragraphs, Items, and Sub-items.

The number for a Part, Chapter, Section, or Article shall be in Chinese character in numerical order, and Paragraphs shall not be numbered, the number for an item shall be a Chinese number in parenthesis in numerical order, and the number for a sub-item shall be an Arabic number in numerical order.

The subtitle of a law shall set forth the enacting organ and the date of promulgation.

Article 55 The office of operation of the Standing Committee of National People's Congress may study questions raised regarding specific aspects of a law and give a response, which shall also be submitted to the Standing Committee for filing.

Chapter Three: Administrative Regulations

Article 56 The State Council enacts administrative regulations in accordance with the Constitution and national law.

Administrative regulations may provide for the following:

(i) matters for which enactment of administrative regulations is required in order to implement a national law;

(ii) matters subject to the administrative regulation of the State Council under Article 89 of the Constitution.

If a matter which ought to be regulated by national law enacted by the National People's Congress and its Standing Committee, and pursuant to a enabling decision issued by the National People's Congress and its Standing Committee, the State Council has enacted an administrative regulation for the time being, and after trial by practice, the conditions for enactment of the relevant national law has matured, the State Council shall timely submit a request to the National People's Congress and its Standing Committee for enactment of the relevant national law.

Article 57 An administrative regulation shall be drafted by the State Council, where the relevant agency of the State Council deems it necessary to enact an administrative regulation, it shall apply to the State Council for preliminary approval.

Article 58 In the process of drafting an administrative regulation, the drafting body shall gather opinions from a wide circle of constituents such as the relevant agencies, organizations and citizens. The gathering of opinions may be in various forms such as panel discussion, feasibility study meeting, hearing etc.

Article 59 Upon completion of a draft administrative regulation, the drafting body shall submit the following to the State Council's legislative affairs office for review: the draft administrative regulation, commentaries, the major difference of opinions on major issues covered by the draft expressed by the various constituencies, and other relevant materials. The legislative affairs office of the State Council shall submit to the State Council a review report and the amended version of the draft, and the review report shall explain the major matters covered by the draft.

Article 60 The enactment procedure for an administrative regulation shall comply with the relevant provisions of the State Council Organic Law of the People's Republic of China.

Article 61 An administrative regulation shall be promulgated by way of a State Council order signed by the premier.

Article 62 Upon signing and promulgation, an administrative regulation shall be published in the State Council Bulletin and nationally circulated newspapers in a timely manner. The version appearing on the State Council Bulletin shall be the standard version.

Chapter Four: Local Decrees, Autonomous Decrees and Special Decrees, and Rules

Section One Local Decrees, Autonomous Decrees and Special Decrees

Article 63 In light of the specific situations and actual needs of the jurisdiction, the People's Congress of a province, autonomous region, municipality directly under the central government and the Standing Committee thereof may enact local decrees provided that they shall not contravene any provision of the Constitution, national law and administrative regulations.

In light of the specific situations and actual needs of the jurisdiction, the People's Congress and its Standing Committee in a major city may enact local decrees provided that they shall not contravene any provision of the Constitution, national law, administrative regulations and the local decrees in force in the province or autonomous region in which the city is located, and such local degrees shall be implemented after they are reviewed and approved by the Standing Committee of the People's Congress of the province or autonomous region. The Standing Committee of the People's Congress of the province or autonomous region shall review the legality of a decrees submitted to it for approval, and shall grant approval within four months if such decree does not contravene any provision of the Constitution, national law, administrative regulations, and the local decrees in force in the province or autonomous region in which the city is located.

In the course of reviewing a local decree submitted to it by a major city, if the Standing Committee of the People's Congress of the province or autonomous region finds that it contravenes a local rule issued by the People's Government of the province or autonomous region, it shall decide on how to handle such situation.

For purposes of this Law, a major city refers to a city where the People's Government of the province or autonomous region is seated, the city where a special economic zone is located, and any other major city approved by the State Council.

Article 64 A local decree may provide for the following:

(i) matters for which enactment of a local decree is required in order to implement a national law or administrative regulation in light of the actual situation of the jurisdiction;

(ii) matters which are local in nature and require the enactment of a local decree.

Except for matters enumerated in Article 8 hereof, in respect of any other matter for which the state has not enacted national law or administrative regulation, the People's Congress of a province, autonomous region, or municipality directly under the central government and the Standing Committee thereof may enact local decrees for the time being in light of its specific situations and actual needs. Where a national law or administrative regulation enacted by the state has come into force, any provision in the local decree which contravenes it shall be invalid, and the enacting body shall amend or repeal such provision on a timely basis.

Article 65 The People's Congress of a province or city where a special economic zone is located and the its Standing Committee shall, pursuant to an enabling decision issued by the National People's Congress, enact decrees for implementation within the special economic zone.

Article 66 The People's Congress of an autonomous ethnic area has the power to enact autonomous decree and special decree in light of its ethnic political, economic and cultural characteristics. An autonomous decree or special decree enacted by an autonomous region shall come into force after it is reviewed and approved by the Standing Committee of National People's Congress. An autonomous decree or special decree enacted by an autonomous prefecture or autonomous county shall come into force after it is reviewed and approved by the Standing Committee of the People's Congress of the province, autonomous region, or municipality directly under the central government.

