I. Management of Import and Export Right

1. In China, the business scope of enterprises with the right to handle Import and export is divided into two categories :

First category: they can deal or act as agents for the export of other commodities and technology other than those stipulated for export by state -organized undertakings or for import by designated companies, and they can handle processing with imported materials, processing with imported designs and assembling with imported components and compensation trade as well as per contra trade and entrepot trade.

Second category: Handle the export of self-made products or technology of their own enterprises or member enterprises. Handle the import of machinery equipment, spare parts, raw and auxiliary materials for their own enterprises or member enterprises as well as processing trade and compensation trade.

2. At present, the foreign trade right of enterprises is transferring from examination and approval to legal registration, and the import and export managing bodies have become multiple.

The first situation. Enterprises that want to obtain the right of import and export, must possess certain conditions, apply to the responsible department of foreign trade and economic cooperation, and obtain the right after undergoing examination and approval.

These enterprises include:

(1) State-owned import and export companies which are the main body of the import and export business and the scope of their business refers to the above-mentioned first category.

(2) State-owned production enterprises, commercial enterprises, chain enterprises and private production enterprises with the right of handling import and export, and the scope of their business refers to the above-mentioned second category.

The second situation, the system of registration

These enterprises include:

(1) 120 State large scale experimental groups. The 1000 key enterprises designated by the state, large scale industrial enterprises in the country and production enterprises under the above-mentioned enterprises. For these enterprises, the scope of foreign trade of the production enterprises refer to the above-mentioned second category, and that of the non-production enterprises refers to the above-mentioned first category.

(2) Enterprises in the five special economic zones established by the state (Shenzhen, Zhuhai, Shantou, Ximen and Hainan) corresponding to the regulations, may register for the right of import and export, and the scope their business refer to the above-mentioned second category.

(3) The business scope of state or collective science and research institutions and high-tech enterprises refer to the above-mentioned second category.

The third situation. As long as they apply for the right of import and export, production enterprises with the permission to undertake processing and assembly projects abroad with their own materials shall obtain the right. However, if these enterprises, one year after obtaining the right of import and export, do not start the processing and assembly work or make no real progress in the work, their right of import and export will be cancelled.

The fourth situation. All foreign-funded enterprises can according to relevant regulations export their self-made products and import machinery equipment, components, raw and auxiliary materials to be used for their own enterprises, as well as handle processing trade and compensation trade.

The fifth situation. Sino-foreign joint foreign trade companies. So far, these kinds of companies have to be examined by the responsible department of foreign trade and submitted for the approval of the State Council; and they can only experiment in Pudong New Area in Shanghai and Shenzhen Special Economic Zone.

The chief responsible department of foreign trade is enforcing the annual examination of the qualification certificate for various kinds of import and export enterprises, and adjusting these enterprises according to real situation and the survival of the fittest.

3. Import and export agent system

The import and export agent system is a unique agent system in China's foreign trade, referring to the fact that foreign trade enterprises with the right to handle import and export carry out import and export business in their own name for those enterprises without such rights.

In carrying out the import and export agent system, the agent must sign a written contract with the trustor, and according to the agent contract the agent shall sign import and export contracts with foreign businesses. The agent must take part in the whole process, following the import and export agent business and carrying out the contracts.

For commodities to be imported by designated companies and commodities to be exported by state-organized undertakings, foreign trade enterprises which do not obtain the right to import or export these products are not allowed to carry out the agent business. Production enterprises and science and research institutions, and foreign-funded enterprises (apart from investment companies and joint foreign-funded enterprises with approval to engage in import and export agent business) are not allowed to handle import and export agent business.

II. Import Commodity Management

1. Import goods license system

With regard to commodities whose imports are subject to restrictions, China practices quotas and license management. This system is not directed at any given country or region, but is designed to coordinate and manage domestic enterprises with the authority to handle import and exports.

In accordance with the stipulations of the Foreign Trade Law, all commodities subject to quota and license management can be imported only after being permitted by the State Council department in charge of foreign trade and economic cooperation or permitted jointly by the department and relevant State Council departments. The Ministry of Foreign Trade and Economic Cooperation serves as the competent department in charge of the import licenses.

