industries;
(5) agriculture, animal husbandry and aquiculture; (6) tourism and service trades. Article 4
Joint ventures to be applied for their establishment shall lay stress on economic results and shall comply with one or several of the following requirements:
(1) they shall adopt advanced technical equipment and scientific
managerial methods which help increase the variety, improve the quality and raise the output of products and save energy and materials; (2) they shall prove to be conducive to technical renovation of
enterprises and be able to bring about quicker returns and bigger profits with less investment;
(3) they shall help expand exports and thereby increase foreign currency receipts;
(4) they shall help train technical and managerial personnel. Article 5
Application for establishing joint ventures shall not be approved if they involve any of the following circumstances: (1) detriment to China's sovereignty; (2) violation of Chinese Law;
(3) nonconformity with the requirements of the development of China's national economy;
(4) environmental pollution;
(5) obvious inequity in the agreements, contracts and articles of association signed, impairing the rights and interests of one of the parties. Article 6
Unless otherwise stipulated, the government department in charge of the Chinese joint venturer in a joint venture shall be the department in
charge of the joint venture (hereinafter referred to as the department in charge). If a joint venture has two or more Chinese joint venturers which are under different departments or from different regions, the departments and regions concerned shall, through consultation, designate a department in charge.
Departments in charge are responsible for providing guidance and assistance and exercising supervision over the joint ventures. Article 7
A joint venture has the right to independently conduct business operations and management within the scope as prescribed by Chinese laws and
regulations, and by the agreement, contract and articles of association of the joint venture. The departments concerned shall provide support and assistance.
Chapter II Establishment and Registration Article 8
The establishment of a joint venture in China is subject to examination and approval by the Ministry of Foreign Economic Relations and Trade of the People's Republic of China (hereinafter referred to as the MOFERT). Upon approval, an Approval Certificate shall be issued by the MOFERT. The MOFERT may entrust the people's governments in the related provinces, autonomous regions, and municipalities directly under the Central Government or relevant ministries or bureaus under the State Council (hereinafter referred to as the entrusted office) with the power to
examine and approve the establishment of joint ventures that comply with the following conditions:
(1) the total amount of investment is within the limit set by the State Council and the source of capital of the Chinese venturers has been ascertained;
(2) no additional allocation of raw materials by the State is required and the national balance as to fuel, power transportation and foreign trade export quotas is not affected. The entrusted office, after approving the establishment of a joint venture, shall report the same to the MOFERT for the record. An Approval Certificate shall be issued by the MOFERT. (The MOFERT and the entrusted office will hereinafter be generally referred to as the examining and approving authorities.) Article 9
The following procedures shall be followed in the establishment of a joint venture:
(1) it is the Chinese joint venturer in a joint venture that shall submit to its department in charge a project proposal and a preliminary feasibility study report of the joint venture to be established with
foreign joint venturer. The proposal and the preliminary feasibility study report, upon examination and approval by the department in charge, shall be submitted to the examining and approving authorities for final
approval. The parties to the venture shall then conduct work centering around the feasibility study, and then proceed on this basis, to negotiate and sign joint venture agreement, contract and articles of association; (2) when applying for the establishment of a joint venture, the Chinese joint venturer is responsible for the submission of the following documents to the examining and approving authorities:
(a) a written application for the establishment of the joint venture; (b) the feasibility study report jointly prepared by the parties to the venture; (c) joint venture agreement, contract and articles of association signed by representatives authorized by the parties to the venture; (d) list of candidates for chairman and vice-chairman of board of directors and directors nominated by the parties to the venture;
(e) written opinions concerning the establishment of the said venture of
the department in charge and the people's government of the province, autonomous region or municipality directly under the Central Government where the joint venture is located. The aforesaid documents shall be written in Chinese. Documents (b), (c) and (d) may be written
simultaneously in a foreign language agreed upon by the parties to the joint venture. Both versions are equally authentic. Article 10
Upon receipt of the documents stipulated in Article 9 (2), the examining and approving authorities shall, within 3 months, decide whether to
approve or disapprove them. Should anything inappropriate be found in any of the aforementioned documents, the examining and approving authorities shall demand an amendment within a limited time. Otherwise, no approval shall be granted. Article 11
The applicant shall, within one month as of the receipt of the Approval Certificate, register with the administrative department for industry and commerce of the province, autonomous region or municipality directly under the Central Government in accordance with the provisions of the Measures of the People's Republic of China for the Administration of the Registration of Chinese-Foreign Equity Joint Ventures (hereinafter referred to as registration administration office). The date of the
issuance of its business licence is the date of the formal establishment of the joint venture. Article 12
Any foreign investor who intends to establish a joint venture in China but is unable to find a specific co-operator in China may submit a preliminary plan for the joint venture project and entrust the China International Trust and Investment Corporation (CITIC) or a trust and investment corporation of a trust and investment corporation of a province,
autonomous region or municipality directly under the Central Government, or a relevant government department or a non-governmental organization, to recommend Chinese co-operators. Article 13
The \document agreed upon by the parties to the joint venture on some major points and principles governing the establishment of the joint venture. \by the parties to the joint venture on their mutual rights and obligations.