An autonomous decree or special decree may vary the provisions of a law or administrative regulation, provided that any such variance may not violate the basic principles thereof, and no variance is allowed in respect of any provision of the Constitution or the Law on Ethnic Area Autonomy and provisions of any other law or administrative regulations which are dedicated to matters concerning ethnic autonomous areas.

Article 67 Any local decree dealing with special major matters of the jurisdiction shall be passed by the People's Congress of the jurisdiction.

Article 68 The procedure for introducing, deliberating and voting on a local decree bill, autonomous decree bill and special decree bill shall be formulated by the local People's Congress in accordance with the Local People's Congress and People's Government Organic Law of the People's Republic of China, as well as by reference to the provisions of Sections Two, Three and Five of Chapter Two hereof.

The agency in charge of uniformly deliberating the draft of a local decree shall present a deliberation result report and the amended draft.

Article 69 A local decree enacted by the People's Congress of a province, autonomous region, or municipality directly under the central government shall be promulgated by the presidium of the current session by way of a public announcement.

A local decree enacted by the Standing Committee of the People's Congress of a province, autonomous region, or municipality directly under the central government shall be promulgated by the Standing Committee by way of a public announcement.

Upon approval, a local decree enacted by the People's Congress of a major city and the Standing Committee thereof shall be promulgated by the Standing Committee of the People's Congress of such major city by way of a public announcement.

Upon approval, an autonomous decree or special decree shall be promulgated by the Standing Committee of the People's Congress of such autonomous region, autonomous prefecture or autonomous county respectively by way of a public announcement.

Article 70 Upon promulgation, a local decree, or an autonomous decree or special decree shall be published in the Bulletin of the Standing Committee of the People's Congress of the region and the newspapers circulated within such jurisdiction in a timely manner.

The version of the local decree, or autonomous decree or special decree appearing on the Standing Committee Bulletin shall be the standard version.

Section Two Administrative and Local Rules

Article 71 The various ministries, commissions, the People's Bank of China, the Auditing Agency, and a body directly under the State Council exercising regulatory function, may enact administrative rules within the scope of its authority in accordance with national law, administrative regulations, as well as decisions and orders of the State Council.

A matter on which an administrative rule is enacted shall be a matter which is within the scope of implementing national law, administrative regulations, and decisions or orders issued by the State Council.

Article 72 If a matter falls within the scope of authority of two or more agencies under the State Council, the relevant agencies shall request the State Council to enact an administrative regulation or the relevant agencies under the State Council shall jointly enact an administrative rule.

Article 73 The People's Government of a province, autonomous region, municipality directly under the central government or a major city may enact local rules in accordance with national law, administrative regulations and local decrees of the province, autonomous region, or municipality directly under the central government.

A local rule may provide for the following:

(i) matters for which enactment of local rules is required in order to implement a national law, administrative regulation or local decree;

(ii) matters which are within the regulatory scope of the local jurisdiction.

Article 74 The procedures for enacting State Council administrative rules and local government rules shall be formulated by the State Council by reference to Chapter Three hereof.

Article 75 An administrative rule shall be decided upon by ministerial affairs meeting or commission affairs meeting.

A local rule shall be decided upon by government regular affairs meeting or plenary meeting.

Article 76 Administrative rules shall be promulgated by way of an order signed by the person in charge of the agency. Local rules shall be promulgated by way of an order signed by the provincial governor, the chairman of the autonomous region, or the mayor of the city.

Article 77 Upon signing and promulgation, administrative rules shall be published on the State Council Bulletin or agency bulletin and nationally circulated newspapers in a timely manner.

Upon signing and promulgation, local rules shall be published on the bulletin of the local People's Government and newspapers circulated in the local jurisdiction in a timely manner.

The version of the administrative or local rules appearing on the State Council Bulletin or agency bulletin and the bulletin of the local People's Government shall be the standard version.

Chapter Five: Scope of Application and Filing

Article 78 The Constitution has the highest legal authority, and no national law, administrative regulation, local decree, autonomous decree and special decree, or administrative or local rule may contravene the Constitution.

Article 79 National law has higher legal authority than administrative regulations, local decrees and administrative or local rules. Administrative regulations has higher legal authority than local decrees and administrative or local rules.

Article 80 A local decree has higher legal authority than local rules issued by governments at the same level and lower level. Local rules enacted by the People's Government of a province or autonomous region have higher legal authority than local rules enacted by the People's Government of a major city located in its jurisdiction.

Article 81 Where an autonomous decree or special decree varies the provision of national law, administrative regulations or local decrees, the provisions of the autonomous decree or special decree shall prevail in the said autonomous area.

Where a decree of a special economic zone varies the provision of national law, administrative regulations or local decrees pursuant to an enabling decision, the provisions of the decree of the special economic zone shall prevail in the said special economic zone.

Article 82 Administrative rules and local rules have the same legal authority have the same legal authority and are implemented within their respective scope of authority.

