WORLD TRADE  
ORGANIZATION  S/C/N/208 
16 December 2002 
 (02-6934) 
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: 
 2001/03/15 
  
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/liberalization meas ures) and the impact of the 
measure on commitments in the Member's schedule and Article II (MFN) exemption 
list, if relevant: 
 
 Law of the People’s Republic of China on Sino-Foreign Equity Joint Venture 
 Full text English translation of the law 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 
 7. The texts are available from: 
 - Enquiry point   ; 
 - WTO Secretariat  ; 
 - Other sources (address, fax    and telephone of other body)   
                                                     
 
* Including international agreements, recognition measures or other types. 
1  In English only S/C/N/208 
Page 2  
 
 Law of the People’s Republic of China on Sino-Foreign Equity Joint Ventures 
 
(Amended at the Third Session of the Seventh National People’s Congress on April 4,1990, and 
revised in accordance with the Decision of the Fourth Session of the Ninth National People’s 
Congress Regarding the Revision of the Law of th e People’s Republic of China on Chinese-Foreign 
Equity Joint Ventures on March 15, 2001). 
 
Article 1  With a view to expanding internatio nal economic cooperation and technological 
exchange, the People’s Republic of China shall permit  foreign companies, enterprises, other economic 
organizations or individuals (hereinafter referred to as “the foreign parties”) to establish equity joint 
ventures together with Chinese companies, enterprises or other economic organizations (hereinafter referred to as “the Chinese partie s”) within the territory of the Peopl e’s Republic of China, under the 
principle of equality and mutual benefit and su bject to approval by the Chinese Government. 
 
Article 2 The Chinese Government shall protect, a ccording to law, the investment, entitled 
profits and their other lawful rights and interests of the foreign party in an equity joint venture, 
pursuant to the agreement, contract and articles of association approved by the Chinese Government. 
 
All activities of an equity joint venture shall comply  with the provisions of the laws and regulations of 
the People’s Republic of China. The state shall not nationalize or requisition any equity joint venture. 
Under special circumstances as required by public interest, an equity joint venture may be requisitioned under legal procedures and ap propriate compensatio ns shall be made. 
 
Article 3 The equity joint venture agreement, contract  and articles of association signed by the 
parties to the venture shall be submitted to competen t state departments in charge of foreign economic 
relations and trade (hereinafter referred to as  the examination and ap proval authorities) for 
examination and approval. The examination and approval authorities shall decide whether to approve 
or disapprove the venture within three months. When approved, the equity joint venture shall register 
with the competent state authorities responsible fo r industry and commerce administration, obtain a 
business license and start operations. 
 
Article 4 An equity joint venture shall take the form of a limited liability company. The 
proportion of the investment of the foreign party in an  equity joint venture shall be, in general, no less 
than 25 percent of the registered capital. The part ies to the venture shall share the profits, risks and 
losses in proportion to their contributions to the registered capital. 
 If any of the parties wishes to assign its register ed capital, it must obtain the consent of the other 
parties to the venture. 
 
Article 5 The parties to an equity joint venture may make their investment in cash, in kind or in 
industrial property rights, etc. 
 
The technology and equipment contributed by a fore ign party as its investment must be actually 
advanced technology and equipment that meet China’s needs. In case of losses caused by a foreign 
party in its deceptive conduct through the intentional provision of outdated technology and 
equipment, it shall compensate fo r the losses. The investment made by a Chinese party may include 
the right to the use of a site provided for the equity  joint venture during the period of its operation. 
Where the right to the use of the site is not taken as a part of the Chinese Party’s investment, the equity joint venture shall pay the Chinese Government for its use. 
 
The above-mentioned investment sha ll be specified in the contract and articles of association of the 
equity joint venture, and their value (excluding that of the site) shall be assess ed by all parties to the 
joint venture.  S/C/N/208 
 Page 3 
 
 
  
Article 6 An equity joint venture shall have a board of directors; the number of the directors 
thereof from each party and the composition of the board shall be stipulated in the contract and 
articles of association after consu ltations among the parties to the ve nture; such directors shall be 
appointed and replaced by the relevant parties. The chairman and the vice chairman (vice chairmen) 
shall be determined through consultations by the pa rties to the venture or elected by the board of 
directors. If the Chinese side or the foreign side assumes the office of the chairman, the other side 
shall assume the office(s) of the vice chairman (vice chairmen). The board of directors shall decide on 
important issues concerning the joint venture under  the principle of equality and mutual benefit. 
 The functions and powers of the board of directors are, as stipulated in the articles of association of the equity joint venture, to discuss and decide on all major issues concerning the venture, namely, the 
venture’s development plans, proposals for production and business operations, the budget for 
revenues and expenditures, the distribution of profits, the plans concerning manpower and wages, the 
termination of business, and the appointment or employment of the general manager, the deputy 
general manager(s),the chief e ngineer, the chief accountant and the auditors, as well as the 
determination of their functions, powers and terms of employment, etc. The offices of general 
manager and deputy general manager(s) (or factory manager and deputy manager(s)) shall be assumed 
by the respective parties to the venture. 
 
