Law of the People's Republic of China on Industrial Enterprises Owned by the Whole People
（Adopted at the First Session of the Seventh National People's Congress and promulgated by Order No. 3 of the President of the People's Republic of China on April 13， 1988， and effective as of August 1， 1988）
颁布日期：19880413 实施日期：19880801 颁布单位：全国人大
Chapter I General Provisions
Chapter II The Establishment， Modification and Termination of the Enterprise
Chapter III Rights and Obligations of the Enterprise
Chapter IV The Factory Director
Chapter V The Staff and Workers and the Staff and Workers' Congress
Chapter VI The Relationship Between the Enterprises and the Government
Chapter VII Legal Liability
Chapter VIII Supplementary Provisions
Article 1 This Law is formulated in accordance with the Constitution of the People's Republic of China with a view to ensuring the consolidation and development of the economic sector under ownership by the whole people， defining the rights and obligations of industrial enterprises owned by the whole people， safeguarding their lawful rights and interests， enhancing their vitality and promoting socialist modernization.
Article 2 An industrial enterprise owned by the whole people （hereinafter referred to as the enterprise） shall be a socialist commodity production and operation unit which shall， in accordance with law， make its own managerial decisions， take full responsibility for its profits and losses and practise independent accounting.
The property of the enterprise shall be owned by the whole people， and shall be operated and managed by the enterprise with the authorization of the state inline with the principle of the separation of ownership and managerial authority. The enterprise shall enjoy the rights to possess， utilize and dispose of， according to law， the property which the state has authorized it to operate and manage.
The enterprise shall obtain the status of a legal person in accordance with law and bear civil liability with the property which the state has authorized it to operate and manage.
The enterprise may， in accordance with the decision of the competent department of the government， adopt contract， leasing or other forms of the system of managerial responsibility.
Article 3 The fundamental task of the enterprise shall be the development of commodity production， creation of wealth， increase of savings and satisfaction of society's growing material and cultural requirements by acting in line with state plans and market demands.
Article 4 While achieving socialist material growth， the enterprise must persistently promote socialist cultural and ideological progress and build up a contingent of well-educated and self-disciplined staff and workers with high ideals and moral integrity.
Article 5 The enterprise must observe the laws and regulations and keep to the socialist orientation.
Article 6 The enterprise must effectively utilize the property which the state has authorized it to operate and manage and realize the multiplication of its assets； the enterprise must， according to law， pay taxes and fees and hand in profits.
Article 7 The enterprise shall implement the system whereby the factory director（manager） assumes overall responsibility for the work of the enterprise.
The factory director shall exercise functions and powers according to law， which shall be protected by law.
Article 8 The grassroots organization of the Chinese Communist Party in the enterprise shall guarantee and supervise the implementation of the guiding principles and policies of the Party and the state in the enterprise.
Article 9 The state shall ensure that the staff and workers enjoy the status of the masters， and the lawful rights and interests of the staff and workers shall be protected by law.
Article 10 The enterprise shall， through the staff and workers' congress and other forms， practise democratic management.
Article 11 The trade union in the enterprise shall represent and safeguard the interests of the staff and workers and conduct its work independently according to law. The trade union in the enterprise shall organize the staff and workers for participation in democratic management and democratic supervision.
The enterprise shall bring into full play the role of the young staff and workers， the women staff and workers and scientific and technical personnel.
Article 12 The enterprise must strengthen and improve its operation and management， implement the economic responsibility system， promote scientific and technological progress， practise economy， combat waste， improve economic results and further its own transformation and development.
Article 13 The enterprise shall implement the principle of distribution according to work. It may also adopt other forms of distribution within the scope prescribed by law.
Article 14 The property which the state has authorized the enterprise to operate and manage shall be protected by law and shall not be infringed upon.
Article 15 The lawful rights and interests of the enterprise shall be protected by law and shall not be infringed upon.
The Establishment， Modification and Termination of the Enterprise
Article 16 The establishment of the enterprise must conform to the law and the relevant provisions of the State Council， and the application for the establishment must be submitted to the government or the competent department of the government for examination and approval. The enterprise shall obtain the status of a legal person after it is approved by， registers itself with and receives a business license from the administrative authorities for industry and commerce.
The enterprise shall carry out its productive and operational activities within the approved and registered scope of operation.
Article 17 An enterprise must meet the following qualifications for its establishment：
1） Its products are needed by society；
2） It has access to the required energy sources， raw and processed materials， and communication and transportation facilities；
3） It possesses a name of its own and premises for production and operation；
4） It possesses funds in conformity with state provisions；
5） It possesses its own organizational structure；
6） It has a definite scope of operation； and
7） Other qualifications as provided by the laws and regulations.
Article 18 The merger of enterprises or the division of an enterprise shall be subject to approval by the government or the competent department of the government in accordance with the provisions of the laws and administrative rules and regulations.
Article 19 An enterprise shall be terminated for any of the following reasons：
1） being abolished due to its violation of the laws and regulations；
2） being dissolved by decision of the competent department of the government made in accordance with the provisions of the laws and regulations；
3） being declared bankrupt in accordance with law； or
4） other reasons.
Article 20 When an enterprise is merged with another enterprise or other enterprise or when it is divided or terminated， its property must be protected and its claims and debts shall be liquidated according to law.
