Article 59 The materials needed for office and daily use for joint¹ ventures can be purchased in China without quantity restrictions². Article 60 The Chinese Government encourages joint ventures to sell their products on the international market.

　　Article 61 Products of joint ventures that are urgently needed or to be imported by China can be mainly sold on the Chinese market.

　　Article 62 A joint venture has the right to export its products itself or entrust³ the sale-agencies of the foreign joint venturer or Chinese foreign trade corporations with sales on a commission or distribution.

　　Article 63 Within the scope of business stipulated⁴ in the contract， a joint venture may import machinery⁵， equipment， parts， raw materials and fuel needed for its production. A joint venture shall make a plan every year for items on which import licenses⁷ are required by the stipulation⁸ of the State， and apply for them every 6 months. For machines， equipment and other objects a foreign joint venturer has contributed as part of its investment， import licenses can be applied⁹ for directly with the documents approved by the examining and approving authorities. For materials the import of which is beyond the stipulated scope of the contract， separate applications for import licenses according to State regulations are required. A joint venture has the right to export its products by itself， whereas for those products which require export licenses under the stipulation of the State， the joint venture shall make an export plan every business year and apply for the needed licenses every 6 months.

　　Article 64 A joint venture may sell its products on the Chinese market in the following ways：

　　（1） For those items under planned distribution， the departments in charge of joint ventures will bring them into the distribution plan of the materials administration departments， which sell them to designated users according to plan.

　　（2） For those items handled by materials and commercial departments， the materials and commercial departments will place orders with the joint ventures.

　　（3） For the excess of those purchased by plan of the above two categories， the joint venture has the right to sell them by itself or entrust sales to the relevant units.

　　（4） For products of a joint venture that Chinese foreign trade companies need to import， the joint venture may sell them to these trade companies and shall be paid in foreign currency.

　　Article 65 Materials purchased and services needed in China by joint ventures shall be priced according to the following stipulations：

　　（1） The six raw materials - gold， silver， platinum¹⁰， petroleum¹¹， coal and timber - that are used directly in production for export shall be priced according to the international market prices provided by the State Administration of Foreign Exchange Control or foreign currency or Renminbi.

　　（2） When purchasing export or import commodities handled by Chinese foreign trade companies， the suppliers and buyers shall negotiate the price， with reference to the prices on the international market， and foreign currency shall be paid.

　　（3） The prices for purchasing coal used as fuel and oil for motor vehicles， which are needed for manufacturing products to be sold domestically， as well as materials other than those listed in （1） and （2） of this Article， and the fees charged for water， electricity， gas， heat， goods transportation， services， engineering， consultancy service and advertisement， etc. provided to joint ventures， shall be treated equally with state-owned enterprises and paid in Renminbi.

　　Article 66 Prices of products of a joint venture for sale on the Chinese domestic market， except those items approved by the price control department for appraisal¹² of prices with reference to the prices on the international market， shall correspond with State-set prices， be priced according to equality and paid in Renminbi. Prices fixed¹³ by a joint venture for its products shall be filed with departments in charge of joint ventures and of price control for the record.

　　Prices of export products of a joint venture will be fixed by the joint venture itself and shall be filed with departments in charge of joint ventures and of price control for the record.

　　Article 67 A joint venture， in its economic exchanges with another Chinese economic organization， shall undertake economic responsibilities and settle disputes over contract in accordance with relevant laws and the contract concluded between the two parties.

　　Article 68 A joint venture shall fill in statistical¹⁵ forms on production， supply and marketing¹⁶ in accordance with relevant regulations， and file them with the departments in charge， statistics departments and other departments concerned for the record.

　　Chapter IX Taxes

　　Article 69 Joint ventures shall pay taxes according to the stipulations of relevant laws of the People's Republic of China.

　　Article 70 Staff members and workers employed by joint ventures shall pay individual income tax according to the Individual Income Tax Law of the People's Republic of China.

