(Promulgated jointly by the General Administration of Civil Aviation of China and the Ministry of Foreign Trade and Economic Cooperation on May 6, 1994)
In order to accelerate the development of civil aviation industry and enhance the operation and management level, it is approved by the State Council that foreign investment is given conditional admittance to civil aviation industry on the basis of priority of State-investment. The relevant policies are hereby announced as follows:
1. Foreign Investment in Airport Construction
(1) Foreign investors may invest in construction of flight zone (including runway, taxiway and apron) of civil airport (not including airport for both civil and military use, similarly hereinafter) by way of either equity joint venture or contractual joint venture within the territory of the People's Republic of China, on condition that the share of the Chinese party constitutes more than 51% of the enterprise's registered capital and the chairman of the board of directors and the general manager are appointed by the Chinese party.
(2) Foreign investors who invest in construction of civil airport flight zone has the preference to invest in such auxiliary projects as terminal building (not including construction and management of VIP lounge), airfreight storehouse, ground service, aircraft maintenance, air catering, hotel, restaurant and aerial fuel, etc. In the case of terminal building project, the share of the Chinese party shall constitute more than 51% and the chairman of the board of directors and the general manager shall be appointed by the Chinese party.
A foreign invested enterprise investing in civil airport flight zone may, subject to approval, properly expand its business scope to operating such airport auxiliary projects as terminal building, airfreight storehouse, ground services, aircraft maintenance, air catering, hotel, restaurant and aerial gasoline, etc.
(3) Air traffic control system shall be financed and managed by the State and foreign investment and participation in management are not permitted.
2. Foreign Investment in Air Transport Enterprise
(1) Foreign investors, in the first place foreign air transport enterprises, may, jointly with Chinese air transport enterprises, invest to establish air transport enterprises by way of either equity joint venture or contractual joint venture. (2) Foreign investors, in the first place foreign air transport enterprises, may invest in air transport enterprises by means that foreign air transport enterprises purchase shares of Chinese air transport enterprises or foreign and Chinese air transport enterprises hold each other's shares.
(3) With regard to foreign investment in air transport enterprise, the General Administration of Civil Aviation of China, together with relevant government departments, chooses one or two air transport enterprise(s) to conduct experiments. It may be extended gradually if this approach gets ripe.
(4) The proportion of foreign share in the registered capital or the paid-in-capital of the foreign invested air transport enterprise shall not exceed 35%, and the votes of their representatives on the board of directors shall not exceed 25%.
(5) The chairman of the board of directors and the general manager of the foreign invested air transport enterprise shall be appointed by the Chinese party. The general manager may, according to needs and on the basis of competitive selection, appoint persons from Chinese party or foreign party as the vice general manager(s) or lower managing staff.
(6) The foreign invested air transport enterprise enjoys the equal treatment in respect of all items of tax with the domestic enterprise of the same category.
(7) No airport authority or aircraft manufacturer of a foreign country may invest to establish an air transport enterprise in China.
3. Foreign investors may invest in general aviation enterprises in the field of agriculture or forestry. The Chinese and foreign parties may agree upon the proportion of such foreign investment.
4. The establishment of a foreign invested aviation enterprise shall be subject to prior permission by the General Administration of Civil Aviation of China. With respect to projects above the limitation amount, the State Planning Commission examines and approves the project report and the feasibility study report, and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) examines and approves the contract and articles of association. With respect to projects below the limitation amount, the General Administration of Civil Aviation of China examines and approves the project report and the feasibility study report, and the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) examines and approves the contract and articles of association. The establishment of a foreign invested enterprise engaged singly in such auxiliary projects as listed in 1(2) shall be subject to approval according to the relevant regulations presently effective.
5. The General Administration of Civil Aviation of China and its regional administrative agencies exercise administrative and supervisory power over the operations of foreign invested aviation enterprises according to law.
6. This circular applies mutatis mutandis in relation to the investment or participation of shares in Mainland civil aviation enterprises by companies, enterprises, other business organizations or individuals from Taiwan, Hong Kong or Macao.
This translation, together with any explanatory material, is provided courtesy of Lehman Tax & Accounting.
