Adopted at the First Session of the Seventh National People's
Congress on April 13, 1988, amended according to the Decision on
Revision of the Law of the People's Republic of China on
Chinese-Foreign Contractual Joint Ventures adopted at the 18th
Meeting of the Standing Committee of the Ninth National People's
Congress on October 31, 2000
Article 1? This Law is formulated to expand economic
cooperation and technological exchange with foreign countries and
to promote the joint establishment, on the principles 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
shall abide by Chinese laws and regulations and may not injure the
public interests of China. The relevant State authority 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 from the
date 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 from the date of receiving the certificate of approval, apply
to the administrative department for industry and commerce for
registration in order to obtain a business license. The date of
issue of the business license of 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 department 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 department 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 department for industry
and commerce according to relevant State regulations. 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 shall be subject to
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 free from any
interference.
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 shall be subject to 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 department for industry and
commerce.
Article 13? The employment, dismissal, remuneration,
welfare benefits, occupational protection, 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 shall establish its
account books within the territory of China, file its accounting
statements according to relevant regulations 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 department for industry and
commerce may order it to suspend its business operation 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
State regulations 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
scope of operation approved, import materials it needs and export
products it produces. A contractual joint venture may, in adherence
to the principles of fairness and rationality, purchase on both the
Chinese and the world market the raw and semi-processed materials,
fuels and other materials it needs within the approved scope of
operation.
Article 20? A contractual joint venture shall, in
accordance with State regulations on tax, pay taxes and may enjoy
the preferential treatment of tax reduction or exemption.
Article 21? 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 shall apply to the financial
and tax authorities, which shall examine and approve the
application in accordance with State regulations 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 22? 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 23? 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 department for
industry and commerce and the tax authorities.
Article 24? 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 from the date of
receiving the application.
Article 25? 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 foreign parties 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 26? 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 27? This Law shall come into force as of the date
of its promulgation.???
(Promulgated by The Standing committee of the National People's
Congress on 2000-10-31)
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Source: Ministry of Commerce