The new Product Quality Law has 74 articles, of which 25 are newly added and over 20 are revised versions of the original articles. Two articles in the original law have been deleted.The new law highlights the following:

1. Quality and technical supervision departments are given the necessary power for law enforcement, whereby product quality supervision departments may carry out on-the-spot inspection and investigation of illegal establishments; collect evidence; and confiscate counterfeits, inferior products and manufacturing equipment.
   
   
2. Penalties for quality violations are increased.
   
   
3. Control of quality supervision departments and product quality inspection and certification organs is strengthened.
   
   
4. The responsibilities of governments at all levels are clarified; they are required to see to it that manufacturers maintain their product quality and must not offer any protection to counterfeits and inferior products turned out by local manufacturers.
   
   
5. Product quality control mechanisms for enterprises are to be established in a bid to prevent the production and sale of counterfeits and inferior products. Enterprises must set up responsibility system on quality assurance and must be legally liable for substandard products.
   
   
6. A general supervision system on product quality is established.

Increased Supervision of Safety Products

In an effort to ensure the quality of safety products and to strengthen administration of such products, the State Bureau of Quality and Technical Supervision and Ministry of Public Security have jointly promulgated the Procedures for the Administration of Safety Products, which will come into effect on September 1, 2000. The two departments have also issued the list of safety products.

The Procedures cover three systems, namely production licensing, safety approval, and production registration. Without production licensing or safety approval, no safety products can be manufactured, sold or used.

Safety products refer to special products for the protection of public security; state, collective and private property; as well as personal safety.

PBOC Issues Finance Leasing Regulations

In order to promote the healthy development of finance leasing in China, the People's Bank of China (PBOC) has promulgated and implemented the Procedures for the Administration of Finance Leasing Companies. Subject to PBOC approval, finance leasing companies are allowed to set up branches and accept foreign investors as shareholders. However, natural persons are not allowed to hold shares.

Finance leasing companies refer to non-bank financial institutions authorised by PBOC to conduct finance leasing business. Under the Procedures, finance leasing companies must have minimum registered capital of Rmb500 million. Finance leasing companies that also operate foreign exchange business must have, in addition, not less than US$50 million worth of foreign exchange. PBOC requires finance leasing companies to make announcements on major issues such as incorporation, structural changes and dissolution.

The Procedures also specify the scope of operation of finance leasing companies. It covers: direct leasing, lease-back, sub-leasing and trustee leasing; operational leasing; accepting funds from legal persons and institutions for trustee leasing; accepting deposits placed by lessees for leasing purposes; providing lessees with working capital for the leasing projects; investment in listed securities and in shares of financial institutions; issuing financial bonds upon approval by PBOC; borrowing from financial institutions; borrowing of foreign exchange; lending from interbank market; sale and handling of the leased property; financial consultancy and guarantee business.

The Procedures, comprising six chapters and 52 articles, set out clear rules on finance leasing companies in terms of administration organs, incorporation and structural changes, business operation, supervision, receivership and termination of business.

The Procedures also stipulate that finance leasing companies must immediately report to PBOC if they come across any emergencies such as difficulty in making cash payments. PBOC may revoke the licence of finance leasing companies if they are in deep financial troubles or have committed grave violations against the law.

Since 1981 when the first finance leasing company was established in China up to 1999, there were 15 such companies in the country. Their total assets amounted to Rmb18.2 billion and their cumulated leasing business reached Rmb190 billion.

Guangdong Raises Entertainment Tax

The Guangdong provincial government has recently issued the Circular Concerning the Adjustment of Business Tax for Entertainment Operations. According to the Circular, the business tax rate for entertainment establishments in Guangdong is raised from 10% to 12%, retrospective to January 1, 2000. Foreign companies engaged in entertainment business should pay attention to the changes.

The tax increase comes on the heels of the government's removal of certain administrative fees on operators of entertainment businesses to reduce their tax burden. The adjustment is part of China's move towards standardising various fees and charges by incorporating them into the tax system.

Websites Promote Business Opportunities

The Domestic and Overseas Business Opportunity Talks 2000, to be held in Beijing in September, is organised by eight organisations and co-sponsored by over 40 domestic and foreign websites.

The eight organisers are: the China South East Asia Business Association, China Trade Publishing House, China Asia-Pacific Economic and Trade Cooperation Association, China Association for Small and Medium Enterprises International Cooperation, China Association for Promotion of International Friendship, China Association for International Scientific and Technological Cooperation, China Association for Promotion of International Science and Peace, and China Association for Regional Development.

