Chapter IV

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

2) 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 or report them for examination and approval in accordance with law and the provisions of the State Council.

2) to decide on the administrative setup of the enterprise;

3) to propose to the competent department of the government the appointment or removal, employment or dismissal of leading administrative cadres at the level of a vice-director of the factory, except as otherwise stipulated by law and the provisions of the State Council;

4) to appoint or remove, employ or dismiss the intermediate-level leading administrative cadres of the enterprise, except as otherwise stipulated by law;

5) to propose plans for wage adjustment and bonus distribution and important rules and regulations, and refer them to the staff and workers' congress for examination and approval; to propose programmes for the use of the welfare fund and make suggestions regarding such other matters as are important for the well-being and benefits of the staff and workers, and to refer them to the staff and workers' congress for deliberation and decision; and

6) to reward or punish the staff members and workers according to law; to submit to the competent department of the government proposals for rewarding or punishing leading administrative cadres at the level of a vice-director of the factory.

Article 46 The factory director must rely on the staff members and workers for the fulfilment of the obligations of the enterprise prescribed in this Law, support the work of the staff and workers' congress, the trade union and other public organizations, and implement the decisions made according to law by the staff and workers' congress.

Article 47 The enterprise shall establish a management committee or some other forms of organization to assist the factory director in making decisions on important issues of the enterprise. The management committee, with the factory director as its chairman, shall be composed of leading persons in charge of various aspects of the enterprise and representatives of the staff and workers.

The important issues as mentioned in the preceding paragraph shall include:

1) the policy of operation, long-term and annual plans, programmes for capital construction and major technical transformation, plans for the training of the staff and workers, plans for wage adjustment, programmes for the distribution and use of the retained funds and programmes for contract and leasing systems of managerial responsibility.

2) the size of the personnel of the enterprise whose wages are counted as cost of the enterprise and the establishment and adjustment of administrative organs; and

3) programmes for the formulation, revision and abrogation of major rules and regulations.

Proposals for discussion of the foregoing important issues shall all be made by the factory director.

Article 48 Factory directors who have made outstanding achievements in leading the enterprises in fulfilling their plans, raising product or service quality, improving economic results or promoting cultural and ideological progress shall be rewarded by the competent department of the government.

Chapter V

The Staff and Workers and the Staff and Workers' Congress

Article 49 The staff and workers of the enterprise shall have the right to participate in its democratic management; the right to put forward opinions and suggestions concerning its production and work; the right to enjoy, according to law, labour protection, labour insurance, rest and vacation; and the right to report the true situation to State organs and make criticisms and charges against the leading cadres of the enterprise. Women staff and workers shall have the right to enjoy special labour protection and labour insurance in accordance with the provisions of the State.

Article 50 The staff and workers should approach their work as the masters of the country that they are, observe labour discipline and the rules and regulations, and fulfil their tasks in production and work.

Article 51 The staff and workers' congress shall be the basic form for the practice of democratic management in the enterprise and the organ for the staff and workers to exercise their powers of democratic management.

The working organ of the staff and workers' congress shall be the trade union committee of the enterprise. The trade union committee of the enterprise shall be responsible for the day-to-day work of the staff and workers' congress.

Article 52 The staff and workers' congress shall exercise the following functions and powers:

1) to hear and deliberate the factory director's reports on the policy of operation, long-term and annual plans, programmes for capital construction and major technical transformation, plans for the training of the staff and workers, programmes for the distribution and use of the retained funds and programmes for contract and leasing systems of managerial responsibility, and to put forward opinions and suggestions;

2) to examine and endorse or to reject the enterprise's programmes for wage adjustment, programmes for bonus distribution, measures for labour protection, measures for awards and penalties and other important rules and regulations;

3) to deliberate and decide on the programmes for the use of the staff and workers' welfare fund, programmes for the allocation of the staff and workers' housing and other important matters concerning the well-being and benefits of the staff and workers;

4) to evaluate and supervise the leading administrative cadres at various levels of the enterprise and put forward suggestions for rewarding or punishing them and for their appointment or removal; and

5) to elect, by decision of the competent department of the government, the factory director and report to such department for approval.

Article 53 Democratic management shall be practised in workshops through the general meetings of the staff and workers, through the staff and workers representative groups or through other forms; the workers shall participate directly in the democratic management of shifts and groups.

Article 54 The staff and workers' congress shall support the factory director in exercising his functions and powers according to law and shall educate the staff and workers for the fulfilment of their obligations specified in this Law.

Chapter VI

The Relationship Between the Enterprises and the Government

Article 55 The government or the competent department of the government shall, in accordance with the provisions of the State Council, issue unified mandatory plans to the enterprises, ensure the supply of materials which are subject to planned allocation and needed by the enterprises for the fulfilment of mandatory plans, examine and approve plans submitted by the enterprises for capital construction and major technical transformation, appoint or remove, reward or punish factory directors, appoint or remove, reward or punish leading administrative cadres at the level of a vice-director of a factory, as proposed by factory directors, and examine and train leading administrative cadres at the factory level.

Article 56 The relevant departments of the government shall, in conformity with the objective that the State regulates the market and the market guides the enterprises, provide services for the enterprises and exercise administration and supervision over the enterprises in line with their respective functions and in accordance with the provisions of the laws and regulations. These departments shall:

1) formulate and adjust industrial policies, and guide the enterprises in working out their development plans;

2) provide advice and information for the enterprises to make their operational decisions;

3) coordinate the relations between the enterprises and other units;

4) safeguard the normal production order of the enterprises, and protect from infringement the State property operated and managed by the enterprises; and

5) gradually improve the public facilities related to the enterprises.