The employment, dismissal, remuneration, welfare, la bour protection and labour insurance, etc. of the 
staff members and workers of the equity joint vent ure shall be specified in  contracts concluded in 
accordance with law. 
 
Article 7 The staff and workers of an equity 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. 
 
An equity joint venture shall provide the necessar y conditions for the venture’s trade union to carry 
out its activities. 
 
Article 8 The net profit of an equity joint venture shall be distributed among the parties to the 
venture in proportion to their respective contributions to the registered capital, after payment out of its 
gross profit of the equity joint venture of income tax, pursuant to the provisions of the tax laws of the 
People’s Republic of China, and after deduction from the gross profit of a reserve fund, a bonus and 
welfare fund for workers and staff members and a business expansion fund, as stipulated in the 
articles of association. 
 
An equity joint venture may, in accordance with provisions of relevant laws and administrative rules 
and regulations of the state on taxation, enjoy pr eferential treatment for reduction of or exemption 
from taxes. 
 
A foreign party who reinvests its share of the net profit within the territory of China may apply for 
partial refund of the in come tax already paid. 
 
Article 9  An equity joint venture shall,  upon presentation of its business license, open a foreign 
exchange account with a bank or any other fina ncial institution which is permitted by the state 
administration for foreign exchange control to handle foreign exchange transactions. 
 A party to an equity joint venture shall handle its  foreign exchange transactions in accordance with 
the Regulations on Foreign Exchange Control of the People’s Republic of China. 
 
An equity joint venture may, in its business op erations, directly raise funds from foreign banks. S/C/N/208 
Page 4  
 
 The various kinds of insurance coverage of an equi ty joint venture shall be  provided by insurance 
companies established within the territory of China. 
 
Article 10 In its purchase of required raw and semi-processed materials, fuels, auxiliary 
equipment, etc., necessary to its approved scope of business, an equity joint venture should purchases 
both on the domestic market and the international ma rket in pursuant to the principle of equality and 
reasonable terms. 
 
An equity joint venture shall be encouraged to mark et its products outside China. It may sell its export 
products on foreign markets directly or through associated agencies or China’s foreign trade agencies. Its products may also be sold on the Chinese market .  When necessary, an equity joint venture may set 
up branches and (or) subsidiaries outside China. 
 
Article 11 The net profit which a foreign party receives as its share after performing its 
obligations under the law and the agreements or the contract, the funds it receives upon the expiration 
of the venture’s term of operation or its early term ination, and its other funds may be remitted abroad 
in accordance with foreign exchange control regulations and in the currency or currencies specified in 
the contract of the equity joint venture. 
 
A foreign party shall be encouraged to deposit in the Bank of China the foreign exchange which it is 
entitled to remit abroad.  Article 12 The wages, salaries or other legitimate in come earned by a foreign worker or staff 
member of an equity joint venture, after payment of the individual income tax under the Tax Law of 
the People’s Republic of China, may be remitted ab road in accordance with foreign exchange control 
regulations. 
 
Article 13 Based on different lines of trade and diff erent circumstances, arrangements for the 
duration of equity joint ventures may be made differently through agreement by the parties to the 
venture. Equity joint ventures engaged in certain lines of trade shall specify their duration in the 
contracts, while equity joint ventures engaged in cer tain other lines of trade may choose to or not to 
specify their duration in the contracts. Where an eq uity joint venture has had its duration specified and 
the parties to the venture agree to extend the durati on, the venture shall file an application for that 
purpose with the examination and approval auth orities six months before its expiration. The 
examination and approval authorities shall, within on e month after receipt of the application, decide 
on its approval or disapproval.  
Article 14 In case of heavy losses, failure of a party to perform its obligations under the contract 
and the articles of association, or force majeure etc., the parties to the joint venture may terminate the 
contract through consultation and agreement, subj ect to approval by the examination and approval 
authorities and to registration with  the competent state administration for industry and commerce. In 
cases of losses caused by a breach of contract, the financial responsibility shall be borne by the party 
that has breached the contract. 
 
Article 15 Disputes arising between the parties to an equity joint venture which the board of 
directors has failed to settle through consultation ma y be settled through mediation or arbitration by 
an arbitration agency of China or through arbitration by another arbitration agency as agreed by the 
parties. The parties to an equity joint venture may start legal proceedings in a Chinese court, if no 
arbitration clause is provided in the equity join t venture contract and if no written agreement is 
concluded afterwards. 
 
Article 16 This Law shall enter into force on the date of its promulgation. 
__________