Reportedly, over 300 people will attend the event, including representatives from domestic and foreign enterprises, business associations, trade commissions under foreign embassies in China, and international organisations in China. Main areas for business negotiation include: import and export of products; project cooperation; high-technology transfer; import, transfer and leasing of equipment; reorganisation and acquisition of small and medium enterprises; labour export; tourism; infrastructure; environmental protection and ecological resources development; agriculture; joint operation, transfer and leasing of shopping malls, hotels, restaurants and entertainment establishments; overseas listing.

By sponsoring this event, the websites will not only provide Internet users with e-business services, but will also allow web surfers to explore more cooperation opportunities.

New ISO Certification

Wu Qing, secretary of the Guangdong Provincial Quality Management Association, has said that the 2000 version of the ISO certification will be launched in November. As the existing version will remain valid for three years, the transition will not affect the certification process of enterprises.

While the present quality certification system is based on the 1991-1994 version embracing 12 articles, the 2000 version comprises only 8 articles and focuses on human resources as the basis for quality management. As the current version will continue to be valid for three years after the 2000 version comes into effect, enterprises can change over to the 2000 version during their annual inspection. Furthermore, since the consultation period for setting up the new quality certification system will take nine months, the certification body will have enough time to understand the new version and the existing ISO certification process will not be affected by the change.

New Rules on Taxation of Consultancy Firms

The State Administration of Taxation has recently issued a circular on the taxation of foreign-invested enterprises (FIEs) and foreign enterprises engaging in consultancy business. The main points of the circular are as follows:

1. When FIEs or their representative offices in China sign contracts with clients to provide consultancy service, the income thus generated must be reported to the local taxation department and business tax and enterprise income tax must be paid.
   
   
2. When consultancy firms outside of China sign contracts with clients to provide consultancy service and the service provided occur in China, the income thus generated must be reported to the Chinese taxation administration and business tax and enterprise income tax must be paid. If the service is provided both in and outside of China, the income derived from the service provided in China must be reported to Chinese authorities and tax paid accordingly.
   
   
3. If consultancy firms outside of China team up with FIEs or their representative offices in China to provide consultancy service, the income thus generated must be shared between the parties concerned in proportion to the work done or according to the terms in their cooperation contract. The FIEs or their representative offices in China must report and pay business tax and enterprise income tax on their share of the income. If a consultancy firm outside of China provides consultancy service jointly with its affiliates or representative offices in China to clients within China, the income receivable by its affiliates or representative offices in China must not be less than 60% of the total income from the consultancy project. The income must be reported and business tax and enterprise income tax paid to the Chinese taxation administration.

If the consultancy firms outside of China mentioned in (2) and (3) above have representative offices in the mainland and they undertake any consultancy project jointly, the income generated should be counted as the taxable income of the representative offices. For those that have not undertaken any project jointly with their representative offices or do not have representative offices in China, tax should be paid by the consultancy service user.

For consultancy firms from Hong Kong or from countries which have double taxation agreements with China, the Chinese authorities would determine whether their mainland operations are considered as permanent establishments. Under the circular, enterprise income tax will be collected from permanent establishments.

Certification of Toys to Commence

The secretariat of the China Certification of Toy Products Commission (CCTP) has formulated and revised six documents and some 20 related provisions, including the Rules for the Implementation of Toy Product Certification, to supplement the original document on certification. The changes are intended to better implement the Procedures for the Administration of Certification of Toy Products and facilitate the work of toy safety certification.

CCTP is China's only state-level toy certification body established with the approval of the State Bureau of Quality and Technical Supervision to carry out certification of toy safety and quality throughout the country. The latest revision focuses on the formats of certification, including one that only requires product testing plus self declaration and inspection. Under the new system, toy manufacturers can choose different formats of certification according to the characteristics of their products.

To help toy manufacturers better understand toy safety and quality certification, obtain such certification, and build up their reputation in product safety and quality in a bid to expand the domestic and international markets, the CCPT secretariat will organise presentations on toy safety and quality certification jointly with provincial bodies in Fujian, Guangdong and Jiangsu.

Dubbed as the "Kingdom of Toys", China has more than 4,000 toy enterprises and their products are mostly shipped to Europe and the US. Last year, China's toy exports totalled US$5.3 billion. Guangdong province alone accounted for three quarters, making it one of the world's major production bases for toys.

According to an official from the Guangzhou Import and Export Toys Inspection Centre, the quality of toys made in China still leaves much to be desired, with some failing to meet the safety standards of the importing countries. In light of this, the State Administration for Entry-Exit Inspection and Quarantine (SAEIQ) has, since 1996, held yearly seminars alternatively in Guangzhou and Shenzhen on the issue. Experts from the Consumer Products Safety Commission of the US, the Toys Inspection Centre under China's SAEIQ, and well-known toy companies are invited to brief mainland toy manufacturers on safety requirements in Europe and the US.