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                     Law of the People's Republic of China on 

          Chinese-foreign Equity Joint Ventures


Adopted by the Second Session of the Fifth National People's Congress on July 1, 1979


Revised in the Third Session of the Seventh National People's Congress on April 4, 1990


Revised for the second time in accordance with "Resolution on Revision of the Law of the People's

Republic of China on Chinese-Foreign Equity Joint Venture" of the Fourth Session of the Ninth

National People's Congress on March 15, 2001


Article 1

    With a view to expanding international economic co-operation and technical exchange, the

People's Republic of China permits foreign companies, enterprises, other economic organizations

or individuals (hereafter referred to as "foreign joint venturers")to joint with Chinese

companies, enterprise or other economic organizations (hereafter referred to as "Chinese joint

ventures") in establishing 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 joint

ventures, the profits due to them and their other lawful rights and interest in a joint venture,

pursuant to the agreement, contract and articles of association approved by the Chinese



  Joint ventures shall follow the provisions of the laws and regulations of the People's

Republic of China in all their activities.


   The state does not practise nationalization and expropriation of a joint venture; under

special circumstances, the state, in accordance with the needs of social public interest,

expropriates a joint venture pursuant to legal procedures and offers corresponding compensations.


Article 3

    The joint venture agreement, contract and articles of association signed by the parties to

the venture shall be submitted to the competent authorities of foreign economic relations and

trade (hereafter referred to as approval authorities), and the approval authorities shall, within

three months, decide whether to approve or disapprove them. After approval, the joint venture

shall register with the state competent authorities of administration for industry and commerce

to obtain a licence to do business and start operations.


Article 4

    A joint venture shall take the form of a limited liability company.


  The proportion of the investment contributed by the foreign joint venturer(s) shall generally

not be less than 25% of the reistered capital of a joint venture.


  The parties to the venture shall share the profits, risks and losses in proportion to their

respective contributions to the registered capital.


  No assignment of the registered capital of a joint venturer 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 a foreign joint venturer's investment must be

advanced technology and equipment that actually suit our country's needs. If the foreign joint

venturer causes losses by deception through the intentional use of backward technology and

equipment, it shall pay compensation for the losses.


  The investment of a Chinese joint venturer 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 joint venturer'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.

chinese Version