Laws of the People's Republic of China

    The Third Session of the Seventh National People's Congress, having
considered the proposal of the State Council regarding the Amendment to the Law
of the People's Republic of China on Chinese-Foreign Equity Joint Ventures
(Draft), decides to make the following revisions to the Law of the People's
Republic of China on Chinese-Foreign Equity Joint Ventures:

    1. A new paragraph shall be added to Article 2 as paragraph 3: "The state
shall not nationalize or requisition any equity joint venture. Under special
circumstances, when public interest requires, equity joint ventures may be
requisitioned by following legal procedures and appropriate compensation shall
be made."

    2. Article 3 shall be amended as: "The equity joint venture agreement,
contract and articles of association signed by the parties to the venture shall
be submitted to the state's competent department in charge of foreign economic
relations and trade (hereinafter referred to as the examination and approval
authorities) for examination and approval. The examination and approval
authorities shall decide to approve or disapprove the venture within three
months. When approved, the equity joint venture shall register with the state's
competent department in charge of industry and commerce administration,
acquire a business license and start operations".

    3. Paragraph 1 of Article 6 shall be amended as: "An equity joint venture
shall have a board of directors; the number of the directors thereof from each
party and the composition of the board shall be stipulated in the contract and
articles of association after consultation among the parties to the venture;
such directors shall be appointed and replaced by the relevant parties. The
chairman and the vice-chairman (vice-chairmen) shall be determined through
consultation by the parties to the venture or elected by the board of
directors. If the Chinese side or the foreign side assumes the office of the
chairman, the other side shall assume the office(s) of the vice-chairman
(vice-chairmen). The board of directors shall decide on important issues
concerning the joint venture on the principle of equlity and mutual benefit."

    4.Paragraph 2 of Article 7 shall be amended as: "An equity joint venture
may, in accordance with provisions of the relevant laws and administrative
rules and regulations of the state on taxation, enjoy preferential treatment
for reduction of or exemption from taxes."

    5. Paragraph 1 of Article 8 shall be amended as: "An equity joint venture
shall, on the strength of its business license, open a foreign exchange account
with a bank or any other financial institution which is permitted by the state
agency for foreign exchange control to handle foreign exchange transactions."

    Paragraph 1 of Article 10 shall be amended as: "The net profit which a
foreign joint venturer receives as its share after performing its obligations
under the laws, and the agreements or the contract, the funds it receives upon
the expiration of the venture's term of operation or its early termination, and
its other funds may be remitted abroad in accordance with foreign exchange
control regulations and in the currency or currencies specified in the contract
concerning the equity joint venture."

    Article 11 shall be amended as: "The wages, salaries or other legitimate
income earned by a foreign worker or staff member of an equity joint venture,
after payment of the individual income tax under the tax laws of the People's
Republic of China, may be remitted abroad in accordance with foreign exchange
control regulations."

    6. Article 12 shall be amended as: "Based on different lines of trade and
different circumstances, arrangements for the duration of equity joint ventures
may be made differently through agreement by the parties to the venture.
Equity joint ventures engaged in certain lines of trade shall specify their
duration in the contracts, while equity joint ventures engaged in certain other
lines of trade may choose to or not to specify their duration in the contract.
Where an equity joint venture has had its duration specified and the parties
to the venture agree to extend the duration, the venture shall file an
application for the purpose with the examination and approval authorities six
months before its expiration. The examination and approval authorities shall,
within one month after receipt of the application, decide on its approval or
disapproval."

    7. Article 13 shall be amended as: "In case of heavy losses, failure of a
party to perform its obligations under the contract and the articles of
association, or force majeure etc., the parties to the joint venture may
terminate the contract through their consultation and agreement, subject to
approval by the examination and approval authorities and to registration with
the state's competent department in charge of industry and commerce
administration. In case of losses caused by a breach of contract, the financial
responsibility shall be borne by the party that has breached the contract."

    This Decision shall enter into force as of the date of promulgation.

    The Law of the People's Republic of China on Chinese-Foreign Equity Joint
Ventures shall be republished after being correspondingly amended according to
this Decision.?