Relevant departments of the Party Central Committee, ministries and commissions of the State Council, various directly affiliated institutions, the Supreme People’s Court, the Supreme People’s Procuratorate, relevant people's organizations, central management enterprises, housing and urban construction departments (construction committees, construction bureaus) and finance offices (bureaus) of provinces, autonomous regions, municipalities directly under the central government and municipalities with independent planning status, and construction bureaus and finance bureaus of Xinjiang Production and Construction Corps,

In order to implement the State Council's requirements for further clearing and regulating the fees charged by enterprises, effectively reducing the burden on construction enterprises and standardizing the quality deposit management for construction projects, the Ministry of Housing and Urban-Rural Development and the Ministry of Finance revised the Measures for the Management of Construction Project Quality Deposits (JZ [2016] No. 295) was revised. Now it is printed and distributed to you for earnest implementation by taking the local situation into consideration.

Ministry of Housing and Urban-Rural Development of the People's Republic of China

Ministry of Finance of the People's Republic of China

June 20, 2017

(This document is open to the public initiatively)

Measures for the Management of Construction Project Quality Deposits

[Article 1] For the purposes of regulating the management of construction project quality deposits and implementing the maintenance liability during the period of defect liability of projects, these Measures are developed in accordance with the Construction Law of the People's Republic of China, the Regulation on the Management of the Construction Project Quality, the Notice of the General Office of the State Council on Reviewing and Regulating Deposits in the Field of Project Construction, the Financial Management Rules for Basic Construction, etc. 

[Article 2] For the purpose of these Measures, “construction project quality deposit” (hereinafter referred to as the “deposit”) means the funds reserved from the project funds payable as agreed to by the contract-issuing party and the contractor in the construction project contact for guaranteeing the maintenance by the contractor for the defects in the construction project during the period of defect liability.

Defect means that the construction project quality does not comply with the mandatory standard or design document for the construction project, or the agreement in the contracting contract.

The period of defect liability shall generally be one year, shall not exceed two years at maximum, and shall be agreed to by the contract-issuing party and the contractor in the contract.

[Article 3] A contract-issuing party shall specify the reservation, refund, and other contents of a deposit in the bidding document, and reach an agreement with a contractor in the contract clauses on the following issues involving deposit: 

(1) The method of depositing and returning the deposits;

(2) The proportion and duration of the margin reserve;

(3) Whether the deposits bear interest, and the way of interest calculation of interest is calculated;

(4) The time limit and calculation method of the period of defect liability;

(5) Procedures for handling disputes in deposit reserve and return and project maintenance quality and expenses;

(6) The method of claim for defects in the period of defect liability;

(7) Payment of liquidated damages for overdue security and liability for breach of contract.

[Article 4] During the period of defect liability, for the government investment projects subject to the centralized treasury payment shall be implemented, and the management of the deposits shall be implemented in accordance with the relevant provisions of the centralized treasury payment. For other government investment projects, the deposit can be reserved with the financial department or the employer. If the employer is revoked, the deposits will be transferred to the user for management along with the delivered assets, in which case the user will act as the employer.

If the social investment project adopts the method of reserving deposits, the contract issuing and contracting parties may agree to transfer the deposit to the third-party financial institution for custody.

[Article 5] The bank guarantee system is implemented, and the contractor may replace the reserve deposits with bank guarantee. 

[Article 6] Before the completion of the project, if the performance bond has been paid, the contractor shall not reserve the project quality deposit at the same time.

If project quality assurance guarantee, engineering quality insurance and other guarantee methods are adopted, the employer may not reserve deposits. 

[Article 7] The contractor shall reserve deposits in accordance with the contractual agreement, and the total reserve ratio of the deposits shall not exceed 3% of the total settlement of the project price. Where the contract stipulates that the contractor replaces the reserve deposit with a bank guarantee, the amount of the deposits shall not exceed 3% of the total settlement of the project price.

[Article 8] The period of defect liability shall be counted from the date on which the project passes the completion acceptance. If the project fails to complete the acceptance inspection within the specified time limit due to the contractor's reasons, the period of defect liability shall be counted from the date of actually passing the completion acceptance. If the project fails to complete the acceptance inspection within the specified time limit due to the employer’s reason, the project will automatically enter the period of defect liability 90 days after the contractor submits the completion acceptance report.

[Article 9] During the period of defect liability, the contractor shall be responsible for the repair and bear the costs of identification and maintenance for the defects caused by the contractor’s reason. If the contractor does not repair or bear the expenses, the employer may deduct from the deposits or bank guarantee according to the contract. If the expenses exceed the guaranteed amount, the employer may make the claim from the contractor according to the contract. After the contractor repairs and bears the corresponding expenses, the liability for damages to the project is not exempted.

For the defect caused by the cause of others, the contractor is responsible for organizing the repair, and the contractor does not bear the cost, and the contractor shall not deduct the fee from the deposit.

[Article 10] During the period of defect liability, the contractor shall conscientiously perform the obligations stipulated in the contract. After their expiration, the contractor may apply to the contractor for the return of the deposits.

[Article 11] After receiving the application for the return of the deposits by the contractor, the employer shall verify with the contractor in accordance with the contractual agreement within 14 days. If there is no objection, the employer shall return the deposits to the contractor as agreed. If there is no agreement on the time limit for return or the agreement is not clear, the employer shall return the deposit to the contractor within 14 days after verification. If it is not returned within the time limit, it shall be liable for breach of contract according to law. If the employer does not reply within 14 days after receiving the contractor's return of the deposit application and still fails to reply within 14 days after the reminder, it will be deemed that the employer accepts the return of deposits application by the contractor.

[Article 12] If the employer and the contractor have disputes in the deposit reserve and return and the quality and cost of the project repair, such disputes shall be handled in accordance with the disputes and controversy resolution procedures stipulated in the contract.

[Article 13] Where the general contracting is implemented for construction projects, the agreement between the general contractor and the subcontractor regarding the rights and obligations of the deposits shall be carried out in accordance with the provisions of these Measures concerning the corresponding rights and obligations of the employer and the contractor.

[Article 14] These Measures shall be interpreted by the Ministry of Housing and Urban-Rural Development and the Ministry of Finance.

[Article 15] These Measures shall come into force on July 1, 2017. The original Measures for the Management of Construction Project Quality Deposits (JZ [2016] No. 295) shall be abolished at the same time.