WORLD TRADE  
ORGANIZATION  S/C/N/209  
17 December 2002 
 (02-6957) 
Council for Trade in Services Original:   English 
 
   
NOTIFICATION PURSUANT TO ARTICLE III:3 OF THE  
GENERAL AGREEMENT ON TRADE IN SERVICES  
  
 The following notification has been received fr om the delegation of the People's Republic of 
China 
 
____________ 
 
 
1. Member notifying:  
 The People's Republic of China 
 
2. Notification under:  
 Article III, paragraph 3 of the Gene ral Agreement on Trade in Services 
 
3. Date of entry into force/duration:  
 2001/07/22 
  4. Agency responsible for implementation and enforcement of the measure:  
Ministry of Foreign Trade and Economic Co-operation 
 5. Complete description of the measure
* indicating the modes of supply covered, the effect 
on trade in services (e.g., restrictions/lib eralization measures) and the impact of the 
measure on commitments in the Member's schedule and Article II (MFN) exemption 
list, if relevant:  
 
Regulations for the Implementation of the Law of the People's Republic of China on Sino-
Foreign Equity Joint Venture 
 
Full text English translation of the regulation is attached.1  The English translation is for 
reference only and the Chinese version shall be authentic.  
6. Members specifically affected, if any:  
 All Members 
 
                                                     
 
* Including international agreements, recognition measures or other types. 
1  In English only  S/C/N/209 
Page 2  
 
 7. The texts are available from:  
 - Enquiry point   ; 
 - WTO Secretariat  ; 
 - Other sources (address, fax  
  and telephone of other body)   
 
__________ 
  S/C/N/209 
 Page 3 
 
 
 Regulations for the Implementation of the Law of the People's Republic of China on 
Sino-Foreign Equity Joint Venture 
 
(Promulgated by the State Council on Septembe r 20, 1983, amended by the State Council on 
January 15, 1986 and on December 21, 1987, amended in accordance with the Decision of the State 
Council on Amending the Regulations for the Implementation of the Law of the People's Republic of 
China on Chinese-Foreign Equity Joint Ventures on July 22, 2001) 
 
Chapter I General Provisions 
 
Article 1  These Regulations are formulated with a vi ew to facilitating the smooth implementation 
of the Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures (hereinafter 
referred to as the La w on Chinese-Foreign Equity Joint Ventures). 
 
Article 2  Chinese-Foreign equity joint ventures (her einafter referred to as joint ventures) 
established within the territory of China in accordance with the Law on Chinese-Foreign Equity Joint Ventures are legal persons of China and are subject to the jurisdiction of Chinese laws and enjoy 
protection thereof.  
 
Article 3  Joint ventures established within the territory of China shall be able to promote the 
development of China's economy and raise scientific and technological levels for the benefit of socialist modernization.  
The industries in which the State encourages, permits,  restricts or prohibits the establishment of joint 
ventures, shall be governed by the provisions of the State on guiding the direction of foreign investment 
and the catalogue for the guidance of foreign investment industries.  
 
Article 4  Applications for establishing joint ventures shall not be approved if they involve any of 
the following circumstances:  
 (1) a detriment to China's sovereignty; 
 (2) violation of Chinese Laws; 
 (3) nonconformity with the requirements of the development of China's national economy; 
 (4) creation of environmental pollution; 
(5) obvious inequity in the agreements, cont racts and articles of association signed, 
impairing the rights and interests of one of the parties. 
 Article 5  A joint venture has the right to independently conduct business operations and 
management within the scope as prescribed by Chinese laws and regulations, and by the agreement, 
contract and articles of association of the joint venture. The departments concerned shall provide support 
and assistance. 
 Chapter II Establishment and Registration 
 
Article 6  The establishment of a joint venture in China shall be subject to examination and 
approval by the Ministry of Foreign Trade and Economic Cooperation of the People's Republic of China 
(hereinafter referred to as the Ministry of Foreign Trade and Economic Cooperation). Upon approval, an 
approval certificate shall be issued by the Ministry of Foreign Trade and Economic Cooperation.  
 The State Council may authorize the people's governments of the provinces, autonomous regions, and municipalities directly under the Central Government or relevant departments of the State Council to 
examine and approve the establishment of joint ventures that meet the following requirements:  
(1) the total amount of investment is within the limit set by the State Council and the 
source of capital of the Chinese venturers has been ascertained; S/C/N/209 
Page 4  
 
 (2) no additional allocation of raw materials by the State is required and the national 
balance as to fuel, power, transportation an d foreign trade export quotas is not affected. 
 
The joint ventures approved and established according to the preceding paragraph shall report to the 
Ministry of Foreign Trade and Economic Cooperation for the record.   
 
