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Business
Law on Contractual Joint Ventures

The Law of the People"s Republic of China on Chinese-Foreign Equity Joint Ventures was adopted and promulgated by the second session of the Fifth NPC on July 1,1979. It was revised by the third session of the Seventh NPC in April 1990. The Law of the People"s Republic of China on Chinese-Foreign Contractual Joint Ventures was adopted and promulgated by the first session of the Seventh NPC on April 13,1988. The Law of the People"s Republic of China on Wholly Foreign-Owned Enterprises was adopted and promulgated by the fourth session of the Sixth NPC on April 12,1986. The three laws have played a significant role in implementing the opening policy, attracting foreign investment, and expanding economic cooperation and technology exchanges with foreign countries since they were issued.

In view of the continued reform and opening up and steady development of the national economy, and in order to adapt to the process of China"s entry into the WTO, to make the three laws more in conformity with China"s reform and opening up, and to establish a socialist market economy legal system within the framework of international practices and rules, after examination and approval by the NPC Standing Committee in 2000, the following revisions were made to the Law of the People"s Republic of China on Chinese-Foreign Contractual Joint Ventures and the Law of the People"s Republic of China on Wholly Foreign-Owned Enterprises:

1). Articles about the balance of foreign exchange account

a. Article 20 of the Law of the People"s Republic of China on Chinese-Foreign Contractual Joint Ventures was deleted, which says: "A contractual joint venture shall keep balance between its foreign exchange income and expenses. It may apply to the relevant authorities for assistance in accordance with the state provisions if it has difficulty in balancing its foreign exchange account."

b. Section 3, Article 18 of the Law of the People"s Republic of China on Wholly Foreign-Owned Enterprises was deleted, which says: "Wholly foreign-owned enterprises shall reach by themselves the balance of foreign exchange receipts and disbursements. In case that the relevant authority in charge approved the sale in China of the products of the enterprises which results in an imbalance of foreign exchange receipts and disbursements of such enterprises, the authority that has approved of the sale shall be responsible for resolving such imbalance."

2). Article about "localization of supplies"

Article 15 of the Law of the People"s Republic of China on Wholly Foreign-Owned Enterprises is changed to: "Supplies, such as raw materials and fuel, required by wholly foreign-owned enterprise within the approved scope of operation may be purchased, according to the principal of fairness and justice, on the domestic or the international market." The previous stipulation, "may be purchased in China to the extent possible," is deleted.

3). Requirement on export achievement

Section 1, Article 3 of the Law of the People"s Republic of China on Wholly Foreign-Owned Enterprises is changed to: "The establishment of wholly foreign-owned enterprises must be beneficial to the development of the Chinese national economy. The state encourages the establishment of export-oriented and technologically advanced wholly foreign-owned enterprises." The stipulation on the establishment of wholly foreign-owned enterprises which must "use advanced technology and equipment and export all or a greater portion of their products" is deleted.

4). Articles on recordation of enterprises" production plans

Section 1, Article 11 of the Law of the People"s Republic of China on Wholly Foreign-Owned Enterprises is deleted, which says: "A wholly foreign-owned enterprise shall report their production and operation plans to the department in charge for record."

The Law of the People"s Republic of China on Chinese-Foreign Equity Joint Ventures was revised in March 2001. Changes are made to eight places. In one revision, the original stipulation said, "In its purchase of required raw and semi-processed materials, fuels, auxiliary equipment, etc., an equity joint venture shall give first priority to Chinese sources, but may also acquire them directly from the international market with its own foreign exchange funds." The new stipulation says, "Supplies, such as raw materials and fuel, required by an equity joint venture within the approved scope of operation may be purchased, according to the principal of fairness and justice, on the domestic or the international market."

 
   
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