Over the past 20 years, the Chinese government has formulated a series of laws, regulations and policies regarding the exploration and development of mineral resources in order to achieve the sustainable development of China's economy, and has set up a policy and regulation system for the exploration and development of mineral resources that dovetails with both China's own specific situation and with international standards.

After China's accession to WTO, the government has been keen to comply with its commitments by adjusting its laws and regulations and administrative functions.   Following the completion of amendments to the three major laws on foreign investment, which are <the Sino-Foreign Joint Venture Law>, (revised on March 15th 2001) < the Foreign-Owned Enterprise Law> (issued by No. 41 Chairman Order, on October 31,2000) and < the Sino-Foreign Cooperative Joint Venture Law>, (issued by No. 4 Chairman Order, on April 13, 1988). The government has also made significant adjustments to the <Regulations  to  Guide  Foreign  Investment  Direction>, <Foreign Investment Industry Guidance Categories> and <Regulations  on  Foreign  Investors  running  Investment Companies>. The state carried out important reforms in investment system, in order to build a fair and orderly market environment for various investment competition.

Investment Restructuring

The  State  Council  issued  <Decision  on  Investment Restructuring> on July 16, 2004, which contains the following major  measures  for  deepening  China's  investment restructuring:

The decision has changed the system for examining and approving the enterprise investment items into the system for authorizing and keeping records. According to< Decision on investment restructuring>, as for enterprises whose items excluding government investment, examination and approval system will not be carried out without exception. Only major items and restricted items have been approved by the government, while the other items have been put on records.

The decision  has rationally delimited the functions of government investment. Government should invest in social and economic domain in which the market can not effectively distribute resources and something relating to the state security;  in  strengthening  the  construction  of  public infrastructure for the purpose of protecting and improving natural environment; in promoting social and economic development of undeveloped areas, as well as science and technology advance and industrialization of new and high technology.    In  order to  put the  invested  funds  of governments at all levels to rational use, some measures should be adopted: direct investment, capital funds input, investment assistance, discount government loans, and etc.

The decision has improved the macro-economic regulation system  for  investment.  Effectively  controlling  various investments of the society must be reached by giving priority to indirect regulation on the basis of a combination of economic and legal means, plus administrative means when necessity.

The decision emphasizes on establishing and perfecting accountability system,  appraisal  system  for completed projects and social monitoring mechanism relating to the projects involving government investment for improving the supervision;  the  coordinated  supervisory  system  and credibility system for enterprise investment should  be established and perfected for promoting the supervision for nongovernmental investment efforts and investment activities of enterprises according to the law; strengthening and improving qualification management in intermediary services and performing qualification-oriented management of the intermediary agent involving consultation ,appraisal and inviting public bidding.

On October 9, 2004, Chinese government unveiled fresh policy  <Provisional  Regulations  Concerning  Approving Foreign Investment Projects>.  It simplified the procedures for examining and approving projects involving foreign investment: first, it substitutes project application report for proposals and feasibility study report. Second, it provides the local governments with greater decision-making power to examine and approve projects. Foreign investment projects listed in encouraged items and permitted items has increased from US$30million to US$100 million; restricted projects has risen from US$ 30million to US$ 50 million. And third, the time limit and authorizing formality have been made clear.

National Development and Reform Commission should either complete the approval for the application report of these items, which should be approved by the State Council and National Development Commission, or submit proposals to the State Council from the date of accepting the application report in 20 workdays; and the time limit can extend for another 10 workdays through permission.

Revisions to Foreign Investment Direction and Industry Guidance Categories

<Foreign Investment Industry Guidance Categories> became effective from the date of January 1, 2005. As far as mineral resources exploration and exploitation concerned, it contains the following major changes: Table 2-1 shows the relevant changes to mineral resources exploration items listed in the Categories.

The number of categories of encouraged items has increased from 9 to 11, while the number of categories of restricted items has decreased from 8 to 6.  In terms of mineral resources exploration, the Categories  has retained the exploration and development of coal and its associated resources, as well as coal seam gas; and the exploitation of iron, manganese, copper, lead, zinc and aluminum minerals as encouraged items.  In addition, the Categories has moved development and application of new technology for raising the recovery ratio of crude oil (limited to cooperation) and development and application of new technology of oil exploration  and  development  concerning  geophysical prospecting, drilling, logging and operation in the pit from the permitted items category to the encouraged items category, thus enabling foreign investment items under these categories to be exempted from equipment importation tariffs and import procedure value-added tax.

The sectors now open to foreign investment has been enlarged. For example, the smelting and processing of radio-active minerals originally locked out foreign investment but now for the first time, their exploitation is now listed under the items opening to foreign investment.

Foreign investment is encouraged in pillar industries in China's western region by loosening the shareholding ratio and industry restrictions for foreign investors investing in that region. The new Categories detail preferential treatment for foreign investors investing in the western region.   For example, complete foreign investment in pillar industries is only allowed in China's western region for the exploration and development of copper, lead, zinc and aluminum, as well as the mining, and smelting of metallurgic minerals.

A New Breakthrough in Foreign Investment Regulations

The <Regulations on Foreign Investors Running Investment Companies> were revised on February 12, 2004. Firstly, there has been a deregulation in terms of currency types for foreign investment, with the result that foreign investors will be able to make injections to the registered capital of investment companies with freely exchangeable currencies or the RMB revenues they have gained within the PRC, or the legitimate RMB revenues they have gained through stock transfer or liquidation.  The change has done away with the original limit restricting foreign investment to foreign currency investment. Foreign enterprises will be treated as domestic enterprises because they are allowed to use legitimate revenues gained in the PRC as investment funds. Secondly, changes have been made to the article saying 'for investment companies with registered capital of no less than US$30 mln, loan values shall not exceed 4 times the amount of the duly paid registered capital'.  Based on this, an article has been added which says 'for investment companies with registered capital no less than US$100 mln, loan values shall not exceed 6 times the amount of the duly paid registered capital.' Based on the article which says 'investment companies are allowed to act as initiators for the establishment of foreign invested limited companies or to hold the legal person stakes (that are not allowed to be circulated) of a foreign invested limited company', an article has been added saying 'investment companies may also hold the legal person stakes (that are not allowed to be circulated) of other limited companies.

<Notice on Transferring the Power of Administration for Keeping  Foreign-investment Enterprise  on  Record and Granting of Approval Certificate to a Lower Level, and further Simplifying the Procedure for Approval> issued by the Ministry of Commerce in November, 2005. From January 1, 2006, new approval authority will be administered to the foreign  investment  enterprises.  In  addition  to  special prescription, many works should be done before running a foreign-investment  enterprise  under  the  limitation  of examination and approval, those includes: directly applying to the departments responsible for commerce of people's government at provincial level where the enterprise is located, going through relevant formalities, and then taking out <authorizing certificate of foreign-investment enterprises>, dealing with registration procedure for running enterprises by taking the certificate as base, and finally receiving a business license.  The  above-mentioned  procedures  are  very convenience for foreign businessmen to invest in running prospecting company and mining company in China.