Article 57 The local governments at or above the county level in the locality of an enterprise shall provide it with the needed materials which are subject to local planning and control, coordinate the relations between the enterprises and other units in the locality, and strive to run well the public welfare undertakings related to the enterprises.

Article58 No State organ or unit shall be permitted to encroach on the right which the enterprise enjoys according to law to make its own decisions in operation and management, or to exact manpower, materials or financial resources from the enterprise by way of apportionment, or to demand the establishment of an organ by the enterprise or to determine the size of the personnel of an organ.

Chapter VII

Legal Liabilities

Article 59 Whoever has conducted productive and operational activities in the name of an enterprise in violation of the provisions of Article 16 of this Law, without prior examination and approval by the government or the competent department of the government and without approval by and registration with the administrative authorities for industry and commerce, shall be ordered to suspend his business operations, and his illegal earnings shall be confiscated.

An enterprise that practises fraud in dealing with the registration authorities and conceals the true situation from them shall be given a warning or punished with a fine; where the circumstances are serious, its business license shall be revoked.

The administrative punishment prescribed in this Article shall be decided upon by the administrative authorities for industry and commerce at or above the county level. If the party in question refuses to accept the decision on punishment in the form of a fine, the suspension of operations, the confiscation of illegal earnings or the revocation of the business license, it may file a suit in a court within 15 days of receiving the notification on the decision; if no suit is filed by the time limit and the decision is not complied with, the authorities that made the decision on punishment may apply to the court for compulsory enforcement.

Article 60 An enterprise that produces and sells substandard products and thereby causes property damage or physical injury to users and consumers shall be liable for damages; if a crime is constituted, the person or persons directly responsible shall be investigated for criminal responsibility according to law.

An enterprise whose product quality does not conform to the terms agreed upon in the economic contract shall be liable for breach of contract.

Article 61 If a decision of the government or the relevant department of the government violates the provisions of Article 58 of this Law, the enterprise shall have the right to apply to the authorities that made the decision for rescission. If no rescission is granted, the enterprise shall have the right to appeal to the authorities at the level next higher to the authorities that made the decision or to a supervisory department of the government. The authorities that accept the appeal shall make a ruling and notify the enterprise of it within 30 days of receiving the appeal.

Article 62 Any leading cadre of the enterprise, who violates the lawful rights and interests of the staff and workers by abusing his power, where the circumstances are serious, shall be given an administrative sanction by the competent department of the government; any leading cadre of the enterprise who retaliates against and frames up charges against staff members or workers by abusing his power and using his public office for private ends shall be investigated for criminal responsibility in accordance with the provisions of Article 146 of the Criminal Law of the People's Republic of China.

Article 63 Any leading cadre of the enterprise or of the relevant department of the government who, due to faults in his work, causes relatively heavy losses to the enterprise and the State, shall be given an administrative sanction by the competent department of the government or the relevant State organ at a higher level.

Any leading cadre of the enterprise or of the relevant department of the government who, due to neglect of duty, causes the property of the enterprise or the interests of the State and the people to suffer heavy losses, shall be investigated for criminal responsibility in accordance with the provisions of Article 187 of the Criminal Law of the People's Republic of China.

Article 64 Whoever obstructs, without resorting to violence or threat, the enterprise leaders from carrying out their functions according to law, shall be punished by the public security organ in the locality of the enterprise in accordance with the provisions of Article 19 of the Regulations of the People's Republic of China on Administrative Penalties for Public Security; whoever by means of violence or threat obstructs the enterprise leaders from carrying out their functions according to law shall be investigated for criminal responsibility in accordance with the provisions of Article 157 of the Criminal Law of the People's Republic of China.

Whoever disturbs the order of the enterprise, thereby making it impossible for production, business operations and work to go on smoothly, but has not caused serious losses, shall be punished by the public security organ in the locality of the enterprise in accordance with the provisions of Article 19 of the Regulations of the People's Republic of China on Administrative Penalties for Public Security; if the circumstances are so serious that production, business operations and work cannot be carried on and serious losses are caused, he shall be investigated for criminal responsibility in accordance with the provisions of Article 158 of the Criminal Law of the People's Republic of China.

Chapter VIII

Supplementary Provisions

Article 65 The principles of this Law shall be applicable to enterprises owned by the whole people in communications and transportation, the postal and telecommunications service, geological exploration, construction and installation, commerce, foreign trade, materials supply, agriculture, forestry and water conservancy. Article 66 If the enterprise implements the contract and leasing systems of managerial responsibility, the party awarding the contract and the contractor, the lessor and the lessee, with regard to their respective rights and obligations, shall implement the relevant provisions of the State Council, apart from abiding by the provisions of this Law.

With respect to the system of leadership in jointly operated enterprises, large-scale associated enterprises and stock enterprises, the relevant provisions of the State Council shall be implemented.

Article 67 The State Council shall, in accordance with this Law, formulate rules for implementation.

Article 68 The standing committees of the people's congresses of the autonomous regions may, in accordance with the principles of this Law and the Law of the People's Republic of China on Regional National Autonomy and in the light of the special features of their respective localities, formulate rules for implementation and report them to the Standing Committee of the National People's Congress for the record.

Article 69 This Law shall go into effect as of August 1, 1988.