Article 83 In the case of national law, administrative regulations, local decrees, autonomous decrees and special decrees, and administrative or local rules enacted by the same body, if a special provision differs from a general provision, the special provision shall prevail; if a new provision differs from an old provision, the new provision shall prevail.

Article 84 National law, administrative regulations, local decrees, autonomous decrees and special decrees, and administrative or local rules do not have retroactive force, except where a special provision is made in order to better protect the rights and interests of citizens, legal persons and other organizations.

Article 85 If there is a difference between a new general provision and an old special provision in respect of the same matter among two national laws, and the applicable provision can not be decided, a ruling shall be made by the Standing Committee of National People's Congress. If there is a difference between a new general provision and an old special provision in respect of the same matter among two administrative regulations, and the applicable provision can not be decided, a ruling shall be made by the State Council.

Article 86 If there is a difference between local decrees and rules in respect of the same matter, a ruling shall be made by the relevant agency in accordance with the following provisions:

(i) In the case of difference between the new general provision and an old special provision enacted by the same agency, the enacting agency shall make the ruling;

(ii) In the case of difference between local decree and administrative rule in respect of the same matter, and applicable provision can not be decided, the State Council shall give its opinion, and where the State Council deems that the local decree should apply, then the local decree shall be applied in the local jurisdiction; where the State Council deems that the administrative rule should apply, it shall request the Standing Committee of National People's Congress to make a ruling;

(ii) In the case of difference between administrative rules, or between local rules and administrative rules in respect of the same matter, and the applicable provision can not be decided, the State Council shall make a ruling; where there is a difference between administrative regulations enacted pursuant to an enabling and a national law and the applicable provision cannot be decided, the Standing Committee of National People's Congress shall make a ruling.

Article 87 If a national law, administrative regulation, local decree, autonomous decree and special decree, or administrative or local rule falls into any of the following categories, the relevant body shall amend or cancel it pursuant to the authority granted in Article 88 hereof:

(i) It exceeds the scope of its authority;

(ii) A lower level law contravenes a higher level law;

(iii) Different provisions exist in respect of the same matter among administrative or local rules, and pursuant to a ruling made by the relevant body, one of the provisions should be amended or canceled.

(iv) The provision of an administrative or local rule is deemed inappropriate and should be amended or canceled;

(v) It violates legally prescribed procedure.

Article 88 The authorities for amending or canceling a national law, administrative regulation, local decree, autonomous decree or special decree, and administrative or local rule are as follows:

(i) The National People's Congress has the authority to amend or cancel any inappropriate national law enacted by its Standing Committee, and to cancel any autonomous decree or special decree approved by its Standing Committee in violation of the Constitution or the provision of Paragraph 2 of Article 66 hereof;

(ii) The Standing Committee of National People's Congress has the authority to cancel any administrative regulation which contravenes the Constitution or any national law, and to cancel any local decree which contravenes the Constitution or any national law or administrative regulation, and to or cancel any autonomous decree or special decree approved by the Standing Committee of the People's Congress of any province, autonomous region, or municipality directly under the central government in violation of the Constitution or the provision of Paragraph 2 of Article 66 hereof;

(iii) The National People's Congress has the authority to amend or cancel any inappropriate administrative rule or local rule;

(iv) The People's Congress of a province, autonomous region, or municipality directly under the central government and the Standing Committee thereof has the authority to amend or cancel any inappropriate local decree enacted by its Standing Committee or any inappropriate local rule approved by its Standing Committee;

(v) The Standing Committee of a local People's Congress has the authority to cancel any inappropriate rule enacted by the local government;

(vi) The People's Government of a province, autonomous region, or municipality directly under the central government has the authority to amend or cancel any inappropriate local rule enacted by a lower level People's Government;

(vii) The enabling body has the authority to cancel the administrative regulation or local decree which has been enacted by the enabled organ acting beyond its scope of authority or in violation of the objective of the enabling decision, and where necessary, the enabling body may revoke the authorization.

Article 89 Within 30 days of its promulgation, an administrative regulation, local decree, autonomous decree or special decree, or any administrative or local rule shall be submitted to the relevant body for filing in accordance with the following provisions:

(i) An administrative regulation shall be submitted to the Standing Committee of National People's Congress for filing;

(ii) A local decree enacted by the People's Congress of a province, autonomous region, or municipality directly under the central government and the Standing Committee thereof shall be submitted to the Standing Committee of National People's Congress and the State Council for filing; a local decree enacted by the People's Congress of a major city and the Standing Committee thereof shall be submitted to the Standing Committee of National People's Congress and the State Council for filing through the Standing Committee of the People's Congress of the province or autonomous region in which the city is located;

(iii) An autonomous or special decree enacted by an autonomous prefecture or autonomous county shall be submitted to the Standing Committee of National People's Congress and the State Council for filing through the Standing Committee of the People's Congress of the province or autonomous region in which the prefecture or county is located;

(iv) An administrative or local rule shall be submitted to the State Council for filing; a local rule shall be concurrently submitted to the Standing Committee of the local People's Congress for filing; local rules enacted by a major city shall also be concurrently submitted to the Standing Committee of the People's Congress and the People's Government of the province or autonomous region for filing;

(v) An administrative regulation or local decree enacted pursuant to an enabling decision shall be submitted to the body specified therein for filing.

