Establishment of Sino-foreign Foreign Trading Equity Joint Ventures Tentative Measures

(Promulgated by the Ministry of Foreign Trade and Economic Cooperation on January 31 2003 and effective 30 days after the date of promulgation.)

(As of the effective date, the Establishment of Pilot Sino-foreign Foreign Trading Equity Joint Ventures Tentative Measures, approved by the State Council on September 2 1996 and promulgated by the Ministry of Foreign Trade and Economic Cooperation on September 30 1996, shall simultaneously be repealed.)

Article 1: These Measures are formulated in accordance with the PRC Foreign Trade Law, the PRC Sino-foreign Equity Joint Venture Law and other relevant laws and regulations in order to further open China to the outside world and promote the development of China's foreign trade.

Article 2: These Measures shall apply to the Sino-foreign foreign trading equity joint ventures (hereafter, Foreign Trading Joint Ventures) established within China by foreign companies and enterprises (hereafter, Foreign Investors) with Chinese companies and enterprises (hereafter, Chinese Investors), and specializing in foreign trade business.

Article 3: Foreign Trading Joint Ventures shall be limited liability companies. The proportion of the registered capital of a Foreign Trading Joint Venture contributed by the Foreign Investors shall be at least 25%.

Article 4: The establishment of a Foreign Trading Joint Venture shall comply with the following conditions:

(1) the Foreign Investors shall have an average annual trade volume with China over the three years before application of at least US$30 million, or US$20 million if the place of registration of the Foreign Trading Joint Venture is in the central or western region;

(2) the Chinese Investors shall have the right to engage in foreign trade, an average annual import and export volume over the three years before the application of at least US$30 million, or US$20 million if the place of registration of the Foreign Trading Joint Venture is in the central or western region;

(3) The Foreign Trading Joint Venture shall fulfil the following conditions:

(i) must have a registered capital of no less than Rmb50 million, or Rmb30 million if the place of registration is in the central or western region;

(ii) must have its own name and organizational structure; and

(iii) must have a business location, specialized personnel and other necessary material conditions appropriate to its foreign trade business activities.

Article 5: A Chinese Investor applying to establish a Foreign Trading Joint Venture must provide the following documents to the local departments in charge of foreign trade and economic cooperation to be reported to the Ministry of Foreign Trade and Economic Cooperation (hereafter, MOFTEC):

(1) a project proposal, and a feasibility study report, joint venture contract and articles of association signed by the Chinese and Foreign Investors;

(2) supporting documents in respect of the registration (copy), creditworthiness and the legal representatives of the Chinese and Foreign Investors;

(3) a list of import and export goods of the proposed Foreign Trading Joint Venture;

(4) annual accounting statements audited by an accounting firm for the past three years of the Chinese and Foreign Investors; and

(5) other documents required by MOFTEC.

MOFTEC shall examine the materials submitted by local branches, and send an official reply and issue a foreign-invested enterprise approval certificate to qualified enterprises within 90 days from the receipt of all the documents.

Article 6: After an application for the establishment of a Foreign Trading Joint Venture is approved, the applicant shall, within one month of the date of approval, apply to complete registration formalities with the State Administration for Industry and Commerce or its authorized local administration for industry and commerce and file tax registration with the tax authority in accordance with the law.

Article 7: Foreign and Chinese Investors may use money capital, material goods, intangible assets (including industrial property rights, proprietary technology and right to the use of a site). Each joint venture party to a Foreign Trading Joint Venture shall pay up the capital contribution to which it has subscribed on time in accordance with relevant State provisions.

Article 8: A Foreign Trading Joint Venture shall, in accordance with relevant State provisions, engage in the import and export of goods, technology and related services on its own behalf or as an agent within the scope of the business and products for which it has been approved, and engage in the wholesaling of its imported goods in China.

Article 9: Products for import and export that are subject to State-imposed quotas and licence control, may only be imported or exported after a Foreign Trading Joint Venture has applied for and obtained the relevant quotas and licences from the relevant State Council departments in charge, in accordance with relevant provisions of the State. A Foreign Trading Joint Venture shall handle the import or export of products that are subject to State-imposed quota bid invitation for import and export in accordance with the provisions of the State Council departments in charge regarding bid invitation and submission for the import and export of goods.

Article 10: The receipt and payment of foreign exchange of a Foreign Trading Joint Venture shall be handled in accordance with relevant State provisions on foreign exchange control.

Article 11: A Foreign Trading Joint Venture shall pay taxes in accordance with relevant State laws, regulations and rules regarding taxation. Its exported goods may enjoy export tax refund (exemption) in accordance with relevant State law, regulations and rules.

Article 12: A Foreign Trading Joint Venture shall observe relevant State laws, regulations and rules regarding finance, accounting and statistics and submit such statements as financial, accounting and statistics statements on time to the relevant local departments in charge.

Article 13: A Foreign Trading Joint Venture may join an import and export chamber of commerce or foreign-invested enterprise association, and must comply with the coordination of such chamber of commerce or association if joined.

Article 14: A Foreign Trading Joint Venture must respect the laws and regulations of China and accept the jurisdiction of the laws and regulations of China, and the lawful rights and interests of such company shall be protected by the laws and regulations of China. Where a Foreign Trading Joint Venture violates the laws and regulations of China, the matter shall be handled in accordance with relevant laws and regulations.

Article 15: The establishment of a Foreign Trading Joint Venture by a company or enterprise from the Hong Kong Special Administrative Region, Macao Special Administrative Region or Taiwan, and a domestic company or enterprise shall be handled with reference to these Measures.

Article 16: Applications for Foreign Trading Joint Ventures whose capital contribution from the Chinese Investors accounts for less than 51% of the venture's registered capital will not be handled before December 11 2003 for the time being.

Article 17: MOFTEC shall be responsible for the interpretation of the Measures.