In 1998, 35 types of commodities were subject to state import quota and license management. Of these, 13 types of commodities were subject to general quota and license management; 15 types of machinery and electronic products were subject to quota and license management; seven types of commodities were not subject to quota management but subject to import license management.

(1) Commodities subject to quota and import license management

In 1999, 28 types of commodities were subject to quota and import license management. Among them are: a: 13 kinds of general commodities, namely, refined oil, wool, polyester fibers, acrylic fibers, polyester chips, natural rubber, automobile tires, sodium cyanide, refined sugar, chemical fertilizers, tobacco and related products, cellulose diacetate fiber tows and cotton. To import this category of commodities, a dealer has to apply to the department of foreign trade and economic cooperation for the "Import License" on the strength of the "Certificate for the Import Quota of General Commodities" signed and issued by the state development planning department. b. There are 15 types of machinery and electronic products, that is, automobiles and related key parts, motorcycles and related engines and frames, color TV sets and tubes, radios and tape recorders and related modules, refrigerators and related compressors, washers, video recording equipment and related key parts, cameras and related bodies, watches, air-conditioners and related compressors, audio and video tape copying equipment, automobile cranes and related chassis, electronic microscopes, air-flow looms, and electronic color separators. To import this category of commodities, a dealer has to apply to the department of foreign trade and economic cooperation for the "Import License" on the strength of the "Import Quota Certificate" signed and issued by the state managerial department in charge of the import and export of machinery and electronic products.

(2) There are seven types of commodities which are not subject to quota management but are subject to import license management, i.e., cereals, plant oil, liquor, color sensitive materials, chemicals under supervision and control (including 12 kinds of chemicals that can be used as chemical weapons, 14 kinds of key carriers for chemical weapons and 17 kinds of raw materials for making chemical weapons), chemicals that can be easily used to produce drugs, and CD and VCD production equipment. To import cereals, plant oil, liquor and color sensitive materials, a dealer has to apply to the department of foreign trade and economic cooperation for the "Import License" on the strength of the "Registration Certificate for the Import of Special Commodities" and other documents signed and issued by the import registration department authorized by the State Development Planning Commission. To import chemicals under supervision and control, a dealer has to apply to the department of foreign trade and economic cooperation for the "Import License" on the strength of the approval document and other documents issued by the State Bureau of Petroleum and Chemical Industry. To import chemicals that can easily be used to make drugs, a dealer has to apply to the department of foreign trade and economic cooperation for the "Import License" on the strength of the approval document issued by the department. To import CD and VCD production equipment, a dealer has to apply to the department of foreign trade and economic cooperation for the "Import License" on the strength of the approval document issued by the State Press and Publication Administration and the "Registration Form for the Import of Machinery and Electronic Products" signed and issued by the managerial department in charge of the import and export of machinery and electronic products.

2. China exercises non-quota management of the import of machinery and electronic products (machinery and equipment, and electronic products and related parts and accessories, and devices and components) beyond quota management. Among them, a. imported machinery and electronic products (77 kinds for 1999) whose accelerated development is needed by China and for whose industrial production is still in the start-up phase in China were placed on the Catalog of Special Products. They will be procured primarily through international bidding; b. as regards other imported machinery and electronic products not subject to quota management, the automatic registration system is practiced, under which all importers must receive and fill up registration forms. Imported machinery and electronic products must comply with bilateral or multilateral trade agreements, as well as state laws and regulations concerning environmental protection and measure. To import special tobacco machinery, radio transmission equipment, satellite TV reception facilities, and special devices and companions for satellite ground reception facilities, a dealer must first obtain approval and permission from relevant state industrial department in charge.

The State Machinery and Electronic Products Import and Export Office is in charge of managing the above imports.

3. Automatic registration for import of special products

To tighten macro-monitoring of the import of a few staple raw materials and sensitive commodities, China exercises automatic registration management of special commodities. Such commodities include cereals, plant oil, liquor, crude oil, asbestos, color sensitive materials, pesticides, plastics raw materials, synthetic rubber, plywood, chemical fiber cloth, rolled steel, billets, and 14 types of non-ferrous metals (copper, aluminum, etc.).