　　Article 71 Joint ventures shall be exempt¹⁷ from Customs duties and consolidated¹⁸ industrial and commercial tax on the following imported materials：

　　（1） machinery， equipment， parts and other materials （materials here and hereinafter mean required materials for the joint venture's construction on the factory site and for installation and reinforcement of machines） which are part of the foreign joint venture's share of investment according to the provisions of the contract；

　　（2） machinery， equipment， parts and components¹⁹， and other materials imported with funds from the joint venture's total investment；

　　（3） machinery， equipment， parts and components， and other materials imported by the joint venture with the additional capital and with the approving authorities， of which China cannot guarantee production and supply；

　　（4） raw materials， auxiliary²⁰ materials， components， parts and packaging materials imported by the joint venture for the production of export goods. Duties and taxes shall be paid or paid retroactively according to regulations when the above-mentioned duty-tax-free materials are approved for sale inside China or diverted to the production of items to be sold on the Chinese domestic market.

　　Article 72 Except those export items restricted by the State， products of a joint venture for export shall be exempt from consolidated industrial and commercial tax， subject to the approval by the Ministry²² of Finance of the People's Republic of China. A joint venture may apply for reduction of or exemption²³ from consolidated industrial and commercial tax for a certain period of time for products that are sold on the domestic market when it has difficulty to pay such tax in its initial period of production.

　　Chapter X Foreign Exchange Control

　　Article 73 All matters concerning foreign exchange for joint ventures shall be handled according to the Interim²⁴ Regulations on Foreign Exchange Control of the People's Republic of China and relevant regulations.

　　Article 74 On the strength of the business license⁶ issued by the State Administration for Industry and Commerce of the People's Republic of China， a joint venture may open foreign exchange deposit accounts and Renminbi deposit accounts with the Bank of China， or any other designated bank. The bank handling the accounts of the joint venture shall monitor its receipts and expenditures²⁵.

　　All foreign exchange incomes of a joint venture must be deposited in the foreign exchange deposit account in the bank where an account has been opened； all payments by the joint venture in foreign exchange are to be effected from its foreign exchange deposit account. The deposit interest rate shall be set according to the announced rates by the Bank of China.

　　Article 75 A joint venture shall in general maintain a balance between its foreign exchange receipts and expenditures. When a joint venture whose products are mainly sold on the domestic market under its approved feasibility study report and contract sustains an imbalance of its foreign exchange receipts and expenditures， the imbalance shall be remedied by the people's government of a relevant province， autonomous²⁶ region or municipality directly under the Central Government or the department in charge under the State Council from their own foreign exchange reserves. If the imbalance defies solution through such adjustment， it shall be solved through inclusion into the plan after the examination and approval by the MOFERT in conjunction with the State Planning Commission of the People's Republic of China.

　　Article 76 A joint venture shall get permission from the State Administration of Foreign Exchange Control or one of its branches to open a foreign exchange deposit account with an overseas bank or one in Hong Kong or Macao， and report to the State Administration of Foreign Exchange Control or one of its branches its foreign exchange receipts and expenditures， and provide bank statements.

　　Article 77 Any branch office set up by a joint venture in a foreign country or in Hong Kong or Macao shall open an account with the Bank of China wherever there is a branch of the bank. The branch office shall submit its annual statement of assets and liabilities and annual profit report to the State Administration of Foreign Exchange Control or one of its branches through the joint venture.

　　Article 78 A joint venture may apply to the Bank of China for foreign currency loans and Renminbi loans according to business needs and according to the Provisional Regulations for Providing Loans by the Bank of China to Chinese-Foreign Equity²⁷ Joint Ventures. Interest rates on loans to joint ventures are as announced by the Bank of China. A joint venture may also borrow foreign exchange as capital from banks abroad or in Hong Kong or Macao， but shall file a report with the State Administration of Foreign Exchange Control or one of its branches for the record.

　　Article 79 After foreign staff and workers or staff and workers from Hong Kong or Macao have paid income tax on their salaries and other legitimate²⁸ incomes according to law， they may apply to the Bank of China for permission to remit²⁹ out all the remaining foreign exchange after deduction³⁰ of their living expenses in China.

　　Chapter XI Financial Affairs and Accounting³¹

　　Article 80 The financial and accounting systems of a joint venture shall be instituted in accordance with China's relevant laws and procedures on financial affairs and accounting， and in consideration of the conditions of the joint venture， and then be filed with the local financial departments and tax authorities for the record.

　　Article 81 A joint venture shall employ a chief accountant to assist the general manager in handling the financial affairs of the enterprises. If necessary， a deputy chief accountant may be appointed.