Article 90 Where the State Council, the Central Military Committee, the Supreme People's Court, the Supreme People's Procuratorate, the various special committees of the Standing Committee and the Standing Committee of the People's Congress of various provinces, autonomous regions and municipalities directly under the central government deems that an administrative regulation, local decree, autonomous decree or special decree contravenes the Constitution or a national law, it may make a written request to the Standing Committee of National People's Congress for review, and the office of operation of the Standing Committee shall distribute such request to the relevant special committees for review and comments.

Where any state organ and social group, enterprise or non-enterprise institution or citizen other than the bodies enumerated above, deems that an administrative regulation, local decree, autonomous decree or special decree contravenes the Constitution or a national law, it may make a written proposal to the Standing Committee of National People's Congress for review, and the office of operation of the Standing Committee shall study such proposal, and where necessary, it shall distribute such proposal to the relevant special committees for review and comments.

Article 91 Where a special committee of the National People's Congress deems that an administrative regulation, local decree, autonomous decree and special decree contravenes the Constitution or a national law during its review thereof, it may present a written review comment to the enacting body; and a joint review session may also be convened between the Legislative Committee and the relevant special committee, and the enacting body shall be summoned to the session to give explanation, and thereafter a subsequent written review comment shall be sent to the enacting body. The enacting body shall conduct deliberation and present its opinion on whether an amendment shall be made, and shall report back to the Legislative Committee and the relevant special committee.

Where a special committee of the National People's Congress deems that an administrative regulation, local decree, autonomous decree or special decree contravenes the Constitution or a national law during its review thereof and the enacting body refuses to make any amendment, it may submit to the Chairman's Committee a written review comment and a bill for its cancellation, and the Chairman's Committee shall decide whether to bring it to the Standing Committee session for deliberation and decision.

Article 92 In respect of the local decrees, autonomous decrees or special decrees, and administrative or local rules which are submitted to other bodies for filing, the body receiving them shall formulate the relevant review procedures consistent with the principle of safeguarding uniformity of law.

Chapter Six: Supplementary Provisions

Article 93 The Central Military Commission shall enact military decrees in accordance with the Constitution and national laws.

The various headquarters, divisions, military regions of the Central Military Commission may enact military rules consistent with its scope of authority in accordance with the relevant national laws and military decrees, decisions and orders.

Military decrees and military rules shall be implemented within the armed forces.

The measures for the enactment, amendment or repeal of military decrees and military rules shall be enacted by the Central Military Committee based on the principles set forth herein.

Article 94 This Law shall become operative as of July 1, 2000.

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(Adopted at the fourth session of the Eighth National People's Congress on March 17, 1996)

Table of Contents

Chapter I.  General Provisions

Chapter II.  Types and Establishment of Administrative Punishments

Chapter III.  Organs Administering Administrative Punishments

Chapter IV.  Jurisdiction and Application of Administrative Punishments

Chapter V.  Decisions on Administrative Punishments

Section 1.  Simple Procedures

Section 2.  General Procedures

Section 3.  Procedure of Hearing

Chapter VI.  Execution of administrative punishments

Chapter VII.  Legal liability

Chapter VIII.  Supplementary provisions



Chapter I.  General Provisions

Article 1.  This law is enacted pursuant to the constitution, with a view to standardizing the establishment and administration of administrative punishments, guaranteeing and supervising the effective enforcement of executive commands by administrative organs, safeguarding public interests and social order, and protecting the legitimate rights and interests of citizens, legal persons or other organizations.

Article 2.  This law is applicable to the establishment and administration of administrative punishments.

Article 3.  The violations of the order of executive commands by citizens, legal persons or other organizations that merit administrative punishments shall be stipulated by laws, regulations or rules according to this law and the punishments are to be administered by administrative organs according to procedures stipulated in this law.

Administrative punishments are invalid without legal basis or without following legal proceedings.

Article 4.  Administrative punishments follow the principle of fairness and openness.

The establishment and administration of an administrative punishment must be based on facts and be corresponding to the facts, nature and circumstances of the offence against the law as well as the degree of its harm to society.

The rules governing the meting out of administrative punishments for offences against the law must be promulgated; rules not promulgated shall not become the basis for administrative punishments.

Article 5.  The combination of punishments and education shall be upheld in administering administrative punishments and correcting offences against the law, so as to teach citizens, legal persons or other organizations to abide by the law consciously.

Article 6.  Citizens, legal persons or other organizations to which administrative organs have given administrative punishments enjoy the rights of statement and defense. If they do not agree with the administrative punishments, they have the right to apply for administrative reconsideration or to initiate administrative proceedings.

Where citizens, legal persons or other organizations suffer losses from administrative punishments, which are illegally meted out by administrative organizations, they have the right to demand compensation.

Article 7.  Where citizens, legal persons or other organizations, which receive administrative punishments for violations of the law, cause losses to others with their offences against the law, they shall bear civil liability.