The State Development Planning Commission is in charge of guiding, coordinating and managing the said work.

4. As regards a tiny number of staple raw material commodities which are vital to the national economy and people's livelihood, which feature a strong nature of the monopoly of the international market and which are sensitive in terms of price, operation and management by verified companies are practiced. Such companies are verified and announced by the Ministry of Foreign Trade and Economic Cooperation.

There are 19 types of imported commodities subject to operation by verified companies, i.e., wheat, crude oil, refined oil (referring to gasoline, diesel oil and kerosene), chemical fertilizers (referring to nitrogenous fertilizer, phosphate fertilizer, potash fertilizer and compound fertilizer), rubber (referring to natural rubber), rolled steel (referring to slabs, wire, shaped steel, tubes and tin-plated iron), timber (referring to logs), plywood (referring to veneer, decorative skin plates and pasted skin plates), wool (referring to raw wool, washed wool and top wool), acrylic fibers, cotton (referring to raw cotton), tobacco and related products, refined sugar, plant oil, waste steel, waste cooper, waste aluminum, waste paper and waste plastics.

5. China prohibits the import of wastes for dumping, stacking and disposal within its territories. It also restricts the import of wastes that can be used as raw materials. In case it is necessary to import wastes listed on the "Catalog of Wastes Whose Imports Are Subject to State Restrictions and Which Can Be Used as Raw Materials," the importer or the user of such wastes must file an application to the environmental protection department at the prefectural level or to the State Environmental Protection Administration, and submit the application to the State Environmental Protection Administration for examination and approval.

For wastes that are allowed to be imported as raw materials by the state, examinations must be given before loading and transport.

To protect human health and the ecological environment, China's State Environmental Protection Administration exercises unified environmental supervision over and management of chemicals imported for the first time and the import and export of poisonous chemicals, and is in charge of releasing the catalog of poisonous chemicals which China prohibits or strictly restricts. As of May 1, 1994, in exporting to China any chemicals not registered in China (with the exception of pesticides), foreign companies or their agents must file an application to the State Environmental Protection Administration for the registration for environmental management of chemicals imported for the first time, and provide free of charge samples for tests.

No enterprise is allowed to engage in the entrepot trade of wastes.

6. As of November 1,1998, apart from obtaining the import permit with the Ministry of Foreign Trade and Economic Cooperation for special needs, no products in the following are allowed to import: used machinery and electronics products in relation to production safety, human safety and environmental production (including pressure container, radiation, engineering machinery, electrical appliances, medical apparatus, food machinery, agricultural machinery, printing machine, textile machinery, color expansion equipment, and amusement) as well as used machinery and electronics products, quota products, special products, registered used machinery and electronics products (used imported machinery and electronic products provided free by foreign businesses from foreign-funded and processing trade enterprises) manufactured before 1980 (including 1980).

7. From March 11, 1998, China no longer imports ephedrine.

III. Export Commodity Management

1. Quota and license management

Commodities subject to China's export quota and license management may be divided into four categories:

For the first category, with respect to staple resource commodities for export essential to the national economy and people's livelihood and staple traditional export commodities holding an important position in China's exports, planned quota management is practiced. This category has 36 types of commodities. Subject to unified joint operation (meaning that only designated companies have the operational authority) are 11 types of these commodities, that is, soybeans (including broken soybeans), corn (including broken corn), coal (including coal pulp), tungsten (tungsten ore, paratungstate ammonium, tungsten peroxide and tungstic acid), antimony (antimony ingots and antimony oxide), crude oil, refined oil, cotton, silk and silk in gray.

For the second category, with regard to export commodities which hold a leading position on the global market or on a certain market and to which a foreign country requests the voluntary restriction, voluntary quota management is practiced.

For the third category, 24 types of Chinese export commodities subject to quota restrictions in other countries, passive quota management is practiced. The annual export amount of the commodities subject to passive quota management shall be decided on by the two sides each year, with major managerial procedures implemented in accordance with bilateral agreements.