The Ministry of Foreign Trade and Economic Cooperation and the people's governments of the 
provinces, autonomous regions, and municipalities directly under the Central Government or relevant 
departments of the State Council authored by the State Council will hereinafter be generally referred to 
as the examination and approval authorities.  Article 7  When applying for the establishment of a joint venture, the Chinese and foreign  
venturers shall jointly submit following documents to the examination and approval authorities: 
 (1) an application for the establishment of the joint venture; 
 (2) the feasibility study report jointly prepared by the parties to the venture; 
(3) the joint venture agreement, contract and articles of association signed by 
representatives authorized by the parties to the venture; 
(4) a list of candidates for chairman and vi ce chairman of the board of directors and 
directors nominated by the parties to the venture; 
(5) other documents specified by the examination and approval authorities. 
 The documents listed in the preceding paragraph shall be written in Chin ese. Documents (2), (3) and ( 4) 
may be written simultaneously in a foreign language agreed upon by the parties to the joint venture. 
Both versions are equally authentic. 
 
Where the examination and approval authorities find  something unsuitable in the documents submitted, 
they shall demand a modification that shall be made within a specified time limit.  
 
Article 8  Upon receipt of the documents provided in Article 7, the examination and approval 
authorities shall, within 3 months, decide whether to approve or disapprove the establishment of the 
joint venture. 
 
Article 9  The applicant shall, within one month as of the receipt of the Approval Certificate, 
register with the administrative department for in dustry and commerce (hereinafter referred to as 
registration administ ration agency) according to the relevant pr ovisions of the State. The date of the 
issuance of its business license is the date of the formal establishment of the joint venture. 
 
Article 10  The "joint venture agreement" mentioned in  these Regulations refers to the document 
agreed upon and concluded by the parties to the joint venture on some major points and principles 
governing the establishment of the joint venture. " Joint venture contract " refers to the document agreed 
upon and concluded by the parties to the joint venture on their mutual rights and obligations. "Articles of 
association of the joint venture" refers to the document agreed upon by the parties to the joint venture 
specifying the purpose, organizational principles and method of management of the joint venture in 
compliance with the principles of the joint venture contract.  
 
Where the joint venture agreement comes into conflict  with the contract, the latter shall prevail.   
 
The parties to the joint venture may agree to sign the contract and articles of association only, without signing an agreement.  
Article 11  A joint venture contract shall include the following main items:  
(1) the names, the countries of registration, the legal addresses of parties to the joint 
venture, and the names, positions and nationalities of the legal representatives thereof;  S/C/N/209 
 Page 5 
 
 
 (2) the name of the joint venture, its legal address, purpose and the scope and scale of 
business; 
(3) the total amount of investment and registered capital of the joint venture, the amount, 
proportion and forms of investment to be contributed by each party to the joint venture, 
the time limit for contributing the investment, stipulations concerning incomplete 
contributions, and assignment of equity; 
(4) the proportion of profits to be shared and losses to be borne by each party; 
(5) the composition of the board of directors, the distribution of the number of directors, 
and the responsibilities, powers and means of employment of the general manager, 
deputy general manager and high ranking managerial personnel;  
(6) the main production equipment and technology to be adopted and their source of 
supply; 
(7) the ways and means of purchasing raw materials and selling products; 
(8) principles governing the handling of finance, accounting and auditing; 
(9) stipulations concerning labor management, wages, welfare, and labor insurance; 
(10) the duration of the joint venture, its dissolution and the procedures for liquidation;  (11) the liabilities for breach of contract; 
(12) ways and procedures for settling disputes  between the parties to the joint venture; 
(13) the language(s) used for the contract and the conditions for putting the contract into 
force. 
 The annex to the contract of a joint venture shal l be equally authentic as the contract itself.  
 
Article 12  Chinese laws shall apply to the conclusion, validity, interpretation and execution of a 
joint venture contract, as well as to the settlement of disputes.  
 
Article 13  The articles of association of a joint venture shall include the following main items:  
(1) the name of the joint venture and its legal address; 
(2) the purpose, business scope and duration of the joint venture; 
(3) the names, countries of registration and legal addresses of parties to the joint venture, 
and the names, positions and nationalities of the legal representatives thereof; 
(4) the total amount of investment, registered capital of the joint venture, each party's 
investment proportion, stipulations concerning the assignment of equity, the proportions 
of profit distribution and losses to be borne by parties to the joint venture; 
(5) the composition of the board of directors, its responsibilities, powers and rules of 
procedure, the term of office of the director s, and the responsibilities of its chairman 
and vice chairman; 
(6) the setting up of management organizati ons, rules for handling routine affairs, the 
responsibilities of the general manager, deputy general manager and other high ranking 
managerial personnel, and the method of their appointment and dismissal; 
(7) principles governing financial, accounting and auditing systems; 
(8) dissolution and liquidation; 
(9) procedures for amendment of the articles of association.  
 
Article 14  The agreement, contract and articles of as sociation shall come into force upon approval 
by the examination and approval authorities. The same applies to amendments thereof.  
 