　　Article 82 A joint venture shall （unless it is a small venture） appoint an auditor³² to be responsible for checking financial receipts， payments and accounts， and to submit reports to the board of directors and the general manager.

　　Article 83 The fiscal³³ year of a joint venture shall coincide with the calendar year， i.e. from January 1 to December 31 on the Gregorian calendar.

　　Article 84 The accounting of a joint venture shall adopt the internationally used accrual³⁴ basis and debit³⁵ and credit accounting system in their work. All vouchers³⁶， account books， statistic¹⁴ statements and reports prepared by the enterprise shall be written in Chinese， or concurrently³⁷ in a foreign language agreed upon by the parties.

　　Article 85 Joint ventures shall， in principle， adopt Renminbi as the standard accounting currency， however， a foreign currency may also be used as the standard accounting currency， if so agreed upon by the parties concerned.

　　Article 86 In addition to the use of a standard accounting currency， joint ventures shall record accounts in currencies actually used in payments and receipts， if such currencies in cash， bank deposits， funds of other currencies， assets and liabilities， gains， expenses， etc. are inconsistent with the standard accounting currency.

　　Joint ventures using a foreign currency in accounting shall work out a statement of accounts in Renminbi equivalents in addition to those in the foreign currency. Losses or gains in remittances³⁸ resulting from differences in exchange rates shall be recorded as current gains or losses for the year in which they occur. No adjustments shall be made to a balance in a foreign currency account as the result of a recorded fluctuation³⁹ in the exchange rate such a currency.

　　Article 87 Principles of profit distribution after payment of taxes in accordance with the Income Tax Law of the People's Republic of China Concerning Chinese-Foreign Equity Joint Ventures are as follows：

　　（1） Allocations for reserve funds， bonuses and welfare funds for staff and workers and expansion funds of the joint venture. The proportion of allocations is to be decided⁴⁰ by the board of directors.

　　（2） Reserve funds which can be used to make up for the losses of the joint venture， or with the consent of the examining and approving authorities， to increase the joint venture's capital for the expansion of production.

　　（3） After the funds specified⁴¹ in （1） of this Article have been deducted⁴² and if the board of directors decides to distribute the remaining profit， it shall be distributed proportionately to each party's investment.

　　Article 88 Profits may not be distributed before the losses of the previous year have been made up. Remaining profits from previous year （or years） may be distributed together with those of the current year.

　　Article 89 A joint venture shall submit quarterly and annual fiscal reports to parties to the joint venture， the local tax authority， department in charge of the joint venture and the financial department at the same level to those departments.

　　A copy of the annual fiscal report shall be submitted to the original examining and approving authorities.

　　Article 90 Only after being examined and certified⁴³ by an accountant registered in China shall the following documents， certificates and reports be considered valid⁴⁴：

　　（1） certificates of investment from all the parties to a joint venture （lists of assessed value agreed upon and signed by the parties to the joint venture and relevant written agreements shall be attached if investment involves materials， site use rights， industrial property and proprietary⁴⁵ technology）；

　　（2） annual fiscal reports of the joint venture；

　　（3） fiscal reports on liquidation⁴⁶ of the joint venture.

　　Chapter XII Staff and Workers

　　Article 91 The employment， recruitment， dismissal and resignation of staff and workers of joint ventures， and their salary， welfare benefits， labour insurance， labour protection， labour discipline and other matters shall be handled according to the Regulations of the People's Republic of China on Labour Management in Chinese-Foreign Equity Joint Ventures.

　　Article 92 Joint ventures shall make efforts to conduct professional and technical training of their staff and workers and establish a strict examination system so that they can meet the requirements of production and managerial skills in a modernized⁴⁷ enterprise.

　　Article 93 The salary and bonus system of joint ventures shall be in accord with the principle of distribution to each according to his work， and more pay for more work.

　　Article 94 Salaries and remuneration of the general manager and deputy general manager（s）， chief engineer， deputy chief engineer（s）， chief accountant and deputy chief accountant， auditor and other high-ranking managerial personnel shall be decided upon by the board of directors.

