Amendment Promises More Leeway for Firms

Development of Sino-foreign enterprises will gain a boost with some of the legal restrictions governing their operations in China about to be shrugged off by lawmakers in the ongoing fourth session of the Ninth National People's Congress (NPC).

Draft amendments to Law on Chinese-Foreign Equity Joint Ventures were submitted yesterday to the Fourth Session of the Ninth NPC for a final debate and approval.

The amendments aim at abolishing stipulations that require Sino-foreign joint ventures to give priority to Chinese-made raw materials when purchasing raw materials, and to report their production plans to the departments concerned.

According to Gu Angran, director of the Legislative Affairs Commission of the NPC Standing Committee, the amendments will allow joint ventures greater leeway in making decisions about procurement as they can purchase raw-materials from both domestic and overseas.

Despite consisting of only a short revision in content, the amendment is seen as a milestone in the country's quest to provide a legal framework that will better serve the development of joint ventures in China, regarded by many as one of the most profitable markets in the world.

Experts said the amendment reflects China's confidence in its opening-up process because it helps create a legal framework that conform to international rules.

Amendment of the law is also believed to be a prerequisite for the further revision of Chinese laws and regulations that fail to meet international standards, something China will need to accomplish immediately after becoming a member of the World Trade Organization.

Gu told lawmakers yesterday that the amendment is a move to make the country's laws consistent with principles of a market-oriented economy and compatible with its impending accession to the World Trade Organization.

Two other laws relating to foreign investment in China -- Law on Foreign-Funded Enterprises and Law on Chinese-Foreign Contractual Enterprises -- were also revised in a similar manner by the NPC Standing Committee, in October of last year.

The draft amendments to the law on joint ventures were reviewed by the executive body of the NPC last October, but no action was taken because the law requires full NPC approval for any amendments.

To make future changes to the law easier, the draft amendments presented yesterday included an article that would abolish the full NPC approval requirement and allow amendment at any time by the NPC Standing Committee.

Gu said the stipulation, which was made in late 1970s when China began to open its door to the outside world, was a move taken to ensure the stability of the country's investment environment.

"But it is no longer needed today as the opening-up policy has become such a long-standing reality,'' Gu said.

The revision of the law is the second amendment. The first revision came during the Third Session of the Seventh NPC in 1990. The law was formally released in July 1979, when China instituted the opening-up policy.

(China Daily 03/10/2001)

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