Article 15  The examination and approval authorities an d the registration administration agency are 
responsible for supervising and checking on the execution of the joint venture contracts and articles of association. 
 S/C/N/209 
Page 6  
 
 Chapter III Form of Organization and Registered Capital 
 
Article 16  A joint venture is a limited liability company.  
 
Each party to the joint venture is liable to the joint venture within the limit of the capital subscribed by 
it. 
 
Article 17  The total amount of investment (including enterprise loans) of a joint venture refers to 
the sum of capital construction funds and the circulating funds needed for the joint venture's production 
scale as stipulated in the cont ract and the articles of association of the joint venture.  
 Article 18  The registered capital of a joint venture refers to the total amount of investment 
registered at the registration administration agency for the establishment of the joint venture. It shall be 
the total amount of investment subscribed by parties to the joint venture.  
 
The registered capital shall generally be represen ted in Renminbi, or may be in a foreign currency 
agreed upon by the parties to the joint venture.  
 
Article 19  A joint venture shall not reduce its registered capital during its term. However, where 
the changes occurring in the total in vestment and the scale of production or operation indicate that there 
is a real need to reduce the registered capital, th e reduction shall be approved by the examination and 
approval authorities.  
Article 20  If one party to the joint venture intends to assign all or part of its investment subscribed 
to a third party, consent shall be obtained from the other party to the joint ve nture, and the assignment 
shall be registered with the registration administration agency after being approved by the examination 
and approval authorities.   
 
When one party assigns all or part of its investment to a third party, the other party has a preemptive 
right.  
 
When one party assigns its investment subscribed to a third party, the terms of assignment shall not be 
more favorable than those to the other party to the joint venture.  
 
No assignment shall be effective should there be any violation of the above provisions.  
 Article 21  Any increase, assignment or other disposal of the registered capital of a joint venture 
shall be approved at a meeting of the board of dire ctors and submitted to the original examination and 
approval authorities for approval.  
 
Registration procedures for changes shall be handled at the registration administration agency.  
 
Chapter IV Ways of Contributing Investment 
 
Article 22  Each joint venturer may invest in cash or may contribute buildings, factory premises, 
equipment or other materials, industrial property, propr ietary technology, or right to the use of a site, 
appraised at appropriate prices, as an investment. If the investment is in the form of buildings, premises, 
equipment or other materials, industrial property or proprietary technology, the prices shall be determined through consultation by the parties to the joint venture on the basis of fairness and reasonableness, or they shall be evaluated by a third party accepted and invited by the parties to the joint 
venture. 
  S/C/N/209 
 Page 7 
 
 
 Article 23  The foreign currency contributed by the foreign joint venturer shall be converted into 
Renminbi according to the base exchange rate quoted by the People's Bank of China on the date of its 
submission or be cross exchanged into the foreign currency as agreed upon.  
 
Should the cash Renminbi contributed by the Chinese joint venturer be converted into foreign currency, 
it shall be converted according to the base exchange  rate quoted by the People's Bank of China on the 
date of its submission. 
 
Article 24  The machinery, equipment or other materi als contributed as an investment by the 
foreign joint venturer shall be indispensable to the production of the joint venture.   The fixed price of the machinery, equipment or othe r materials referred to in the preceding paragraph 
shall not be higher than the current international mark et price for similar equipment or other materials. 
 
Article 25  The industrial property or proprietary technology contributed by the foreign joint 
venturer as an investment shall m eet one of the following conditions: 
(1) capable of markedly improving the performance and quality of existing products and 
raising productivity; 
  (2) capable of notably saving raw materials, fuel or power. 
 
Article 26  Foreign joint venturers who contribute industrial property or proprietary technology as 
an investment shall present relevant documentation on the industrial property or proprietary technology, including copies of the patent certificates or tradem ark registration certificates , statements of validity, 
their technical characteristics, practical value, the ba sis for calculating the price and the price agreement 
signed with the Chinese joint venturers. All these shall serve as an annex to the contract. 
 
Article 27  The machinery, equipment or other materials, industrial property or proprietary 
technology contributed by the foreign joint venturer as an investment shall be submitted to the 
examination and approval au thorities for approval.  
 
Article 28  The parties to the joint venture shall pay in  all the investment su bscribed according to 
the time limit stipulated in the contract. Where the time limit has been exceeded and there has not been a 
payment or a full payment, compensation for losses or  interest on the arrears shall be paid in accordance 
with the stipulations of the contract 
 
Article 29  After the investment is paid by the parties to the joint venture, a Chinese certified public 
accountant shall verify it and provide a certificate of  verification, in accordance with which the joint 
venture shall issue to them investment certificates, which include the following items: the name of the 
joint venture; date, month and year of the establishment of the joint venture; names of the joint venturers 
and the investment contributed; date, month and year of the contribution of the investment; and date, 
month and year of the issuance of investment certificates.  
 