For the fourth category, as regards important name-brand, high-quality and special export commodities which are large in terms of export value and whose operational order are liable to become chaotic, as well as a few commodities that really need management, general license management is practiced. In the condition of normal market demand and supply, virtually no restrictions shall be imposed on their annual export amounts.

With respect to export commodities subject to planned quota management, voluntary quota management and general license management, export license management is practiced. At present, 92 types of commodities are subject to export license management and can be divided into 116 types in line with actual operation.

The Ministry of Foreign Trade and Economic Cooperation and foreign trade managerial departments at the provincial level are in charge of national and local management of export commodities subject to quota management, respectively.

To set up a mechanism of fair competition and maintain a normal order in foreign trade, the Chinese government puts part of the export commodities under quota for bidding, so that export enterprises can use and obtain the state quota for export goods through compensated bidding. In 1998, 33 kinds of goods were put under quota. Among which, 21 were textiles, 12, other goods, and 4 were under gratuitous bidding.

Regular distribution is practiced for export goods quota which does not fit for bidding. A total control and self application method are used for quotas for such goods as much wanted textiles, and this means that import and export enterprises which can manage may apply directly for quota permits with export contracts or other related papers.

2. Commodities banned from export

Whatever involving one of the following circumstances shall not be operated or exported by any enterprise:

(1) Commodities hat jeopardize national security;

(2) Cultural relics whose export is prohibited by laws and regulations, animals or plants on the verge of extinction and products manufactured by reform-through-labor units;

(3) Commodities that infringe the international obligations undertaken by the People's Republic of China; and

(4) Musk, natural bezoar, copper and copper base alloy and platinum which are in exceptionally short supply on the domestic market.

IV. Customs Control

According to law, customs offices at all levels across China supervise and control entrance and exit transport means and goods, luggage and articles, mails and other goods, levy and collect tariffs and other taxes, crack down on smuggling, and work out customs statistics and handle other customs business.

1. Customs supervision and control

(1) Supervision and control over entrance and exit means of transport

When entrance and exit means of transport reaches or leaves the place where a customs office is in operation, the person in charge of such means shall declare to the customs office and hand in documents for inspection, and accept customs supervision and inspection.

(2) Supervision and control over import and export goods under general trade terms

A. The customs' supervisory principle regarding this category of goods is: acceptance declarations -- examining and verifying documents -- inspecting goods -- handling tax collection -- customs clearance.

The import and arrival ports of entry for whole motor vehicles and automobile engines, frames, front and rear covers and driver's cabins (excluding other automobile parts and accessories) are coastal ports of entry in the Dalian Port, the Tianjin New Port, the Shanghai Port and the Huangpu Port, two land ports of entry in Manzhouli and Shenzhen (Huanggang). Other ports of entry do not handle related imported customs declarations. Customs declaration on the import of whole vehicles may not be filed to another customs office.

Customs declaration and tax payment ports of entry for other key automobile parts are Beijing, Dalian, Nanjing, Huangpu, Zhanjiang, Haikou, Nanning, Xiamen, Wuhan, Kunming, Chongqing, Harbin, Changchun, Shenyang, Manzhouli, Erlianhaote, Gongbei in Shenzhen, Lhasa, Shantou, Jiangmen, Hangzhou, Hohhot, Urumqi, the Tianjin New Port and East Port, Wenjindu in Shenzhen, Qingdao, Pujiang in Shanghai, Wusong in Shanghai, Xinfeng in Guangzhou and Mawei in Fuzhou. Other customs offices do not handle declarations for such a category of commodities.

No restrictions to customs declaration and tax payment ports of entry are imposed on automobile parts and accessories imported by air.

B. Supervision and control over import and export goods for bonded and processing trade

Customs offices practice within a certain time limit continuous supervision over bonded and processing trade (processing imported materials, processing and assembling for overseas customers and compensatory trade).