　　Chapter XIII Trade Union

　　Article 95 Staff and workers of a joint venture have the right to set up grass-roots trade unions and carry on trade union activities in accordance with the Trade Union Law of the People's Republic of China （hereinafter referred to as Chinese Trade Union Law） and the Statute⁴⁸ of the Trade Unions of China.

　　Article 96 Trade unions in joint ventures are representatives of the interests of the staff and workers. They have the power to sign， on behalf of the staff and workers， labour contracts with joint ventures and supervise the execution of these contracts.

　　Article 97 The basic tasks of the trade unions in joint ventures are： to protect the democratic rights and material interests of the staff and workers according to law； to help the joint ventures with the arrangement and rational use of welfare and bonus funds； to organize political， professional， scientific and technical studies， carry out literary， art and sports activities； and to educate staff and workers to observe labour discipline and strive to fulfil the economic tasks of the enterprises.

　　Article 98 Trade union representatives have the right to attend， without the right to vote， meetings of the board of directors held to discuss important issues such as development plans， production and operational activities of joint ventures and to air the opinions and demands of staff and workers.

　　Trade union representatives have the right to attend， without the right to vote， meetings of the board of directors held to discuss and decide on awards and penalties to staff and workers， salary and wage system， welfare benefits， labour protection and labour insurance， etc. The board of directors shall heed⁴⁹ the opinions of the rade union and win its co-operation.

　　Article 99 A joint venture shall actively²¹ support the work of the trade union， and， in accordance with the stipulations of the Chinese Trade Union Law， provide housing and facilities for the trade union as offices， meeting-halls， and for organizing welfare， cultural and sports activities. The joint venture shall allot⁵⁰ an amount of money totalling 2 per cent of all the salaries of the joint venture's staff and workers as trade union funds， which the trade union of the joint venture shall use according to the relevant administration rules for trade union funds formulated⁵² by the All-China Federation⁵³ of Trade Unions.

　　Chapter XIV Duration， Dissolution and Liquidation

　　Article 100 The duration of a joint venture shall be decided upon through consultation⁵⁴ among all the parties to the joint venture according to the actual conditions of the particular lines of business and projects. The duration of a joint venture engaged in an ordinary project shall， in principle， be between 10 to 30 years. Duration for those engaged in projects requiring large amounts of investment， long construction cycles and low profit rates on the capital may be longer than 30 years.

　　Article 101 The duration of a joint venture shall be determined⁵⁵ by all the parties to the joint venture in the agreement， contract and activities of association. The duration begins from the date when the joint venture is issued a business license. When all parties to a joint venture agree to extend the duration， the joint venture shall file an application for extending the duration signed by representatives authorized⁵⁶ by the parties with the examining and approving authorities 6 months before the date of expiration⁵⁷ of the duration. The examining and approving authorities shall give an official written reply to the applicant⁵⁸ within one month as of the date of receipt of the application. Upon approval of the extension of the duration， the joint venture concerned shall go through registration⁵⁹ formalities for the alteration⁶⁰ in accordance with the Measures of the People's Republic of China for the Registration Administration of Chinese-Foreign Equity Joint Ventures.

　　Article 102 A joint venture may be dissolved in the following situations：

　　（1） termination of duration of the venture；

　　（2） inability to continue operations due to heavy losses；

　　（3） inability to continue operations due to the failure of one of the contracting parties to fulfil its obligations prescribed in the agreement， contract and articles of association；

　　（4） inability to continue operations due to heavy losses caused by force majeure such as natural calamities⁶¹ and wars；

　　（5） failure to obtain the desired objectives of the operation and no prospects⁶² for future development；

　　（6） occurrence of other reasons for dissolution as prescribed in the contract and articles of association.

　　In cases described in （2）， （3）， （4）， （5） and （6） of this Article， the board of directors shall make an application for dissolution to the examining and approving authorities for approval.

　　In the situation described in （3） of this Article， the party which has failed to fulfil its obligations prescribed in the agreement， contract and articles of association shall be liable for the losses arising therefrom.

　　Article 103 Upon announcement of the dissolution of a joint venture， its board of directors shall work out procedures and principles governing the liquidation and nominate candidates for the liquidation committee. It shall report to the department in charge of the joint venture for examination， verification and supervision⁶³ of its liquidation.