Chapter V Board of Directors and Management Structure 
 
Article 30  The highest authority of the joint venture sh all be its board of directors, which shall 
decide all major issues concerning the joint venture.  
 
Article 31  The board of directors shall consist of no less than three members. The distribution of 
the number of directors shall be determined through consultation by the parties to the joint venture with reference to the proportions of investment contributed.  
 
The term of office for the directors is four years.  Their term of office may be renewed with the re-
appointment by the parties to the joint venture. S/C/N/209 
Page 8  
 
  
Article 32  The board of directors shall convene at le ast one meeting every year. The meeting shall 
be called and presided over by the chairman of the board. Where the chairman is unable to call the 
meeting, he shall authorize the vice chairman or a director to call and preside over the meeting. The 
chairman may convene an in terim meeting on the suggestion of more than one third of the directors.  
 
A board meeting requires a quorum of over two thirds of the directors. Where a director is unable to 
attend, he may make a proxy authorizing someone else to represent him and vote in his stead.  
 
A board meeting shall usually be held at the lo cation of the joint venture's legal address. 
 Article 33  Decisions on the following items shall be made only after being unanimously agreed 
upon by the directors present at the board meeting: 
(1) amendments to the articles of association of the joint venture; 
(2) suspension or dissolution of the joint venture; 
(3) increase in or reduction of the registered capital of the joint venture; (4) merger or division of the joint venture. 
 
Decisions on other matters may be made according to the rules of procedure stipulated in the 
articles of association. 
 Article 34  The chairman of the board of directors is th e legal representative of the joint venture. 
Where the chairman is unable to perform his duties, he  shall authorize the vice chairman of the board or 
a director to represent the joint venture.  
 
Article 35  A joint venture shall establish a management office which is responsible for the day-to-
day management and operations. The management office shall have a general manager and several 
deputy general managers who assist the general manager in his work.  
 
Article 36  The general manager shall carry out the decisions of the board meeting and organize 
and conduct the day-to-day management and operations of the joint venture. Within the scope of 
authorization by the board, the general manager sh all; externally, represent the joint venture, and 
internally, have the right to appoint and dismiss his subordinates and exercise other powers as authorized 
by the board of directors.  
 
Article 37  The general manager and deputy general managers shall be engaged by the board of 
directors of the joint venture. These positions may be held either by Chinese or foreign citizens.  
 
At the instance of the board of directors, the chairm an, vice chairman or other directors of the board may 
concurrently be the general manager, deputy gene ral managers or other high ranking managerial 
personnel of the joint venture.  
 
In handling major issues, the general manager sh all consult with the deputy general managers. 
 
The general manager or deputy gene ral managers shall not hold posts concurrently as general manager 
or deputy general managers of other economic organizations. They shall not get involved in other 
economic organizations' commercial competition against their own joint venture.  
 Article 38  In case of graft or serious dereliction of duty on the part of the general manager, deputy 
general managers or other high rank ing managerial personnel, they may be dismissed at any time by a 
decision of the board of directors. 
  S/C/N/209 
 Page 9 
 
 
 Article 39  Establishment of branch offices (including sales offices) outside China or in regions of 
Hong Kong or Macao is subject to approval by the Ministry of Foreign Trade and Economic 
Cooperation. 
 
Chapter VI Introduction of Technology 
 
Article 40  The introduction of technology mentioned in this Chapter refers to the acquisition of 
necessary technology by the joint venture by means of technology transfer from a third party or a joint 
venturer. 
 Article 41  The technology to be introduced to the joint venture shall be appropriate and advanced 
and enable the venture's products to display conspic uous social economic results domestically or to be 
competitive on the international market.  
 
Article 42  The right of the joint venture to do business independently shall be maintained when 
concluding such technology transfer agreements, and relevant documentation shall be provided by the technology exporting party with reference to the provisions of Article 26 of these Regulations.  
 
Article 43  The technology transfer agreements conclude d by a joint venture shall be submitted to 
the examination and approval authorities for approval.  
 Technology transfer agreements shal l meet the following requirements: 
(1) Fees for the use of technolog y shall be fair and reasonable. 
(2) Unless otherwise agreed upon by both parties, the technology exporting party shall not 
put any restrictions on the quantity, price or regi on of sale of the products that are to be 
exported by the technology importing party. 
(3) The term for a technology transfer agreemen t is generally not longer than 10 years. 
(4) After the expiration of a technology transfer  agreement, the technology importing party 
shall have the right to continue to use the technology. 
(5) Conditions for mutual exchange of information on the improvement of the technology 
by both parties to the technology transfer agreement shall be reciprocal. 
(6) The technology importing party shall have the right to buy the equipment, parts and raw 
materials needed from sources they deem suitable. 
(7) No irrational restrictive clauses prohibited under Chinese law and regulations shall be 
included. 
 Chapter VII Right to the Use of Site and Fees 
 
Article 44  Joint ventures shall carry out the principle of frugal use of land for their premises. Any 
joint venture requiring the use of a site shall file an application with local departments of the municipal 
(county) government in charge of land and obtain the right to use a site after securing approval and 
signing a contract. The acreage, location, purpose and contract period and fee for the right to use a site 
(hereinafter referred to as site use fee), rights and obligations of the two contracting parties and penalty 
provisions for breach of contract shall be stipulated in explicit terms in the contract. 
 