Where offences against the law constitute crime, investigation shall be conducted to determine criminal responsibility; administrative punishments are not to replace criminal punishments.


Chapter II.  Types and Establishment of Administrative Punishments

Article 8.  Types of administrative punishments:

(1) warning;

(2) fines;

(3) confiscating illegally-gained income and property;

(4) ordering the suspension of production and operations;

(5) provisionally suspending or revoking permits or licences;

(6) administrative detention;

(7) other administrative punishments stipulated in laws and administrative regulations.

Article 9.  Various types of administrative punishments can be established by laws.

Administrative punishments that restrict personal freedom can only be established by laws.

Article 10.  Administrative regulations may establish administrative punishments exclusive of those restricting personal freedom.

Where the law has stipulated administrative punishments for offences against law, but specific stipulations are necessary in administrative regulations, stipulations on the behavior that should receive administrative punishments and the types and extent of punishments must be formulated within the limits provided by law.

Article 11.  Local laws and regulations may establish administrative punishments exclusive of those restricting personal freedom and revoking operation licences of enterprises.

Where the law and administrative regulations have stipulated administrative punishments on the offences against law, but specific stipulations are necessary in local laws and regulations, stipulations on the behavior that should receive administrative punishments and the types and extent of punishments must be formulated within the limits provided by law and administrative regulations.

Article 12.  Rules and regulations formulated by ministries and commissions under the State Council may, within the limits provided by law and administrative regulations, make specific stipulations on the behavior that should receive administrative punishments and on types and extent of the punishments.

For behaviour that has not yet been subject to any laws or administrative regulations and behaviour violating the order of executive commands as stated in the aforementioned rules and regulations formulated by ministries and commissions under the State Council, administrative punishments, such as warnings and a certain amount of fine, may be established. The amounts of the fines are to be stipulated by the State Council.

The State Council may authorize its directly subordinate organs that have the right of administrative punishment to make stipulations on administrative punishments according to the first and second paragraphs of this article.

Rules and regulations formulated by provincial, autonomous regional and municipal people's governments; people's governments of cities where provincial and autonomous regional people's governments are located; and people's governments of larger cities, with the State Council's approval, may provide specific stipulations on the behaviour that should receive administrative punishments and types and extent of the punishments within the limits provided by law, rules and regulations.

For behaviour which has not been subject to any laws or regulations yet and behaviour violating the order of executive commands as stated in the aforementioned rules and regulations formulated by people's governments, administrative punishments, such as warnings and a certain amount of fine, may be established. The amounts of the fines are to be stipulated by standing committees of provincial, autonomous regional, or municipal people's congresses.

Article 14.  Except for the stipulations in Articles 9, 10, 11, 12 and 13 of this law, other regulatory documents are not to establish administrative punishments.


Chapter III.  Organs Administering Administrative Punishments

Article 15.  Administrative punishments are administered by administrative organs with the right of administrative punishment within the limits of their legal powers.

Article 16.  The State Council or provincial, autonomous regional and municipal people's governments authorized by the State Council may designate an administrative organ to exercise the right of administrative punishment of relevant administrative organs, but the right of administrative punishment that restricts personal freedom can be exercised only by public security organs.

Article 17.  Organizations authorized by laws and regulations to manage public affairs may administer administrative punishments within the limits of their legal authority.

Article 18.  According to the stipulations in laws, rules or regulations, administrative organs may, within the limits of their legal powers, entrust organizations that meet the stipulations in Article 19 of this law to administer administrative punishments. Administrative organs shall not entrust other organizations or individuals to administer administrative punishments.

The entrusting administrative organs shall be responsible for the entrusted organizations' behavior of administering administrative punishments and bear legal responsibility for the consequences of the behavior.

Within the scope of what they are entrusted, the entrusted organizations shall administer administrative punishments in the name of the entrusting administrative organs, and shall not re-entrust any other organizations or individuals to administer the administrative punishments.

Article 19.  The entrusted organizations shall meet the following requirements:

(1) they shall be the institutions established according to law and managing public affairs;

(2) they shall have staff who are familiar with relevant laws, rules, regulations and operations;

(3) they shall be able to organize and conduct corresponding technical inspection or evaluation on offences against the law when necessary.


Chapter IV.  Jurisdiction and Application of Administrative Punishments

Article 20.  Administrative punishments are under the jurisdiction of an administrative organ with administrative punishment authority under the local people's government at or above the county level in the place where the unlawful acts take place, unless otherwise specified by law or administrative regulations.

Article 21.  When the jurisdiction over a case is in dispute, the disputing parties shall refer the case for a decision to an administrative organ at a higher level which has jurisdiction over them .

Article 22.  When unlawful acts amount to crimes, the administrative organ in charge must refer the case to a judicial organ for investigation of criminal liability according to the law.

Article 23.  In carrying out administrative punishments, administrative organs should order parties concerned to correct their unlawful acts or to correct them within a specified period.

Article 24.  Parties concerned must not be given the administrative punishment of paying fine two or more times for one unlawful act.

Article 25.  Persons under 14 years of age are not to be given administrative punishments for their unlawful acts; instead, their custodians are to be ordered to discipline them. Persons over 14 but under 18 years of age are to be given lenient or reduced administrative punishments for their unlawful acts.