C. Supervision and control over goods in free trade zones

Free trade zones are economic zones which were established with the State Council approval and over which customs office exercise special supervision and control. They are the economic zones with the highest degree of opening up and liberalization in China today. Their major function is "handling re-export trade, processing for export and bonded warehouses."

China's policy on free trade zones are:

That enterprises within a free trade zone may freely conduct trade activities with overseas enterprises;

That all kinds of trade and commercial activities conducted by enterprises within a free trade zone together with domestic enterprises outside the zone (referring to other areas outside the zone within China's territories) shall be regarded as foreign trade business. Enterprises within a free trade zone may sign trade contracts only with Chinese enterprises with the authority to handle imports and exports; and

That enterprises within a free trade zone do not have the domestic import and export operational authority.

Since June of 1990, 15 free trade zones have been set up with the State Council approval (please refer to Chapter VI).

(3) Supervision and control over entrance and exit luggage and articles and mails

The basic customs principle governing the inspection of entrance and exit luggage and articles is that a reasonable amount for the owner's own use constitutes the ceiling and that the amount in excess of the ceiling shall not be permitted to enter or leave China.

With regard to entrance and exit personal mails, a reasonable amount for the owner's own use serves as the ceiling and that the ceiling on the value set by the customs office may not be exceeded.

2. Tariff management

(1) Import and export duties

In March of 1985, the State Council promulgated the "Regulations of the People's Republic of China Concerning Import and Export Duties," which were promulgated following revisions for the second time on March 8, 1992. In accordance with the stipulations of the "Regulations of the People's Republic of China Concerning Import and Export Duties," customs levies and collects on behalf of the state import and export duties on import and export goods and articles.

The "Customs Import and Export Tariff Regulations of the People's Republic of China " are an important component of the "Regulations of the People's Republic of China Concerning Import and Export Duties." As of January 1, 1992, China adopted the internationally accepted the "System for Standardizing Commodity Names and Classification" (namely, the HD catalog). That year it joined the "Convention on Standardizing International Commodity Names and Classification." The Customs Procedures on Imports and Exports" promulgated on January 1, 1996, adopt the 1996 edition of "Standardization System" catalog revised by the World Customs Organization.

The import duty involves general tax rates and preferential tax rates, with the latter being applicable to import goods whose origins of place are countries or regions which have signed agreement on mutually beneficial tariffs. Other kinds of import goods shall be applicable to general tax rates.

China once again cut its tariff rates on import and export commodities on October 1, 1997. At present, among China's tariff rates, the highest is 100%, the arithmetic average tariff rate, 17%, and the weighted average tariff rate, 13.3%.

China currently levies and collects export duty on 25 types of commodities including tungsten ore and silicon iron.

Tax calculation formula:

Import tariff amount = CIF ?/font> import duty rate

Export tariff amount = FOB ?/font> (1 + export duty rate) ?/font> export duty rate

(2) Value-added tax and consumption tax

As of January 1, 1994, in accordance with the stipulations of the "Provisional Regulations of the People's Republic of China Concerning the Value-Added Tax" and the "Provisional Regulations of the People's Republic of China Concerning the Consumption Tax," the importer who declares goods entering the territories of the People's Republic of China shall pay the value-added tax, in addition to the import duty, and the consumption tax on some kinds of goods simultaneously. The consignee of import goods or the unit and individual handling customs declaration procedures shall be the payer of the value-added tax on imported goods and the consumption tax. The value-added tax on imported goods and the consumption tax shall be collected by the customs office for taxpayers.

Tax calculation formula

Value-Added tax payment = (CIF + import duty amount + consumption tax payment) ?/font> value-added tax rate

Price-based Consumption tax payment = (FOB + import duty rate) ?/font> (1 - consumption tax rate) ?/font> consumption tax rate

Quantity-based consumption tax payment = taxable consumption amount ?/font> consumption tax unit amount

(3) Tax refunding for exports

China's "Procedures on Managing Tax Refunding (Exemption) for Export Goods" stipulate that as regards goods for export and goods for export handled on commission, enterprises with the export operational authority, after customs declarations for such goods are filed and sales are done in financial procedures, can submit reports monthly to a taxation department on the strength of relevant documents to obtain approval for refunding of or exemption from the value-added tax and the consumption tax. Furthermore, in line with China's characteristics in introducing foreign funds, the "Circular of the State Taxation Administration Concerning the Issue of Tax Refunding for Foreign-Funded Enterprises" lays down special provisions on goods for export produced by foreign-financed enterprises.

