charge of land and obtain the right to use a site after securing approval and signing a contract. The acreage, location, purpose and contract period and fee for the right to use a site (hereinafter referred to as site use fee), rights and obligations of the two contracting parties and penalty provisions for breach of contract shall be stipulated in explicit terms in the contract. Article 48
If the Chinese joint venturer already has the right to the use of site for the joint venture, it may use the right as part of its investment. The monetary equivalent of this investment shall be the same as the site use fee otherwise paid for acquiring a site of similar conditions. Article 49
The standards for site use fee shall be set by the people's governments of the province, autonomous region or municipality directly under the Central Government where the joint venture is located in the light of the purpose of use, geographic and environmental conditions, expenses for requisition, demolition and resettlement and the joint venture's requirements for infrastructure, and filed with the MOFERT and the state department in charge of land for the record. Article 50
Joint ventures engaged in agriculture and animal husbandry may, with the consent of the people's governments of the province, autonomous region or municipality directly under the Central Government, pay a percentage of the joint venture's revenues from its business operations as site use fees to the local department in charge of land. Projects of a development nature in economically under-developed areas may receive special
preferential treatment in respect of site use fees with the consent of the local people's government. Article 51
The rates of site use fees shall not be subject to adjustment in the first 5 years beginning from the day the land is used. After that, the interval in between the necessary adjustments to be made according to the
development of the economy, changes in supply and demand, and changes in geographic and environmental conditions shall not be less than three years.
Site use fee as part of the investment by the Chinese joint venture shall not be subject to adjustment during the contract period. Article 52
The fee for the right to the use of a site obtained by a joint venture according to Article 47 of these Regulations shall be paid annually from the day to use the land stipulated in the contract. For the first calender year, the venture will pay a half-year fee if it has used the land for over 6 months; if less than 6 months, the site use fee shall be exempted. During the contract period, if the rate of site use fee is adjusted, the
joint venture shall pay it according to the new rate from the year of adjustment. Article 53
Joint ventures that have permission to use a site shall only have the right to the use of it but no ownership. Assignment of the right to use land is forbidden.
Chapter VIII Planning, Purchasing and Selling Article 54
A joint venture shall work out a capital construction plan (including labour force required for the construction, building materials, water, power and gas supply) according to the approved feasibility study report, and the plan shall be included in the capital construction plan of the department in charge of the joint venture, which shall give priority in arranging supplies and ensured the execution of the plan. Article 55
Funds earmarked for capital construction of a joint venture shall be put under unified management of the bank where the venture has opened an account. Article 56
A joint venture shall work out a production and operating plan in
accordance with the scope of operation and scale of production stipulated in the contract. The plan shall be carried out with the approval of the board of directors and filed with the department in charge of the joint venture for the record.
Departments in charge of the joint ventures and planning administration departments at all levels shall not prescribe mandatory production and operation plans for joint ventures. Article 57
In its purchase of required machinery, equipment, raw materials, fuel, parts, means of transport and office equipment, etc. (hereinafter referred to as materials), a joint venture has the right to decide whether it buys them in China or from abroad. However, where the terms are the same, it shall give first priority to purchasing them in China. Article 58
Joint ventures can purchase materials in China through the following channels:
(1) those under planned distribution shall be brought into the supply plan of the departments in charge of joint ventures and supplied by materials and commercial departments or production enterprises according to contracts;
(2) those handled by materials and commercial departments shall be purchased from these departments;
(3) those freely circulating on the market shall be purchased from
production enterprises or their sale or commission agencies;
(4) those export items handled by foreign trade corporations shall be purchased from the appropriate foreign trade corporations. Article 59
The materials needed for office and daily use for joint ventures can be purchased in China without quantity restrictions. 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 entrust 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 stipulated in the contract, a joint venture may import machinery, equipment, parts, raw materials and fuel needed for its production. A joint venture shall make a plan every year for items on which import licenses are required by the stipulation 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 applied 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, platinum, petroleum, 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 appraisal 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 fixed 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 statistical forms on production, supply and marketing 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 exempt from Customs duties and consolidated 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 components, 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, auxiliary 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 Ministry of Finance of the People's Republic of China.
A joint venture may apply for reduction of or exemption 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 Interim Regulations on Foreign Exchange Control of the People's Republic of China and relevant regulations.