Article 26.  Mentally sick persons are not to be given administrative punishments for their unlawful acts if these acts are committed when they are unable to judge or control themselves; instead, their custodians are to be ordered to keep them under close watch and to send them for medical treatment. Persons suffering from intermittent insanity shall be given administrative punishments for their unlawful acts if these acts are committed when they are mentally normal.

Article 27.  Parties concerned who meet one of the following conditions shall be given lenient or reduced administrative punishments according to the law:

(1) who voluntarily eliminate or reduce the damaging consequences resulting from their unlawful acts;

(2) who commit unlawful acts under other people's coercion;

(3) who have won credit in helping administrative organs investigate unlawful acts;

(4) other people who are given lenient or reduced administrative punishments.

Those whose unlawful acts are minor and have not resulted in damaging consequences and who promptly correct their mistakes are not to be given administrative punishments.

Article 28.  If those whose unlawful acts amount to crimes have been put under administrative detention by an administrative organ and also have been sentenced to criminal detention or prison terms by a people's court, their criminal detention or prison terms shall be reduced accordingly.

If those whose unlawful acts amount to crimes have been fined by an administrative organ and are again ordered by a people's court to pay a fine, the amount of fine shall be reduced accordingly.

Article 29.  Unless otherwise specified by law, those whose unlawful acts are not discovered within two years are not to be given administrative punishments.

The aforementioned time limit is computed from the date when the unlawful acts take place; if the unlawful acts continue or of a continuous nature, the time limit is computed from the date when the unlawful acts terminate.


Chapter V.  Decisions on Administrative Punishments

Article 30.  If citizens, legal persons or other organizations shall be given administrative punishments according to the law for violating administrative management order, administrative organs must find out the facts; those whose unlawful acts are not clearly proved are not to be given administrative punishments.

Article 31.  Before making the decision to impose administrative punishments, administrative organs shall notify the parties concerned the facts, reasons and grounds on which the decision is made, as well as the rights that the parties concerned enjoy according to the law.

Article 32.  Parties concerned have the right to make a statement and to defend themselves. Administrative organs must fully hear the opinion of the parties concerned and shall verify the facts, reasons and evidence presented by the parties concerned. Administrative organs shall accept the facts, reasons and evidence presented by the parties concerned if these facts, reasons and evidence are valid.

Administrative organs must not increase punishments for the parties concerned because they have defended themselves.

Section 1.  Simple Procedures

Article 33.  If, in a violation of the law where irrefutable facts can be produced and a legal basis provided for its handling, a civilian is liable to a fine of under 50 yuan and a legal person and other organizations are liable to a fine under 1,000 yuan or are liable to such administrative punishment as a warning, a decision on administrative punishment can be made on the spot. The relevant party should execute the decision on administrative punishment in accordance with Articles 46, 47 and 48 of this law.

Article 34.  When making an on-the-spot decision on administrative punishment, a law enforcement person should show his law enforcement identity card to the relevant party, fill out a numbered administrative punishment form, and give it to the relevant party on the spot.

The administrative punishment form should explicitly contain the details of the relevant party's violation of the law; the basis for the administrative punishment; the amount, time and location of the fine; and the name of the administrative department. The law enforcement person should sign or seal the completed form.

The law enforcement person should report this decision on administrative punishment to his administrative department for filing purposes.

Article 35.  If the relevant party does not agree with the on-the-spot decision on administrative punishment, he may apply for an administrative review or file an administrative lawsuit.

Section 2.  General Procedures

Article 36.  Apart from meting out an on-the-spot administrative punishment in accordance with Article 33 of this law, if an administrative department discovers any behavior by a civilian, a legal person or other organizations is liable to administrative punishment, it must completely, objectively and justly investigate the case and collect the relevant evidence; if necessary, it should conduct an inspection in accordance with law and regulations.

Article 37.  When an administrative department conducts an investigation or inspection, there must be present at least two law enforcement personnel, who must produce their identity cards to the relevant party. The relevant party should truthfully answer questions and cooperate in the investigation or inspection; no obstruction is allowed. Notes must be taken during questioning or inspection.

An administrative department may conduct a sample survey in the course of collecting evidence. To prevent possible loss of evidence, and because it may be hard to obtain such evidence, it may be stored with registration on the approval of the person in charge of the administrative department. A decision should be made within seven days on how to handle it. During this period, the relevant party or other personnel are not allowed to destroy or transfer the evidence.

If the law enforcement person and the relevant party have direct common interests, avoidance is necessary.

Article 38.  After the investigation, the person in charge of the administrative department should examine the investigation results and make one of the following decisions according to the merit of each case:

(1) A decision on meting out administrative punishment to violations of law liable to administrative punishment, taking account of the seriousness of each case and its specific conditions.

(2) A decision on not meting out administrative punishment to slight violations of law that are not liable to administrative punishment.

(3) A decision on not applying administrative punishment to a case in which the facts cannot prove a violation of law.

(4) A decision on submitting to a judicial department a case in which violations of law constitute criminal offences.