Article 45  If the Chinese joint venturer already has the right to the use of a site for the joint 
venture, it may use the right as part of its investment. The monetary equivalent of this investment shall 
be the same as the site use fee otherwise paid for acquiring a site of similar conditions.   Article 46  The standards for site use fees shall be set by the people's governments of the province, 
autonomous region or municipality directly under the Central Government where the joint venture is 
located in the light of the purpose for which it is used, geographic and environmental conditions, 
expenses for requisition, demolition and resettlement and the joint venture's requirements for S/C/N/209 
Page 10  
 
 infrastructure, and filed with the Ministry of Foreign Trade and Economic Cooperation and the State 
department in charge of land for the record.  
 
Article 47  Joint ventures engaged in agriculture and animal husbandry may, with the consent of 
the people's governments of the province, autonomous region or municipality directly under the Central 
Government, pay a percentage of the joint venture's revenues from its business operations as site use 
fees to the local department in charge of land.  
 
Projects of a development nature in economica lly under-developed areas may receive special 
preferential treatment in respect of site use fees with the cons ent of the local people's government. 
 Article 48  The rates of site use fees shall not be subject to adjustment in the first 5 years beginning 
from the date the land is used. After  that, the interval in between the necessary adjustments to be made 
according to the development of the economy changes in, supply and demand, and changes in 
geographic and environmental conditions shall not be less than three years.  
 Site use fees as part of the investment by the Chinese joint venturers shall not be subject to adjustment 
during the contract period.  
 
Article 49  he fee for the right to the use of a site  obtained by a joint venture according to 
Article 44 of these Regulations shall be paid annually  from the date of use of the land as stipulated in 
the contract.  For the first calendar year, the venture will pay a half-year fee if it has used the land for over 6 months; if less than 6 months, the site use f ee shall be exempted. During the contract period, if 
the rate of the site use fee is adjusted, the joint ve nture shall pay it according to the new rate from the 
year of adjustment. 
 
Article 50  In addition to the right to use a site ob tained according to the provisions of this 
Chapter, a joint venture may, according to the relevant provisions of the State, also obtain the right to 
use a site. 
 Chapter VIII Purchasing and Selling 
 
Article 51  In its purchase of required machinery, equipment, raw materials, fuel, parts, means of 
transport and office equipment, etc. (hereinafter referred to as materials), a joint venture has the right 
to decide whether it buys them in China or from abroad.  
 Article 52  The materials needed for office and daily use for joint ventures can be purchased in 
China based on needs without quantity restrictions.  
 
Article 53  The Chinese Government encourages joint ventures to sell their products on the 
international market. 
 
Article 54  A joint venture has the right to export its  products itself and may entrust the sales 
organization of the foreign joint venturer or a Chinese-Foreign trade corporation to sell on a 
commission or distributorship basis. 
 
Article 55  Within the scope of business stipulated in the contract, a joint venture may import 
machinery, equipment, parts, raw materials and fuel needed for its production. A joint venture shall make a plan every year for items for which import li censes are required by the provisions of the State, 
and apply for them every 6 months. For machines, equipment and other objects a foreign joint 
venturer has contributed as part of its investment, import licenses can be applied for directly with the 
documents approved by the examination and approval authorities. For materials the import of which is  S/C/N/209 
 Page 11 
 
 
 beyond the stipulated scope of the contract, separa te applications for impo rt licenses according to 
provisions of the State are required.  
 
A joint venture has the right to export its products by itself, whereas for those products which require 
export licenses according to the provisions of the State, the joint venture shall make an export plan 
every business year and apply for the needed licenses every 6 months.  
 
Article 56  A joint venture, in the price of the materi als purchases in China, and the payment of 
fees for water, electricity, gas, heat, goods transportation, labour services, engineering design, 
consultancy and advertisement services, etc., sh all enjoy equal treatment with other domestic 
enterprises in China.  
Article 57  A joint venture, in its economic exch anges with another Chinese economic 
organization, shall undertake economic responsibilities and settle  disputes over contracts in 
accordance with relevant laws and the cont ract concluded between the two parties.  
 Article 58  A joint venture shall, according to the provisions of the Statistics Law of the People's 
Republic of China and the statistical system for th e utilization of foreign capital, provide statistical 
data and submit statistical statements. 
 Chapter IX Taxes 
 
Article 59  Joint ventures shall pay taxes according to  the provisions of relevant laws of the 
People's Republic of China. 
 
