Laws of the People's Republic of China

The Ministry of Foreign Trade and Economic Cooperation

Order of the The Ministry of Foreign Trade and Economic Cooperation

No.3

"Interim Measures for the Experiment in the Establishment of Chinese-foreign Joint Venture Foreign Trade Companies" is approved by the State Council of the People's Republic of China on September 2, 1996, and is promulgated now. This law shall enter into force as of the date of promulgation.

Minister of the Ministry of Foreign Trade and Economic Cooperation: Wu Yi

September 30,1996

Interim Measures for the Experiment in the Establishment of Chinese-foreign Joint Venture Foreign Trade Companies

Article 1

These Measures are formulated in accordance with "The Foreign Trade Law of the People's Republic of China", "The Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures" as well as other relevant laws and regulations with a view to further expanding the scope of opening up to the outside world and promoting the growth of China's foreign trade.

Article 2

These Measures shall be applicable to Chinese-foreign joint venture foreign trade companies(hereinafter referred to as "joint venture foreign trade companies") set up within the territory of China(experimental areas) by foreign companies and enterprises(hereinafter referred to as "foreign companies") and Chinese companies and enterprises(hereinafter referred to as "Chinese companies") for the sole purpose of engaging in import-export trade.

Article 3

The joint venture foreign trade company shall be a limited liability company. The percentage of the registered capital of Chinese company in a joint venture foreign trade company shall not be less than 51%; the percentage of a foreign company shall be more than 25%. The legal representative shall be appointed by the Chinese company.

Article 4

The following conditions shall be satisfied in the establishment of a joint venture foreign company:

(1)

A foreign company shall have the following qualifications:

a.

a turnover of over US$ 5 billion in the year preceding the application;

b.

an average annual trade volume of over US$ 30 million with China during the three years preceding the application;

c.

A representative office has been set up within the territory of China for more than three years prior to the application, or an investment of over US$ 30 million within the territory of China.

(2)

A Chinese company shall have the following qualifications:

a.

having authorization in foreign trade operations;

b.

an average annual import-export volume of over US$ 200 million during the three years preceding the application, out of which the export amount shall not be less than US$ 100 million;

c.

having set up more than three branches, subsidiaries and joint ventures outside the territory of China, with an average annual turnover of more than US$ 10 million in the three years prior to the application.

(3)

A joint venture foreign trade company shall have the following qualifications:

a.

Its registered capital shall not be less than RMB 100 million yuan;

b.

Having its own name and organization;

c.

Having necessary place, professional staff and other material conditions suitable for foreign trade operations.

Article 5

In applying for the establishment of a joint venture foreign trade company, the Chinese company shall submit the following documents to the department in charge of foreign trade and economic cooperation of the state through the local department of foreign trade and economic cooperation for examination:

(1)

project proposal and the feasibility study, contract and constitution signed by the Chinese and foreign parties;

(2)

certificates of registration(copies) of the Chinese and foreign parties, credibility certificates and legal representative certificates;

(3)

certificate of approval of the foreign company's invested enterprise in China(copy), or approval paper for the establishment of representative office in China(copy), business license(copy) and credibility report issued by a Chinese registered accountant firm(copy);

(4)

certificates of registration of the Chinese company's branch, subsidiary and joint venture outside the territory of China(copy);

(5)

tables of assets and liabilities of the Chinese and foreign parties in the past three years and the certificates of confirmation issued by the auditing department;

(6)

business scope of the proposed joint venture foreign trade company;

(7)

other documents as required by the department in charge of foreign trade and economic cooperation of the state.

A certificate of approval for the joint venture foreign trade company shall be issued by the department in charge of foreign trade and economic cooperation of the state upon examination by the department in charge of foreign trade and economic cooperation of the state and approval by the State Council.

Article 6

Upon approval by the state of the application for the establishment of the joint venture foreign trade company, the Chinese company shall, within one month starting from the date of approval, go through the procedures of registration with the certificate of approval at the department of industry and commerce administration, and complete financial registration at the department of finance in charge within one month starting from registration.

Article 7

Funding by the foreign company for the registered capital of the joint venture foreign trade company can be in convertible currency, and funding by the Chinese company can be in RMB, in kind and invisible assets or other property rights.

Parties in the joint venture foreign trade company shall, within one month starting from the date of issuance of the business license, complete full payment of their respective confirmed amount of funds.

Article 8

The joint venture foreign trade company shall engage in selfoperations or agency business operations of import and export of goods and technologies with the approved business scope. It shall not engage in other business operations without approval.

Article 9

Import or export of commodities under quota and license control by the state for import and export can be effected upon approval after application to the department in charge concerned of the state in accordance with relevant provisions of the state. The joint venture foreign trade company shall, in accordance with the provisions of the department in charge for tender and bidding of the commodities for import and export, take part in bidding with regard to commodities for import and export under quota tender by the state.

Article 10

The joint venture foreign trade company shall handle foreign exchange settlement, selling and payment in accordance with the relevant provisions by the state for state-owned foreign trade companies. The joint venture foreign trade company shall maintain foreign exchange balance. Specific control measures shall be formulated by the People's Bank of China in consultation with the department in charge of foreign trade and economic cooperation of the state.

Article 11

The joint venture foreign trade company shall effect payment of taxes in accordance with relevant taxation laws and regulations of the state. The state shall effect refund of taxes on its export products in accordance with the provisions for the refund of taxes on export by state owned foreign trade companies.

Article 12

The joint venture foreign trade company shall, at regular intervals, submit reports and tables of finance, accounting and statistics to local departments in charge in accordance with the laws and regulations of China concerning finance, accounting and statistics.

Article 13

The joint venture foreign trade company shall apply to join the chamber of commerce for import and export or the association enterprises with foreign investment, and obey the coordination of either the chamber or the association.

Article 14

The joint venture foreign trade company shall abide by the laws and regulations of China and put itself under the jurisdiction of the laws and regulations of China. Its legitimate rights shall be protected by the laws and regulations of China.

Violation of laws and regulations of China on the part of the joint venture foreign trade company shall be handled in accordance with relevant laws and regulations. Violation of these Measures by the joint venture foreign trade company shall be handled by the department in charge of foreign trade and economic cooperation.

Article 15

Reference shall be made to these Measures with regard to the establishment of joint venture foreign trade companies by companies, enterprises of Hongkong, Macao and Taiwan regions and inland companies and enterprises.

Article 16

The areas of experiment and number of companies for experiment shall be determined by the State Council. For the present, experiment shall be conducted only in the Pudong New Development Zone of Shanghai and Shenzhen Special Economic Zone.

Article 17

These Measures shall enter into force as of the date of promulgation. The department in charge of foreign trade and economic cooperation of the state shall be responsible for the interpretation.