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Ministry Of Construction In China Issues Consultative Draft Of Regulations Governing The Qualifications Of Construction-Related Enterprises

On 9 August 2005, the Ministry of Construction in China issued a consultative draft of the Administrative Provisions Governing the Qualifications of Construction-Related Enterprises (the “Provisions”) to various relevant governmental organisations who were requested to respond with their comments by 23 August 2005. When promulgated, the Provisions are meant to supersede, and serve to consolidate, various sets of regulations governing this area of the law previously issued by the Chinese government.

The Provisions set out the framework for the qualification regime for enterprises who engage in survey, design, construction or supervision activities in China (the “Activities”). Detailed definitions on what constitute the Activities are set out in the Provisions – these definitions are fairly broad and accordingly, it would appear that the Provisions will be applicable to contractors, consultants and any company who engages in construction related activities in China. The Provisions are, however, not applicable to military projects. It is also pertinent to note that the Provisions do not make a distinction between local and foreign invested enterprises. This is consistent with the latest approach of the Chinese government in harmonising and unifying the qualification regimes for local and foreign contractors and design companies doing business in China.

The Provisions specify the types/grades of the qualifications which can be attained for each of the Activities. For example, in relation to construction, the types of qualifications are general contracting, specialist contracting and labour sub-contracting and the grades for each of those are Super, One, Two and Three. The requirements to be fulfilled in order to attain the relevant types/grades of qualifications are to be promulgated by the relevant construction administration authority of the State Council. Also, depending on the grade of the qualification applied for, approval would either be at the central or the provincial level. Taking the example of construction enterprises again, central approval is required for general contracting grades Super and One and for some specialist contracting grade One, while only provincial approval is required for general contracting grade Two and below, specialist contracting grades Two and Three and all labour sub-contracting.

The rest of the Provisions outline the relevant application, approval and supervision procedures, and it should be noted that the Provisions cover not just the initial application for the requisite qualifications, but also applications for increasing the type of Activities to be undertaken by the relevant enterprise, upgrades, modifications, etc. All qualification certificates last for 5 years.

The use of forged documents when applying for qualification certificates or obtaining qualification certificates through unlawful means attract certain penalties which include disqualifications ranging from 1 to 3 years and criminal sanctions in severe cases.

Kee Kwee Tan, Clifford Chance
Asia Supplement to International Construction Newsletter
Autumn 2005

Cannonway wishes to thank Kee Kwee Tan and Clifford Chance LLP for contributing this article. All rights reserved to Clifford Chance. This article is not a substitute for detailed advice on specific transactions and problems and should not be taken as constituting legal advice on any issue discussed. Clifford Chance is a major international law firm with offices in business centres around the world.

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