\parties to the joint venture specifying the purpose, organizational principles and method of management of the joint venture in compliance with the principles of the joint venture contract. Where the joint venture agreement comes into conflict with the contract, the latter shall prevail.
The parties to the joint venture may agree to sign the contract and articles of association only, without signing an agreement. Article 14
A joint venture contract shall include the following main items: (1) the names, the countries of registration, the legal addresses of parties to the joint venture, and the names, positions and nationalities of the legal representatives thereof;
(2) name of the joint venture, its legal address, purpose and the scope and scale of business;
(3) total amount of investment and registered capital of the joint
venture, amount, proportion and forms of investment to be contributed by each party to the joint venture, the time limit for contributing investment, stipulations concerning incomplete contributions, and assignments of investments;
(4) the proportion of profit to be shared and losses to be borne by each party;
(5) the composition of the board of directors, the distribution of the number of directors, and the responsibilities, powers and means of
employment of the general manager, deputy general manager and high-ranking managerial personnel;
(6) the main production equipment and technology to be adopted and their source of supply;
(7) the ways and means of purchasing raw materials and selling finished products, and the ratio of products sold within Chinese territory to those sold abroad;
(8) arrangements for receipts and expenditures in foreign currency;
(9) principles governing the handling of finance, accounting and auditing; (10) stipulations concerning labour management, wages, welfare, and labour insurance;
(11) the duration of the joint venture, its dissolution and the procedures for liquidation;
(12) the liabilities for breach of contract;
(13) ways and procedures for settling disputes between the parties to the joint venture;
(14) the language(s) used for the contract and the conditions for putting the contract into force.
The annex to the contract of a joint venture shall be equally authentic as the contract itself. Article 15
Chinese laws shall apply to the conclusion, validity, interpretation and execution of a joint venture contract, as well as to the settlement of disputes. Article 16
The Articles of association of a joint venture shall include the following
main items:
(1) the name of the joint venture and its legal address;
(2) the purpose, business scope and duration of the joint venture;
(3) the names, countries of registration and legal addresses of parties to the joint venture, and the names, positions and nationalities of the legal representatives thereof;
(4) the total amount of investment, registered capital of the joint
venture, each party's investment proportion, stipulations concerning the assignment of investment, the proportions of profit distribution and losses to be borne by parties to the joint venture;
(5) the composition of the board of directors, its responsibilities, powers and rules of procedure, the term of office of the directors, and the responsibilities of its chairman and vice-chairman;
(6) the setting up of management organizations, rules for handling routine affairs, the responsibilities of the general manager, deputy general manager and other high-ranking managerial personnel, and the method of their appointment and dismissal;
(7) principles governing financial, accounting and auditing systems; (8) dissolution and liquidation;
(9) procedures for amendment of the articles of association. Article 17
The agreement, contract and articles of association shall come into force upon approval by the examining and approving authorities. The same applies to amendments thereof. Article 18
The examining and approval authorities and the registration administration office are responsible for supervising and checking on the execution of the joint venture contracts and articles of association.
Chapter III Form of Organization and Registered Capital Article 19
A joint venture is a limited liability company.
Each party to the joint venture is liable to the joint venture within the limit of the capital subscribed by it. Article 20
The total amount of investment (including loans) of a joint venture refers to the sum of capital construction funds and the circulating funds needed for the joint venture's production scale as stipulated in the contract and the articles of association of the joint venture. Article 21
The registered capital of a joint venture refers to the total amount of investment registered at the registration administration office for the establishment of the joint venture. It shall be the total amount of investment subscribed by parties to the joint venture.