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A Joint Circular of the State Economic Commission,
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1979.08.08
STATE ECONOMIC COMMISSION / STATE ADMINISTRATION OF INDUSTRY & COMMERCE / PEOPLE'S BANK OF CHINA
nits belonging to
the same department  or  sector,  the  mediation and arbitration
procedure  can be decided by the authorities in charge of that
department or sector.
 During the period of mediation and arbitration, the arbitrating
authorities, in  the  light of the actual situation, may notify both
contractors to stop executing the contract for the time being.
 (7) The People's Bank is to supervise all enterprises' execution of
their economic  contracts  by  means  of  credit  and settlement
management. The People's Bank will gradually take the measure of
granting  loans  to enterprises in accordance with their economic
contracts, on the basis of the state plan. The rules of settlement
must be conscientiously followed and settlement discipline strictly
adhered to. Both contractors must settle the account in accordance
with  the mode of settlement specified in the economic contract, and
the  bank  should  handle acceptance or refusal of payments, or
deduct  the  required  sum  of  money from the account of the
enterprise  which  delays  payment for the goods or payment of
compensation, in accordance with the specific regulations of the rules
of settlement.
 (8)  The money paid in compensation caused by an enterprise's own
errors should not be included in the cost of production of the goods,
but should be  paid out of the enterprise's share of the profits
or out of its own funds. If a serious violation of this rule occurs,
a fine will be deducted from the wages of those who are responsible
for it, and an investigation into their administrative or legal
responsibilities should be made.
 For any failure in executing the contract caused by force majeure or
other reasons  which are really not brought about by the enterprise
itself,  the  enterprise   can   be  freed  from  economic
responsibilities  when  the  above  causes  are  proved through
investigation by the arbitrating authorities. The authorities  in
charge  can  take other measures to recoup as much of those economic
losses as possible.
 (9)  In  order to supervise enterprises and to encourage them to
execute their  contracts conscientiously, the supervisory authorities
have the right to verify both the statistics and data concerned and
the actual execution of  the  contract. If problems that hamper the
execution of the contract are discovered, the departments concerned
should  be asked to take effective steps to solve the problem in
time. Any violations of the law -- such as performing shoddy work or
using  inferior  materials,  making profits by acting as a broker,
selling a contract at a profit, or purposely avoiding supervision --
should be put to the Administration of Industry and Commerce for
investigation  and punishment. If it is a serious case, it should be
handed over to the judiciary for punishment by law.
 (10)  Economic  contracts  are  major  business  documents. All
enterprises should  establish  files,  compile  ledgers  and keep
them properly. For a guaranteed contract,the enterprise should give
a copy to the guarantor authorities for special filing.
 (11)  In  their work, the contract supervisory authorities should
closely  cooperate  with  judicial,  planning and other business
departments concerned. Necessary liaison systems should be established
for exchanging information, coordinating actions and strengthening
collaboration.
 (12)  All  parts  of  the country are asked to adopt the above
points as experiments, to sum up their experiences and to offer
suggestions for further amendments.




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