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  LAW OF THE PEOPLE'S REPUBLIC OF CHINA ON CHINESE-FOREIGN CO

                    N-TRACTUAL JOINT VENTURES

【名称】 LAW OF THE PEOPLE'S REPUBLIC OF CHINA ON CHINESE-FOREIGN CO

N-TRACTUAL JOINT VENTURES

【题注】

【章名】 Important Notice: (注意事项)

英文本源自中华人民共和国务院法制局编译, 中国法制出版社出版的《中华人民

共和国涉外法规汇编》(1991年7月版).

当发生歧意时, 应以法律法规颁布单位发布的中文原文为准.

This English document is coming from "LAWS AND REGULATIONS OF THE

PEOPLE'S REPUBLIC OF CHINA GOVERNING FOREIGN-RELATED MATTERS" (1991.7)

which is compiled by the Brueau of Legislative Affairs of the State

Council of the People's Republic of China, and is published by the China

Legal System Publishing House.

In case of discrepancy, the original version in Chinese shall prevail.

【章名】 Whole Document (法规全文)

LAW OF THE PEOPLE'S REPUBLIC OF CHINA ON CHINESE-FOREIGN CON-

TRACTUAL JOINT VENTURES

(Adopted at the First Session of the Seventh National People's

Congress and promulgated by Order No. 4 of the President of the People's

Republic of China on April 13, 1988, and effective as of the date of

promulgation)

Article 1

This Law is formulated to expand economic cooperation and technological

exchange with foreign countries and to promote the joint establishment, on

the principle of equality and mutual benefit, by foreign enterprises and

other economic organizations or individuals (hereinafter referred to as

the foreign party) and Chinese enterprises or other economic organizations

(hereinafter referred to as the Chinese party) of Chinese-foreign

contractual joint ventures (hereinafter referred to as contractual joint

ventures) within the territory of the People's Republic of China.

Article 2

In establishing a contractual joint venture, the Chinese and foreign

parties shall, in accordance with the provisions of this Law, prescribe in

their contractual joint venture contract such matters as the investment or

conditions for cooperation, the distribution of earnings or products, the

sharing of risks and losses, the manners of operation and management and

the ownership of the property at the time of the termination of the

contractual joint venture.

A contractual joint venture which meets the conditions for being

considered a legal person under Chinese law, shall acquire the status of a

Chinese legal person in accordance with law.

Article 3

The state shall, according to law, protect the lawful rights and interests

of the contractual joint ventures and of the Chinese and foreign parties.

A contractual joint venture must abide by Chinese laws and regulations and

must not injure the public interests of China.

The relevant state authorities shall exercise supervision over the

contractual joint ventures according to law.

Article 4

The state shall encourage the establishment of productive contractual

joint ventures that are export-oriented or technologically advanced.

Article 5

For the purpose of applying for the establishment of a contractual joint

venture, such documents as the agreement, the contract and the articles of

association signed by the Chinese and foreign parties shall be submitted

for examination and approval to the department in charge of foreign

economic relations and trade under the State Council or to the department

or local government authorized by the State Council (hereinafter referred

to as the examination and approval authority). The examination and

approval authority shall, within 45 days of receiving the application,

decide whether or not to grant approval.

Article 6

When the application for the establishment of a contractual joint venture

is approved, the parties shall, within 30 days of receiving the

certificate of approval, apply to the administrative authorities for

industry and commerce for registration and obtain a business license. The

date of issuance of the business license of a contractual joint venture

shall be the date of its establishment.

A contractual joint venture shall, within 30 days of its establishment,

carry out tax registration with the tax authorities.

Article 7

If the Chinese and foreign parties, during the period of operation of

their contractual joint venture, agree through consultation to make major

modifications to the contractual joint venture contract, they shall report

to the examination and approval authority for approval, if the

modifications include items involving statutory industry and commerce

registration or tax registration, they shall register the modifications

with the administrative authorities for industry and commerce and with the

tax authorities.

Article 8

The investment or conditions for cooperation contributed by the Chinese

and foreign parties may be provided in cash or in kind, or may include the

right to the use of land, industrial property rights, non-patent

technology or other property rights.

Article 9

The Chinese and foreign parties shall, in accordance with the provisions

of the laws and regulations and the agreements in the contractual joint

venture contract, duly fulfil their obligations of contributing full

investment and providing the conditions for cooperation. In case of

failure to do so within the prescribed time, the administrative

authorities for industry and commerce shall set another time limit for the

fulfillment of such obligations; if such obligations are still not

fulfilled by the new time limit, the matter shall be handled by the

examination and approval authority and the administrative authorities for

industry and commerce according to relevant state provisions.

The investments or conditions for cooperation provided by the Chinese and

foreign parties shall be verified by an accountant registered in China or

the relevant authorities, who shall provide a certificate after

verification.

Article 10

If a Chinese or foreign party wishes to make an assignment of all or part

of its rights and obligations prescribed in the contractual joint venture

contract, it must obtain the consent of the other party or parties and

report to the examination and approval authority for approval.

Article 11

A contractual joint venture shall conduct its operational and managerial

activities in accordance with the approved contract and articles of

association for the contractual joint venture. The right of a contractual

joint venture to make its own operational and managerial decisions shall

not be interfered with.

Article 12

A contractual joint venture shall establish a board of directors or a

joint managerial institution which shall, according to the contract or the

articles of association for the contractual joint venture, decide on the

major issues concerning the venture. If the Chinese or foreign party

assumes the chairmanship of the board of directors or the directorship of

the joint managerial institution, the other party shall assume the vice-

chairmanship of the board or the deputy directorship of the joint

managerial institution. The board of directors or the joint managerial

institution may decide on the appointment or employment of a general

manager, who shall take charge of the daily operation and management of

the contractual joint venture. The general manager shall be accountable to

the board of directors or the joint managerial institution. If a

contractual joint venture, after its establishment, chooses to entrust a

third party with its operation and management, it must obtain the

unanimous consent of the board of directors or the joint managerial

institution, report to the examination and approval authority for

approval, and register the change with the administrative authorities for

industry and commerce.