Article 21 The modification of registered items such as the merger of enterprises and the division or termination of the enterprise， and the scope of operation shall be subject to approval by and registration with the administrative authorities for industry and commerce.
Rights and Obligations of the Enterprise
Article 22 The enterprise shall， under the guidance of state plans， have the right to arrange on its own the production of products needed by society or the provision of services for society.
Article 23 The enterprise shall have the right to request for the adjustment of mandatory plans when no arrangements are made for product sales.
The enterprise shall have the right to accept or reject production assignments given by any department or unit outside the mandatory plans.
Article 24 The enterprise shall have the right to sell its products on its own， except as otherwise stipulated by the State Council.
And enterprise undertaking production according to a mandatory plan shall have the right to marker for itself products manufactured in excess of the planned quota and products it retains as its share under the plan.
Article 25 The enterprise shall have the right to choose the suppliers for itself and purchase from them materials needed for production.
Article 26 The enterprise shall have the right to determine for itself the prices of its products and the charges for its services， except for those which， as stipulated by the State Council， are under the control of the price authorities and the relevant competent departments.
Article 27 The enterprise shall have the right to negotiate and sign contracts with foreign parties in accordance with the provisions of the State Council.
The enterprise shall have the right to withdraw and use， according to the provisions of the State Council， the foreign exchange revenues it retains as its Council.
Article 28 The enterprise shall have the right to budget and use its retained funds in accordance with the provisions of the State Council.
Article 29 The enterprise shall have the right， in accordance with the provisions of the State Council， to lease out or transfer against compensation the fixed assets that the state has authorized it to operate and manage， but the proceeds therefrom must be used for the renewal of equipment and technical transformation.
Article 30 The enterprise shall have the right to determine such forms of wages and methods of bonus distribution as are appropriate to its specific conditions.
Article 31 The enterprise shall have the right to employ or dismiss its staff members and workers in accordance with the provisions of the State Council.
Article 32 The enterprise shall have the right to decide on its organizational structure and the size of its personnel.
Article 33 The enterprise shall have the right to reject the exaction of its manpower， materials and financial resources in the form of apportionment by any state organ or unit. Except as otherwise stipulated by the laws and regulations， any demand made on the enterprise by any state organ or unit in any form for the provision of manpower， materials and financial resources shall be exaction by apportionment.
Article 34 The enterprise shall have the right， in accordance with law and the provisions of the State Council， to engage in joint operations with other enterprises or institutions， to invest in other enterprises or institutions and to hold shares in other enterprises.
The enterprise shall have the right to issue bonds in accordance with the provisions of the State Council.
Article 35 The enterprise must fulfil the mandatory plans.
The enterprise must perform the contracts concluded according to law.
Article 36 The enterprise must ensure the normal maintenance of its fixed assets and upgrade and renew its equipment.
Article 37 The enterprise must observe state provisions concerning finance， labour and wages， price control， etc.， and accept supervision by the financial， auditing， labour and wage， price and other administrative authorities.
Article 38 The enterprise must guarantee the quality of its products and services and be responsible to users and consumers.
Article 39 The enterprise must raise labour efficiency， economize the use of energy and of raw and processed materials and strive to reduce costs.
Article 40 The enterprise must strengthen its security work， maintain the order of production and protect state property.
Article 41 The enterprise must implement the system of safe production， improve labour conditions， do good work in labour protection and environmental protection， and carry on production in a safe and civilized manner.
Article 42 The enterprise shall strengthen ideological and political education， legal education， national defence education， scientific and cultural education as well as technical and vocational training so as to raise the quality of its staff and workers.
Article 43 The enterprise shall support its staff and workers in scientific research， invention and creation and activities for technical inovation， for making rationalization proposals and for socialist labour emulation， and reward them for such endeavours.
The Factory Director
Article 44 Except as otherwise stipulated by the State Council， the selection of the factory director shall be made by the competent department of the government in the light of the specific conditions of the enterprise by one of the following methods：
1） appointment by the competent department of the government or choice of an applicant on a competitive basis by the same department； or
20 election by the staff and workers' congress of the enterprise.
With respect to the person to be appointed or the applicant to be chosen as factory director by the competent department of the government， the opinions of the staff and workers shall be solicited， with respect to the person elected as factory director by the staff and workers' congress of the enterprise， his appointment shall be reported to the competent department of the government for approval.
The removal or dismissal of the factory director appointed or chosen from applicants by the competent department of the government shall be decided upon by such department， while the opinions of representatives of the staff and workers shall be solicited； the recall of the factory director elected by the staff and workers' congress of the enterprise shall be decided by such congress and reported to the competent department of the government for approval.
Article 45 The factory director shall be the legal representative of the enterprise.
The enterprise shall establish a system of production， operation and management headed by the factory director. The factory director shall occupy the central position in the enterprise and assume overall responsibility for building up a materially developed and culturally and ideologically advanced enterprise.
The factory director shall exercise leadership in the production， operation and management of the enterprise by exercising the following functions and powers：
1） to decide on the various plans of the enterprise of report them for examinaton and approval in accordance with law and the provisions of the State Council；
2） to decide on the administrative setup of the enterprise；