Implementing Regulations for the PRC Sino-foreign Equity Joint Venture Law (3rd Revision)

Promulgated: July 22 2001
Effective: as of date of promulgation

Main contents: The revision removes several restrictions applying to equity joint ventures. It cancels the provision in the original Article 4, which makes technology exchange and increased export conditions for the establishment of an equity joint venture. It also amends the original Article 14 to remove the requirement that the domestic to foreign sales ratio and the foreign exchange income and expense structure be fixed in the joint venture contract. Amendments to the original Articles 27, 57 and 58 remove the necessity of following specified supply channels and of giving priority to domestically produced goods when purchasing manufacturing machinery or supplies. Likewise, pre-set sales procedures, price controls and price reporting procedures are eliminated with the cancelling of the provisions contained in the original Articles 58, 64 and 66.
In other instances, the revision streamlines the Regulations by replacing detail with a reference to other legislation. In this way, a list of 20 industries open to equity joint venture activity has been replaced with an article stating that equity joint venture establishment will be subject to government regulations on foreign investment (Article 3). Similarly, the original Article 71 has been amended to state that imported items "will be subject to tax exemption or reduction in accordance with State tax law". The original Articles 100 and 101, which specified the time periods of operation for equity ventures, have been combined and now state that time periods will be in accordance with the Sino-foreign Equity Joint Venture Terms Tentative Provisions.
Several amendments reduce the influence of the government body overseeing the domestic joint venture partner. A provision in the original Article 6, which stated that the joint venture's principle overseer was the Chinese partner's head department has been deleted. Other amendments remove provisions that give this department authority over technical transfer (original Article 46), equipment funding (original Article 30), and the feasibility study (original Article 54). Also deleted is the requirement that the Chairman of the Board of Directors be chosen by the domestic partner (original Article 30).
Finally, the revision stipulates that foreign exchange provided by the foreign partner will be converted at the standard rate set by the People¶Þ Bank of China, instead of a rate quoted by the State Administration of Foreign Exchange (original Article 26).
Related legislation: PRC, Sino-foreign Equity Joint Venture Law (2nd Revision), Mar 15 2001, CLP 2001 No.3 p5 and Sino-foreign Equity Joint Venture Terms Tentative Provisions, Oct 22 1990, CLP 1991 No.1 p71

clp reference:2310/01.07.22promulgated:2001-07-22effective:2001-07-22