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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 Peoples 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 an regulations and the agreements in the
contractual joint venture contract, duly fulfill 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, labor protection and
labor 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 ventures 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 ventures 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 ventures 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 ventures 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
ventures 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 ventures 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. |