Article 60  Staff members and workers employed by joint ventures shall pay individual income 
tax according to the Individual Income Tax Law of the People's Republic of China. 
 
Article 61  The following materials imported by a joint venture enjoy tax reduction or tax 
exemption according to the relevant pr ovisions of the tax law of China: 
(1) machinery, equipment, parts and other mate rials (materials here and hereinafter mean 
required materials for the joint venture's construction on the factory site and for 
installation and reinforcement of machines ) which are part of the foreign joint 
venture's share of investment accordin g to the provisions of the contract; 
(2) machinery, equipment, parts and other materials imported with funds from the joint 
venture's total investment; 
(3) machinery, equipment, parts and other materials imported by the joint venture with 
the additional capital and with the approval of the approval and examination 
authorities, of which China cannot guarantee production and supply; 
(4) raw materials, auxiliary materials, components, parts and packaging materials 
imported by the joint venture for the production of export goods. 
 
Duties and taxes shall be paid or paid retroact ively according to regulations when the above 
mentioned duty tax free materials are approved for sale  inside China or diverted to the production of 
items to be sold on the Chinese domestic market. 
 
Article 62  Except those export items restricted by China, export products of a joint venture 
enjoy tax reduction, tax exemption or refund of tax according to the relevant provisions of the tax law 
of China.  
Chapter X Foreign Exchange Control 
 S/C/N/209 
Page 12  
 
 Article 63  All matters concerning foreign exchange for joint ventures shall be handled according 
to the Regulations on Foreign Exchange Control of  the People's Republic of China and relevant 
administrative measures. 
 
Article 64  On the basis of its business license, a joint venture may open a foreign exchange 
account or a Renminbi account with a bank within the territory of China, and the depository bank 
shall monitor its receipts and expenditures. 
 
Article 65  A joint venture shall get permission from the State Administration of Foreign 
Exchange or one of its branches to open a foreign exchange account with an overseas bank or one in Hong Kong or Macao, and report to the State Administration of Foreign Exchange or one of its branches its foreign exchange receipts and expe nditures, and provide statements of account.  
 
Article 66  Any branch office set up by a joint venture in a foreign country or in Hong Kong or 
Macao shall submit its annual statement of assets  and liabilities and annual statement of profit to the 
State Administration of Foreign Exchange or one of its branches through the joint venture.   
Article 67  A joint venture may apply to the financial in stitutions within the territory of China for 
foreign currency loans and Renminbi loans accord ing to business needs; a joint venture may also 
borrow foreign exchange as capital from banks abro ad or in Hong Kong or Macao according to the 
relevant provisions of the State and go through the registration or record formalities with the State Administration of Foreign Exchange or one of its branches.  
Article 68  After foreign staff and workers or staff a nd workers from Hong Kong or Macao have 
paid income tax on their salaries and other legitima te income according to law, they may, with the 
deduction of their living expenses in China, convert the remaining po rtion into foreign exchange and 
remit them out according to the relevant provisions of the State. 
 
Article 69  The financial and accounting systems of a joint venture shall be instituted in 
accordance with China's relevant laws and proced ures on financial affairs and accounting, and in 
consideration of the conditions of  the joint venture, and then be  filed with th e local finance 
departments and tax authorities for the record. 
 
Article 70  A joint venture shall employ a chief accountant to assist the general manager in 
handling the financial affairs of the enterprise . If necessary, a deputy chief accountant may be 
appointed.  
Article 71  A joint venture shall (unless it is a sma ll venture) appoint an audit or to be 
responsible for checking financial receipts, payments  and accounts, and to submit reports to the board 
of directors and the general manager . 
 
Article 72  The fiscal year of a joint venture shall coincide with the calendar year, i.e. from 
January 1 to December 31 on the Gregorian calendar. 
 
Article 73  The accounting of a joint venture shall adopt the internationally used accrual basis 
and debit and credit accounting system. All vouchers, account books, and statements prepared by the 
enterprise shall be written in Chinese, or concur rently in a foreign language agreed upon by the 
parties.  Article 74  Joint ventures shall, in principle, adopt Renminbi as the standard accounting 
currency; however, a foreign currency may also be used as the standard accounting currency, if so 
agreed upon by the parties concerned. 
  S/C/N/209 
 Page 13 
 