The person in charge of the administrative department should conduct a collective discussion to decide a major administrative punishment on a complicated case or a major violation of the law.

Article 39.  When administrative organs impose administrative punishments according to Article 38 of this law, they shall prepare an administrative punishments decision letter. The letter shall contain the following:

(1) the names and addresses of the parties concerned;

(2) the facts and evidence of violation of the law, regulations or rules;

(3) the type of administrative punishments to be imposed and the grounds for imposing these punishments;

(4) the manner and period of carrying out the administrative punishments;

(5) if the parties concerned do not agree with the administrative punishments decision, the channels and deadline for application for administrative reconsideration or for filing an administrative lawsuit;

(6) the name of the administrative organ that makes the administrative punishments decision and the date the decision is made .

The administrative punishments decision letter must be stamped with the seal of the administrative organ that makes the decision.

Article 40.  The administrative punishments decision letter shall be handed to the parties concerned on the spot after the decision is announced. If the parties concerned are not present, the administrative organ shall send the letter to the parties concerned within seven days, according to relevant stipulations of the civil procedure law.

Article 41.  Before making the decision of imposing administrative punishments, if the administrative organ in charge and its law enforcement personnel failed to tell the parties concerned according to Articles 31 and 32 the facts, reasons, and grounds on which the administrative punishments are imposed, or refused to hear the statement and argument of the parties concerned, the administrative punishments decision is not valid, unless the parties concerned waive their right to make a statement or defend themselves.

Section 3.  Procedure of Hearing

Article 42.  Before making an administrative punishment decision for suspending production and business operations, revoking certificates or business licences, imposing relatively large fines or imposing other administrative punishments, administrative organs shall notify the parties concerned of their right to a public hearing. If the parties concerned ask for a public hearing, the administrative organ shall organize one. The parties concerned shall not bear the expenses of public hearings organized by administrative organs. Public hearings are to be organized according to the following procedure:

(1) If a public hearing is requested by the parties concerned, the request shall be submitted within three days after the parties concerned are notified by the administrative organ in charge.

(2) The administrative organ shall notify the parties concerned of the time and location of the public hearing, seven days before it is held.

(3) With the exception of cases involving state secrets, business secrets or individual privacy, hearings shall be held in public.

(4) Public hearings are to be presided over by a person appointed by the administrative organ in charge and who is not one of the investigators of the case in question. If the parties concerned deem that the person presiding over the public hearing has a direct connection to the case, they have the right to ask the person to withdraw.

(5) The parties concerned may personally attend the public hearing or may ask one to two persons to represent them.

(6) At public hearings, investigators present the facts and evidence of violations of law by the parties concerned, as well as suggest administrative punishments; the parties concerned defend themselves and confront the investigators.

(7) A transcript on the public hearing shall be made, checked by the parties concerned, and signed by them or affixed with their seals.

If the parties concerned do not agree with the imposed administrative punishments that restrict physical freedom, the punishments shall be enforced according to relevant articles of the regulations on public security management and punishment.

Article 43.  After a case hearing, the administrative department should make a decision in accordance with Article 38 of this law.


Chapter VI.  Execution of Administrative Punishments

Article 44.  After a decision on administrative punishment is made, the relevant party should execute the decision within the prescribed time limit.

Article 45.  If the relevant party applies for an administrative review or files an administrative lawsuit because he does not agree with the decision on administrative punishment, this administrative punishment still remains valid, except when there are other legal provisions.

Article 46.  The administrative department that decides on a fine should be separated from the institution that collects the fine.

Apart from the fine collected on the spot in accordance with Articles 47 and 48 of this law, neither the administrative department that decided on the fine nor its law enforcement personnel are not allowed to collect any other fines of their own accord.

The relevant party should, within 15 days after receipt of the notice on administrative punishment, pay the fine at a designated bank, which should accept the payment and directly deposit it in state treasury.

Article 47.  In cases where an on-the-spot decision is made on administrative punishment in accordance with Article 33 of this law, a law enforcement person may collect a fine on the spot if one of the following circumstances applies:

(1) A fine under 20 yuan lawfully imposed;

(2) A fine difficult to collect in the future.

Article 48.  In remote regions, in rivers and seas and in regions with poor transport facilities, if the relevant party really finds it hard to pay the fine at a designated bank after an administrative department or its law enforcement personnel make a decision on administrative punishment in accordance with Articles 33 and 38 of this law, the administrative department or its law enforcement personnel may collect the fine on the spot at the relevant party's request.

Article 49.  When an administrative department or its law enforcement personnel collect a fine on the spot, they should use a standardized receipt of a provincial, autonomous regional or municipal financial department for the fine; if they do not produce a standardized receipt of the financial department, the relevant party has the right not to pay the fine.

Article 50.  A law enforcement person should, within two days after collection of the fine on the spot, submit the fine to his administrative department; the fine collected on a river or at sea should be submitted to the administrative department within two days from the date the law enforcement person comes ashore, and the administrative department should deliver the fine to a designated bank within two days.