Article 13

The employment, dismissal, remuneration, welfare, labour protection and

labour insurance, etc. of the staff members and workers of a contractual

joint venture shall be specified in contracts concluded in accordance with

law.

Article 14

The staff and workers of a contractual joint venture shall, in accordance

with law, establish their trade union organization to carry out trade

union activities and protect their lawful rights and interests.

A contractual joint venture shall provide the necessary conditions for the

venture's trade union to carry out its activities.

Article 15

A contractual joint venture must establish its account books within the

territory of China, file its accounting statements according to relevant

provisions and accept supervision by the financial and tax authorities.

If a contractual joint venture, in violation of the provisions prescribed

in the preceding paragraph, does not establish its account books within

the territory of China, the financial and tax authorities may impose a

fine on it, and the administrative authorities for industry and commerce

may order it to suspend its business operations or may revoke its business

license.

Article 16

A contractual joint venture shall, by presenting its business license,

open a foreign exchange account with a bank or any other financial

institution which is permitted by the exchange control authorities of the

state to conduct transactions in foreign exchange. A contractual joint

venture shall handle its foreign exchange transactions in accordance with

the provisions of the state on foreign exchange control.

Article 17

A contractual joint venture may obtain loans from financial institutions

within the territory of China and may also obtain loans outside the

territory of China. Loans to be used by the Chinese and foreign parties

as investment or conditions for cooperation, and their guarantees, shall

be provided by each party on its own.

Article 18

The various kinds of insurance coverage of a contractual joint venture

shall be furnished by insurance institutions within the territory of

China.

Article 19

A contractual joint venture may, within its approved scope of operation,

import materials it needs and export products it produces. A contractual

joint venture may purchase, on both the domestic market and the world

market, the raw and processed materials, fuels, etc. within its approved

scope of operation.

Article 20

A contractual joint venture shall achieve on its own the balance of its

foreign exchange receipts and expenditures. If a contractual joint venture

is unable to achieve the balance of its foreign exchange receipts and

expenditures on its own, it may, in accordance with state provisions,

apply to the relevant authorities for assistance.

Article 21

A contractual joint venture shall, in accordance with state provisions on

tax, pay taxes and may enjoy the preferential treatment of tax reduction

or exemption.

Article 22

The Chinese and foreign parties shall share earnings or products,

undertake risks and losses in accordance with the agreements prescribed in

the contractual joint venture contract.

If, upon the expiration of the period of a venture's operation, all the

fixed assets of the contractual joint venture, as agreed upon by the

Chinese and foreign parties in the contractual joint venture contract, are

to belong to the Chinese party, the Chinese and foreign parties may

prescribe in the contractual joint venture contract the ways for the

foreign party to recover its investment ahead of time during the period of

the venture's operation. If the foreign party, as agreed upon in the

contractual joint venture contract, is to recover its investment prior to

the payment of income tax, it must apply to the financial and tax

authorities, which shall examine and approve the application in accordance

with state provisions concerning taxes.

If, according to the provisions of the preceding paragraph, the foreign

party is to recover its investment ahead of time during the period of the

venture's operation, the Chinese and foreign parties shall, as stipulated

by the relevant laws and agreed in the contractual joint venture contract,

be liable for the debts of the venture.

Article 23

After the foreign party has fulfilled its obligations under the law and

the contractual joint venture contract, the profits it receives as its

share, its other legitimate income and the funds it receives as its share

upon the termination of the venture, may be remitted abroad according to

law.

The wages, salaries or other legitimate income earned by the foreign staff

and workers of contractual joint ventures, after the payment of the

individual income tax according to law, may be remitted abroad.

Article 24

Upon the expiration or termination in advance of the term of a contractual

joint venture, its assets, claims and debts shall be liquidated according

to legal procedures. The Chinese and foreign parties shall, in accordance

with the agreement specified in the contractual joint venture contract,

determine the ownership of the venture's property. A contractual joint

venture shall, upon the expiration or termination in advance of its term,

cancel its registration with the administrative authorities for industry

and commerce and the tax authorities.

Article 25

The period of operation of a contractual joint venture shall be determined

through consultation by the Chinese and foreign parties and shall be

clearly specified in the contractual joint venture contract. If the

Chinese and foreign parties agree to extend the period of operation, they

shall apply to the examination and approval authority 180 days prior to

the expiration of the venture's term. The examination and approval

authority shall decide whether or not to grant approval within 30 days of

receiving the application.

Article 26

Any dispute between the Chinese and foreign parties arising from the

execution of the contract or the articles of association for a contractual

joint venture shall be settled through consultation or mediation. In case

of a dispute which the Chinese or the foreign party is unwilling to settle

through consultation or mediation, or of a dispute which they have failed

to settle through consultation or mediation, the Chinese and foreign

parties may submit it to a Chinese arbitration agency or any other

arbitration agency for arbitration in accordance with the arbitration

clause in the contractual joint venture contract or a written agreement on

arbitration concluded afterwards. The Chinese or foreign party may bring

a suit in a Chinese court, if no arbitration clause is provided in the

contractual joint venture contract and if no written agreement is

concluded afterwards.

Article 27

The detailed rules for the implementation of this Law shall be formulated

by the department in charge of foreign economic relations and trade under

the State Council and reported to the State Council for approval before

implementation.

Article 28

This Law shall come into force as of the date of its promulgation.