 
 Article 75  In addition to the use of a standard accounting currency, joint ventures shall record 
accounts in currencies actually used in payments and receipts, if such currencies in cash, bank 
deposits, funds of other currencies, assets and liabilities, gain s, expenses, etc. are inconsistent with the 
standard accounting currency. The account statemen t compiled and reported by a joint venture that 
uses a foreign currency as the standard accounting currency shall be converted into Renminbi 
equivalents. The differences, conv erted into the standard accounti ng currency and resulting from the 
fluctuations in foreign exchange ra tes, shall be recorded as current gains or losses in remittances for 
the year in which they occur. The surplus appearing in foreign currency accounts as the result of a 
recorded fluctuation in the exchange rates shall be  handled, while setting accounts at the end of the 
year, by accountants in accordance with the provisi ons of relevant Chinese laws and financial and 
accounting system.  
Article 76  Principles of profit distribution after paym ent of taxes in accordance with the Income 
Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign 
Enterprises are as follows: 
(1) Allocations for reserve funds, bonuses and welfare funds for staff and workers and 
expansion funds of the joint venture. The proportion of allocations is to be decided by 
the board of directors.  
(2) Reserve funds which can be used to make up for the losses of the joint venture, or 
with the consent of the examination and approval authorities, to increase the joint 
venture's capital for the expansion of production. 
(3) After the funds specified in Item (1) of this Article have been  deducted and if the 
board of directors decides to distribute the remaining profit, it shall be distributed 
proportionately according to each party's investment. 
 
Article 77  Profits may not be distributed before the losses of the previous year have been made 
up.  Remaining profits from a previous year (or years) may be distributed together with those of the 
current year. 
 
Article 78  A joint venture shall submit quarterly and an nual accounting reports to parties to the 
joint venture, the local tax authority and the financial authority . 
 
Article 79  Only after being examined and certified by a certified public accountant of China 
shall the following documents, certificat es and reports be considered valid: 
(1) certificates of investment from all the par ties to a joint venture (lists of assessed value 
agreed upon and signed by the parties to the joint venture and relevant written agreements shall be attached if investme nt involves materials, site use rights, 
industrial property and proprietary technology); 
(2) annual accounting reports of the joint venture; 
(3) accounting reports on liquidation of the joint venture. 
 Chapter XII Staff and Workers 
 
Article 80  The employment, recruitment, dismissal and resignation of the staff and workers of 
joint ventures, and their salary, welfare benefits, labo r insurance, labor protectio n, labor discipline and 
other matters shall be handled according to the provisions of the State on labour and social security . 
 
Article 81  Joint ventures shall make efforts to cond uct professional and technical training of 
their staff and workers and establish a strict examination system so that they can meet the requirements of production and manage rial skills in a modem enterprise. 
 
Article 82  The salary and bonus system of joint ventures shall be in accord with the principle of 
distribution to each according to his work, and more pay for more work. S/C/N/209 
Page 14  
 
  
Article 83  Salaries and remuneration of the genera l manager and deputy genera1 manager(s), 
chief engineer, deputy chief engineer(s), chief acc ountant and deputy chief accountant, auditor and 
other high ranking managerial personnel shall be decided upon by the board of directors. 
 
Chapter XIII Trade Unions  Article 84  Staff and workers of a joint venture have the right to set up grassroots trade unions 
and carry on trade union activities in accordance with  the Trade Union Law of the People's Republic 
of China and the Statute of the Trade Unions of China.  Article 85  Trade unions in joint ventures are repres entatives of the interests of the staff and 
workers. They have the right to sign, on behalf of  the staff and workers, labor contracts with joint 
ventures and supervise the execution of these contracts. 
 
Article 86  The basic tasks of the trade unions in joint ventures are: to protect the democratic 
rights and material interests of the staff and workers according to law; to help the joint ventures with 
the arrangement and rational use of welfare and bonus funds; to organize political, professional, 
scientific and technical studies, carry out literary, art and sports activities; and to educate staff and 
workers to observe labor discipline and strive to  fulfill the economic tasks of the enterprises. 
 Article 87  Trade union representatives have the right to attend, without the right to vote, 
meetings of the board of directors held to discuss important issues such as development plans, 
production and operational activities of  joint ventures and to air the opinions and demands of staff and 
workers.  
 
Trade union representatives have the right to attend, without the right to vote, meetings of the board of 
directors held to discuss and decide on awards and penalties to staff and workers, the salary and wage 
system, welfare benefits, labor protection and labor insurance, etc. The board of directors shall heed 
the opinions of the trade union and win its cooperation. 
 
Article 88  A joint venture shall actively support the wo rk of the trade union, and, in accordance 
with the provisions of the Trade Union Law of People's Republic of China, provide housing and 
facilities for the trade union as offices, meeting halls,  and for organizing welfare, cultural and sports 
activities. The joint venture shall allot an amount of money totalling 2 per cent of all the salaries of 
the joint venture's staff and workers as trade union funds, which the trade union of the joint venture shall use according to the relevant administrative rules for trade union funds formulated by the All 
China Federation of Trade Unions. 
 Chapter XIV Duration, Dissolution and Liquidation 
 Article 89  The duration of a joint venture is governed by the Interim Provisions Concerning 
Contract Period of Chinese-Foreign Equity Joint Ventures.  
 