Article 51.  If the relevant person does not execute the decision on administrative punishment in due time, the administrative department that made the decision on administrative punishment may take the following measures:

(1) In a case of nonpayment of a fine due, a daily surcharge of 3 per cent will be imposed on the fine;

(2) In accordance with law, the property sealed up and detained will be auctioned, or the deposit frozen will be allotted for payment of the fine;

(3) A request will be made to a people's court for compulsory implementation.

Article 52.  If the relevant party incurs economic difficulties and wishes to postpone the payment of a fine or pay it by installments, postponement or installment can be permitted upon application by the relevant party with the approval of the administrative department.

Article 53.  Property confiscated according to law, other than that which should be destroyed according to law, must be put up for public auction according to state provisions or handled according to relevant state provisions.

Fines, confiscated illicit earnings or revenue gained by auctioning off unlawful property must be turned over to the state treasury, and under no circumstances can any administrative organs or individuals retain the money or share it in secret, or partake of it in disguised form; under no circumstances can financial departments return fines, confiscated illicit earnings or revenue gained by auctioning off unlawful property to the administrative organs that have made decisions on administrative punishments.

Article 54.  Administrative organs should establish a sound system of supervision over administrative punishments. The people's governments at and above the county level should oversee and check administrative punishments with greater intensity.

Citizens, legal persons or other organizations are entitled to petition against or impeach administrative punishments meted out by administrative organs; administrative organs should conduct investigations seriously and take the initiative in rectifying any erroneous administrative punishments found.


Chapter VII.  Legal Liability

Article 55.  Administrative organs administering administrative punishments under any of the following situations are to be ordered by superior administrative organs or the departments concerned to make corrections; and administrative punishments can be meted out to persons directly in charge and other personnel held directly responsible for these matters:

(1) meting out administrative punishments without a legal basis;

(2) arbitrarily changing the types and extent of administrative punishments;

(3) violating the statutory procedure on administrative punishment;

(4) violating the provisions in Article 18 of this law on administering administrative punishments by proxy.

Article 56.  Relevant parties punished by administrative organs are entitled to reject and impeach the punishments if there are no receipts confirming the payment of fines or the confiscation of property or receipts used for confirming the payment of fines or the confiscation of property are made and issued by non- statutory departments. Superior administrative organs or the departments concerned are to seize and destroy any unlawful receipts used and mete out administrative punishments to persons directly in charge and other personnel held directly responsible for the matters.

Article 57.  Administrative organs collecting fines by themselves in violation of the provisions in Article 46 of this law and financial departments returning fines or auction revenue to administrative organs in violation of the provisions in Article 53 of this law are to be ordered by superior administrative organs or the departments concerned to make corrections; and administrative punishments are to be meted out according to law to persons directly in charge and other personnel held directly responsible for the matters.

Article 58.  Administrative organs retaining fines or confiscated illicit earnings or property, sharing them in secret or partaking of them in disguised form are to be ordered by financial departments or the departments concerned for reimbursement, and administrative punishments are to be meted out according to law to persons directly in charge and other personnel held directly responsible for the matters; those whose cases are so serious as to constitute a crime are liable to criminal charges according to law.

Law enforcement officers abusing their powers to ask for or accept bribes or embezzle fines, which constitutes a crime, are liable to criminal charges according to law; and administrative punishments are to be meted out according to law to those whose cases are too light to constitute a crime.

Article 59.  Administrative organs that inflict losses on the parties concerned by using or damaging property seized should make compensation according to law, and administrative punishments are to be meted out according to law to persons directly in charge and other personnel held directly responsible for the matters.

Article 60.  Administrative organs doing damage to citizens or their property or inflicting losses on legal persons or other organizations by unlawfully conducting checks or enforcing measures should make compensation according to law, and administrative punishments are to be meted out to persons directly in charge and other personnel held directly responsible for the matters; those whose cases are so serious as to constitute crimes are liable to criminal charges according to law.

Article 61.  Administrative organs which, for the sake of their own selfish interests, do not turn over to judicial organs persons liable to criminal charges and mete out administrative punishments to those concerned in lieu of criminal punishments are to be ordered by superior administrative organs or departments concerned to make corrections; administrative punishments are to be meted out to persons directly in charge of organs which refuse to make corrections ; those who engage in self-seeking misconduct and shield and wink at illegal acts are liable to criminal charges in accordance with the provisions of Article 188 of the Criminal Law.

Article 62.  In cases where the legitimate rights and interests of citizens, legal persons or other organizations, public interests and social order are jeopardized because law enforcement officers are so negligent in their duties that illegal acts have gone unchecked and unpunished, administrative punishments are to be meted out to persons directly in charge and other personnel held directly responsible for the matters; those whose cases are so serious as to constitute a crime are liable to criminal charges according to the law.


Chapter VIII.  Supplementary Provisions

Article 63.  The concrete method of implementation of the provisions in Article 46 of this law on the distinction between making decisions on fines and collecting fines is to be formulated by the State Council.

Article 64.  This law is to come into force as of October 1, 1996.

The provisions of laws and regulations on administrative punishments enacted before the promulgation of this law that are incongruous with this law should be revised according to the provisions of this law from the day of its promulgation, and the revisions are to be completed by December 31, 1997.