In 1999, the export tax refund rate of the four kinds of machinery and electronics products such as machinery equipment, electrical appliances and electronics products, transport machinery and apparatus and meters registered 17%, and it was also 17% for the export tax refund of garments;

Textile materials and products other than garments and other machinery and electronics products other than the above-mentioned four finds of machinery and electronic products and goods applicable to 17% value added tax stood at 15% for export rebate tax;

Other goods applicable to 17% value-added tax rate and goods other than agricultural products applicable to 13% value-added tax rate registered an export tax refund rate of 13%;

The export tax refund rate for agricultural products was 5%.

Enterprises are divided into A B C D four categories according to the kinds of commodities, export scale, whether there were the acts of tax cheat and financial management. For category A, tax is refunded before approval; for category B, a simplified refund application is adopted; for category C, certificates must be completed before applying for tax rebate and for category D, a stringent method is to be carried out on tax rebate application, examination and approval.

Except for state-approved trade which falls under the category of processing imported materials for export again, goods for export including crude oil and export goods as assistance to other countries, goods whose exports are banned by the state do not enjoy tax refunding or are not exempted from the value-added tax. In exporting such goods, enterprises shall not be given back the taxes paid for export goods and shall pay the value-added tax that they should pay for export goods.

For foreign-funded enterprises established before the end of 1993, the policy of tax exemption of goods is exercised; domestic tax is collected for the purchase of raw materials at home; the last export link is exempted from tax; and the import tax volume is not to be offset nor refunded. With respect to foreign-funded enterprises established after January 1, 1994, they shall all have to implement the stipulations of the provisional regulations on the value-added tax, the consumption tax and the business tax as other enterprises. If products turned out by such enterprises are exported directly, their tax payments involved by export products will be refunded in accordance with the relevant stipulations of the Provisional Regulations Concerning the Value-Added Tax.

(4) Other customs managerial measures

Customs Evaluation: The Customs office examines the price of the import and export goods according to laws in a bid to confirm the price of tax.

Protection of Intellectual Property Rights: to promote trade and economic cooperation and technological and cultural exchanges between China and other countries and to safeguard social and public interests, the customs office may, in accordance with the application of a property right holder which is placed on record in the General Administration of Customs, detain goods suspected of infringement that will enter or leave China soon, in order to enforce protection of the intellectual property rights in connection with the import and export goods.

Customs Inspection: to ensure the effective enforcement of state import and export laws and regulations and safeguard state interests, the customs office has the power to inspect within a given time limit, in accordance with the stipulations of relevant laws and regulations, account books, data and relevant receipts related to import and export goods, which are kept by relevant enterprises or institutions.

V. Legally-Prescribed Commodity Quarantine and Animal and Plant Quarantine

Legally-prescribed commodity quarantine means that in accordance with the "Commodity Inspection Law of the People's Republic of China," the China State Exit and Entrance Inspection and Quarantine Bureau carries out compulsory inspections of staple import and export commodities, the commodities that have many quality problems found, the commodities involving safety and hygiene, and the commodities crucial to the national economy and people's livelihood. The namelist of legally-prescribed commodities is drawn up and announced by the China State Exit and Entrance Inspection and Quarantine Bureau.

Commodities beyond legally-prescribed inspection are all subject to inspection by the consignee and the user of such commodities on their own. Should quality problems be found, the consignee or the user should immediately apply to the local exit and entrance inspection and quarantine department for commodity inspection. The inspection result of the exit and entrance inspection and quarantine department may be taken as the basis for negotiations on claims between the two trade partners.