Article 90  A joint venture may be dissolved in the following situations: 
(l) expiration of the duration of joint operation; 
(2) inability to continue opera tions due to heavy losses; 
(3) inability to continue operations due to the failure of one of the contracting parties to 
fulfill its obligations stipulated in the agreement, contract and articles of association;  
(4) inability to continue operations due to h eavy losses caused by force majeure such as 
natural calamities and war; 
(5) failure to obtain the desired objectives of the operation and having no prospects for 
future development;  S/C/N/209 
 Page 15 
 
 
 (6) occurrence of other reasons for dissolution as stipulated in the contract and articles of 
association. In cases described in items (2), (4), (5) and (6) of the preceding 
paragraph, the board of directors may make  an application for dissolution to the 
examination and approval authorities for approval. In case described in item (3) of the 
preceding paragraph, the party that is carr ying out or has fulfilled the contract may 
make an application for dissolution to the examination and approval authorities for 
approval.  
 
In the situation described in (3) of this Article, the party that ha s failed to fulfill its obligations 
stipulated in the agreement, contract and artic les of association shall be liable for the losses 
arising therefrom. 
 
Article 91  Upon announcement of the dissolution of a joint venture, its liquidation shall be 
carried out; the said joint venture shall, according to the Measures for the Liquidation of Foreign 
Investment Enterprises, establish a liquidation committee that is responsible for the liquidation matter. 
 Article 92  Members of a liquidation committee shall generally be selected from among the 
directors of a joint venture. In case the directors cannot serve or are unsuitable to be members of the 
liquidation committee, the joint venture may invite  Chinese certified public accountants and lawyers 
to do the job. When the examina tion and approval authorities deems necessary, it may send personnel 
to supervise the process.   The liquidation expenses and remuneration for the members of the liquidation committee shall be 
given priority in the disbursements from the existing assets of the joint venture. 
 
Article 93  The tasks of the liquidation committee are: to conduct a thorough investigation of the 
property of the joint venture concerned, its credits and debts; to work out the statement of assets and 
liabilities and an inventory of its property; to put forward a basis on which its property is to be 
evaluated and calculated; and to formulate a liquidation plan. All these shall be carried out upon 
approval of the board of directors. 
 
During the process of liquidation, the liquidation committee shall represent the joint venture 
concerned in initiating legal actio ns or responding thereto.  
 
Article 94  A joint venture shall be liable for its debts with all of its assets . The remaining assets 
after the clearance of debts shall be distributed amon g the parties to the joint venture in proportion to 
each party's investment unless otherwise provided fo r in the agreement, contract and articles of 
association of the joint venture. 
 
At the time when a joint venture is being dissolved, if  the balance of its net assets or the balance of its 
remaining property with deduction of the ente rprises undistributed profit, various funds and 
liquidation expenses exceeds the enterprises paid in capital, the excess portion is the liquidation 
income on which the income tax sh all be paid according to law. 
 
Article 95  On the completion of the liquidation of a dissolved joint venture, the liquidation 
committee shall submit a liquidation report approved by a meeting of the board of directors to the 
examination and approval authorities, go through fo rmalities for cancelling its registration and hand in 
its business license to the registration administration agency.  Article 96  After the dissolution of a joint venture, its account books and documents shall be left 
in the custody of the former Chinese joint venturer. 
 S/C/N/209 
Page 16  
 
 Chapter XV Settleme nt of Disputes 
 
Article 97  Disputes arising over the interpretation or  execution of the agreement, contract or  
articles of association betw een the parties to the joint venture sh all, if possible, be settled through 
friendly consultation or mediation. If these mean s prove futile, the disputes shall be subject to 
arbitration or judicial settlement. 
 
Article 98  Parties to a joint venture, in accordance with the written agreement on arbitration, 
may have an arbitration carried out by an arbitral in stitution in China or by other arbitral institutions.  
 Article 99  In the absence of a written agreement on arbitration between the parties to a joint 
venture, either party may bring a su it in the Chinese people's court.  
 
Article 100  In the process of settling disputes, except for matters in dispute, parties to a joint 
venture shall continue to carry out other provisions stipulated by the agreement, contract and articles 
of association of the joint venture  
Chapter XVI Supplementary Provision 
 
Article 101  The Chinese departments in charge of visas shall provide facility by simplifying 
procedures for staff and workers from foreign c ountries or from Hong Kong or Macao, (including 
their family members) who have frequent needs fo r entry and exit into and out of the territory of 
China. 
 
Article 102  The Chinese staff and workers going abroad for study, business negotiations or 
training because of work requirements shall go th rough the exit formalities according to the relevant 
provisions of the State.  
 
Article 103  Staff and workers from foreign countries or from Hong Kong or Macao working for a 
joint venture may bring in needed means of transp ort and office equipment with payment of taxes 
according to the relevant provisions of the tax law of China.  
 
Article 104  Where laws or administrative regulations pr ovide otherwise for joint ventures set up 
in the special economic zones, such provisions prevail.  
 
Article 105  These Regulations shall be effective as of the date of promulgation. 
 
___________