Law of the People's Republic of China
(Adopted by the Second Session of the Fifth National People's Congress on July 1, 1979, first amended according to the Resolution on Revising the Law of the People's Republic of China on Chinese-Foreign Joint Ventures adopted by the Third Session of the Seventh National People's Congress on April 4, 1990 and amended for the second time according to the Resolution on Revising the Law of the People's Republic of China on Chinese-Foreign Joint Ventures adopted by the Fourth Session of the Ninth National People's Congress on March 15, 2001)
Article 1 With a view to expanding international economic cooperation and technical exchange, the People's Republic of China permits foreign companies, enterprises, other economic organizations or individuals (hereinafter referred to as ``foreign partner in a joint ventures'') to join with Chinese companies, enterprises or other economic organizations (hereafter referred to as ``Chinese partner in a joint ventures'') to establish joint ventures in the People's Republic of China in accordance with the principle of equality and mutual benefit and subject to approval by the Chinese government.
Article 2 The Chinese government protects, in accordance with the law, the investment of foreign partner in a joint ventures, the profits due them and their other lawful rights and interests in a joint venture, pursuant to the agreement, contract and articles of association approved by the Chinese government. All the activities of a joint venture shall comply with the stipulations of the laws and legal regulations of the People's Republic of China. The state shall not nationalize or take over joint ventures; under special circumstances and according to the needs of social public interests, the state may requisite joint ventures according to legal procedures with due compensation.
Article 3 The joint venture agreement, contract and articles of association signed by the parties to the venture should be submitted to the competent foreign economic and trade department of the state (hereafter referred to as the ``examining and approving organ'') for examination and approval; and the examining and approving organ shall, within three months, decide whether to approve or disapprove them. After approval, the joint venture should register with the competent administration department for industry and commerce, obtain a license to do business and start operation.
Article 4 A joint venture shall take the form of a limited liability company. The proportion of the investment contributed by the foreign joint venture(s) should generally not be less than 25 percent of the registered capital of a joint venture.
The parties to the venture shall share the profits, risks and losses in proportion to their respective contribution to the registered capital. No assignment of the registered capital of a joint venture participant shall be made without the consent of the other parties to the venture.
Article 5 Each party to a joint venture may make its investment in cash, in kind or in industrial property rights, etc. The technology and the equipment that serve as the investment of the foreign partner in a joint venture must be advanced technology and equipment that actually suit our country's needs. If the foreign partner in a joint venture causes losses by deception through the intentional use of backward technology and equipment, it shall pay compensation for these losses.
The investment of a Chinese partner in a joint
venture may include the right to the use of a site provided for the joint
venture during the period of its operation. If the right to the use of
the site does not constitute a part of a Chinese partner's investment,
the joint venture shall pay the Chinese government a fee for its use.
The various investments referred to above shall be specified in the joint
venture contract and articles of association, and the value of each (excluding
that of the site) shall be jointly assessed by the parties to the venture.
The board of directors is empowered, pursuant to the provisions of the articles of association of the joint venture, to discuss and decide all major problems of the joint venture: expansion programs, proposals for production and operating activities, the budget for revenues and expenditures, distribution of profits, plans concerning manpower and pay scales, the termination of business and the appointment or employment of the president, the vice-president(s), the chief engineer, the treasurer and the auditors, as well as their powers and periods of employment, etc. The offices of president and vice-president(s) (or factory manager and deputy manager(s)) shall be assumed by the respective parties to the venture. Matters such as the employment, dismissal, payment, welfare, labor protection and labor insurance of the staff and workers of joint ventures shall be provided for in contracts reached in accordance with the law.
Article 7 Staff and workers of joint ventures shall
establish their trade union organizations, conduct trade union activities
and safeguard their lawful rights and interests according to the law.
Joint ventures shall provide necessary conditions for the activities of
the trade unions within the enterprises.
A joint venture may enjoy preferential treatment
of tax reduction or exemption in accordance with state tax laws and administrative
regulations. A foreign partner in a joint venture that reinvests in China
its share of the net profit may apply for refund of a part of the income
taxes already paid.
Article 15 Disputes arising between the parties
to a joint venture that the board of directors cannot settle through consultation
may be settled through mediation or arbitration by a Chinese arbitration
agency or through arbitration by another arbitration agency agreed upon
by the parties to the venture. In cases where the parties of a joint venture
have not made any stipulations on arbitration in their contract or have
not reached an agreement on arbitration in writing afterward may take
proceedings to the people's court.