In accordance with the stipulations of the "Law of the People's Republic of China Concerning Quarantine of Entrance and Exit Animals and Plants," the China State Exit and Entrance Inspection and Quarantine Bureau carries out, according to law, quarantine of entrance and exit animals and plants, animal and plant by-products and the carrying containers and packaging materials for other kinds of matters subject to quarantine, as well as means of transport from an animal or a plant epidemic-stricken area.

VI. Food Hygienic Inspection and Pharmaceutical Inspection

In accordance with the stipulations of the "Food Border Hygienic Quarantine Law of the People's Republic of China," all imported foodstuffs, food additives, food containers, food packaging materials and food-related tools and equipment are subject to hygienic supervision and inspection by the exit and entrance inspection and quarantine department. Foodstuffs for export are also subject to hygienic supervision and inspection by the exit and entrance inspection and quarantine department.

China practices a registration approval system on the import of medicine (medicine for medical use, finished products, semi-finished products and auxiliary medicine). Imported medicine to China must get the "Registration Certificate of Imported Medicine" issued by the China State Medicine Supervision Bureau, and pass the inspection of the Port Medicine Inspection Institute authorized by the State Medicine Supervision Bureau. The application of imported medicine registration must be put forward by the representative office of foreign pharmaceutics stationed in China or their registration agent in China. Imported medicine registered for import must carry out clinical research according to the Chinese regulations on "the Methods of Examination and Approval of New Medicines" and "The Scope of Management of the Clinical Tests of Medicine." (GCP). The imported medicine must write down in the "Registration Certificate of Imported Medicine" the final package of the manufactured plant or packaging factory in finishing the production, use Chinese names for the medicine and Chinese to notify the name of medicine, chief components and registration number, and use Chinese manual. It must enter China from a port that has a Port Medicine Inspection Institute.

The export of traditional Chinese medicine is managed under the Methods on the Quarantine of Animals and Plants and Regulations on Endangered Species.

Management of special pharmaceuticals is as follows:

(1) Blood products Except for human serin, the state bans any unit or individual from importing blood products. In case of urgent needs for clinical treatment, the importer shall report beforehand to the Health Department (Bureau) of a province, an autonomous region or a municipality directly under the central government for approval.

(2) Psychoactive drugs and radiactive medicine

The import and export of psychoactive drugs and radiative medicine are subject to examination and approval by the Ministry of Health, which issues the import and export permit to the importer and has designated the China Pharmaceutical Tonics Import and Export Corporation to take charge of such imports and exports. The varieties and classification of psychoactive drugs are published by the Ministry of Health each year.

(3) Narcotic drugs The import and export of narcotic drugs is subject to examination and approval by the Ministry of Health, which issues narcotic drug import and export permits and notifies the government of the exporting country and the International Narcotic Drug Control Secretariat.

VII. Foreign Exchange Control

On December 28, 1993, the People's Bank of China decided to merge the two tiers of RMB exchange rates from 1994 and to institute the single managed floating exchange rate system based on market supply and demand; and to introduce the bank foreign exchange settlement and selling system. In accordance with the "Provisions on Managing Foreign Exchange Settlements, Sales and Payments" promulgated on June 20, 1996, the convertibility of RMB under current account would be achieved before the end of 1996. All units within the territory of China must promptly send various kinds of their incomes in foreign exchanges back to China. With the exception of that part of their foreign exchange earnings which comply with provisions and are permitted to open a separate foreign exchange bank account, they must sell all of their foreign exchange earnings to designated foreign exchange banks at the bank-set exchange rates. With regard to foreign exchanges paid by a unit within the territory of China under current account to foreign customers, on the strength of valid certificates, the unit can convert RMB into foreign exchanges in a designated bank. The interbank foreign exchange trading market was established. The People's Bank of China releases daily exchange rates of RMB against major foreign currencies in line with the prices formed on the interbank foreign exchange market. It has prohibited foreign currency from being used for valuation and settlements and from circulation within the territory of China, and has stopped the issue of foreign exchange certificates.

China's long-range objective for the reform of its foreign exchange managerial system is to make RMB a convertible currency, institute the single managed floating exchange rate system based on market supply and demand, and establish a standardized foreign exchange market.

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