　　Article 104 Members of a liquidation committee shall generally be selected from among the directors of a joint venture. In case the directors cannot serve or are unsuitable to be members of the liquidation committee， the joint venture may invite accountants and lawyers registered in China to do the job. When the examining and approving authorities deems necessary， it may send personnel to supervise the process.

　　The liquidation expenses and remuneration for the members of the liquidation committee shall be given priority in the disbursements from the existing assets of the joint venture.

　　Article 105 The tasks of the liquidation committee are： to conduct thorough investigation⁶⁴ of the property of the joint venture concerned， its credits and debts； to work out the statement of assets and liabilities and an inventory⁶⁵ of its property； to put forward a basis on which its property is to be evaluated and calculated； and to formulate⁵¹ a liquidation plan. All these shall be carried out upon approval of the board of directors.

　　During the process of liquidation， the liquidation committee shall represent the joint venture concerned in initiating⁶⁶ legal action or responding thereto.

　　Article 106 A joint venture shall be liable for its debts with all of its assets. The remaining assets after the clearance⁶⁷ of debts shall be distributed among the parties to the joint venture in proportion to each party's investment unless otherwise provided for in the agreement， contract and articles of association of the joint venture.

　　At the time when a joint venture is being dissolved， the portion of its net assets or remaining property that exceeds the value added to its registered capital is regarded as profit on which income tax shall be levied⁶⁸ according to law. The foreign joint venturer shall pay income tax according to law on the portion of the net assets or remaining property due him that exceeds his investment when he remits⁶⁹ it abroad.

　　Article 107 On the completion of the liquidation of a dissolved joint venture， the liquidation committee shall submit a liquidation report approved by a meeting of the board of directors to the original examining and approving authorities， go through formalities for cancelling its registration and hand in its business license to the original registration authorities.

　　Article 108 After the dissolution of a joint venture， its account books and documents shall be left in the custody⁷⁰ of the former Chinese joint venturer.

　　Chapter XV Settlement of Disputes

　　Article 109 Disputes arising over the interpretation⁷¹ or execution of the agreement， contract or articles of association between the parties to the joint venture shall， if possible， be settled through friendly consultation or mediation⁷². If these means prove futile⁷³， the disputes shall be subject to arbitration⁷⁴ or judicial⁷⁵ settlement.

　　Article 110 Parties to a joint venture shall apply for arbitration in accordance with the relevant written agreement. They may submit the disputes to the Foreign Economic and Trade Arbitration Commission of the China Council for the Promotion⁷⁶ of International Trade in accordance with its arbitration rules. With mutual⁷⁷ consent of the parties concerned， arbitration can also be carried out by an arbitration agency in the country where the respondent is located or by one in a third country in accordance with the arbitration agency's rules.

　　Article 111 In the absence of a written agreement on arbitration between the parties to a joint venture， either party may bring a suit in a Chinese people's court.

　　Article 112 In the process of settling disputes， except for matters in dispute， parties to a joint venture shall continue to carry out other provisions stipulated by the agreement， contract and articles of association of the joint venture.

　　Chapter XVI Supplementary⁷⁸ Provisions

　　Article 113 The Chinese departments in charge of visas shall provide facility by simplifying procedures for staff and workers from foreign countries or from Hong Kong or Macao （including their family members） who have frequent needs of entry and exit into and out of the China.

　　Article 114 The departments in charge of joint ventures shall make applications and go through the formalities for Chinese staff and workers going abroad for studies， business negotiations⁷⁹ or training.

　　Article 115 Staff and workers from foreign countries or from Hong Kong or Macao working for a joint venture may bring in needed means of transport and office equipment with payment of Customs duties and consolidated industrial and commercial taxes according to regulations.

　　Article 116 Joint ventures set up in the special economic zones shall comply with the provisions otherwise provided， if any， in the laws and regulations adopted by the National People's Congress， its Standing⁸⁰ Committee or the State Council.

　　Article 117 The power to interpret these Regulations is vested in the Ministry of Foreign Economic Relations and Trade.

　　Article 118 These Regulations shall go into force as of the date of promulgation⁸¹.

　　Note：

　　[*1] New provisions have been added to this Article. Therefore， the relevant provisions in the Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures amended⁸² on April 4， 1990 shall prevail. - The Editor

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