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Sino-Foreign Cooperative Joint Venture Enterprise Law

 Article 1    This Law is formulated in order to increase the foreign economic cooperation and technology exchange and promote foreign enterprises and other economic organizations or individuals (hereinafter, "Foreign Parties") to establish Sino-foreign cooperative joint venture enterprises (hereinafter, "CJVs") in China in conjunction with Chinese enterprises or other economic organizations (hereinafter, "Chinese Parties") and based on the principles of equality and mutual benefit.

 Article 2    The Chinese and Foreign Parties to a CJV shall, in establishing the CJV, agree to in the contract of the CJV on the matters such as the investment or cooperation conditions, distribution of revenues or products, share of risks and losses, methods of operation and management, and ownership of the properties at the termination of the CJV, in accordance with this Law.
A CJV that complies with the provisions of the laws of China regarding the legal person qualifications shall be qualified to be a Chinese legal person in accordance with the law.

 Article 3    The State protects, pursuant to the law, the lawful rights and interests of CJVs and the Chinese and Foreign Parties thereto.
CJVs must comply with the Chinese laws and regulations, and shall not harm the social public interest of China.
The relevant State authorities oversee CJVs in accordance with the law.

 Article 4    The State encourages the establishment of export-oriented or technologically advanced CJV with a manufacturing nature.

 Article 5    In applying for the establishment of a CJV, the agreement, contract, articles of association, and other documents entered into by the Chinese and Foreign Parties to the CJV shall be submitted to the State Council's department in charge of foreign economic relations and trade or a departments and local people's government (hereinafter, "Examination and Approval Authority") authorized by the State Council for examination and approval. Within 45 days of receiving an application, the Examination and Approval Authority shall decide whether to grant the approval or not.

 Article 6    After an application for the establishment of a CJV is approved, the applicant shall, within 30 days of receiving the approval certificate, apply for registration with, and collect the business license from, the relevant administrative authority for industry and commerce. The date of issuance of the business license of the CJV shall be the date of its establishment.
The CJV shall, within 30 days of the date of its establishment, go through the formalities for tax registration with the relevant taxation authority.

 Article 7    Where the Chinese and Foreign Parties to a CJV agree to make any major change to the contract of the CJV through consultation within the duration of cooperative joint venture operation, such change shall be reported to the Examination and Approval Authority for approval. Where the change involves any statutory item registered with an administrative authority for industry and commerce or tax authority, formalities for change of registration shall be gone through with the administrative authority for industry and commerce or tax authority.

 Article 8    The investment made in or the cooperation conditions provided for a CJV by the Chinese and Foreign Parties thereto may be in cash, in kind, or in the form of land use right, industrial property rights, non-patented technologies, or other property rights.

 Article 9    The Chinese and Foreign Parties to a CJV shall, pursuant to the provisions of the laws and regulations and the cooperative joint venture contract, perform their obligations of paying up the investment or providing the cooperation conditions as scheduled. Failure to perform within the schedule shall render the relevant administrative authority for industry and commerce specifying a time limit for performance. Failure to perform within such specified time limit shall render the Examination and Approval Authority and the administrative authority for industry and commerce taking measures in accordance with the relevant provisions of the State.
The investment made or cooperation conditions provided by the Chinese and Foreign Parties to a CJV shall be verified by a certified public accountant of China or the relevant agency, accompanied by issuance of a certification thereon.

 Article 10    Where one of the Chinese and Foreign Parties to a CJV transfers all or part of its rights or obligations under the contract of the CJV, the transfer shall be subject to the other party's consent and be submitted to the Examination and Approval Authority for approval.

 Article 11    A CJV shall carry out operation and management activities according to the approved contracts and articles of association thereof. The right to operate and manage the enterprise on its own shall not be subject to any interference.

 Article 12    A CJV shall have a board of directors or a joint management body to make decisions on the major issues of the CJV in accordance with the contract or articles of association of the CJV. Where the chairman of the board or the director of the joint management body is from one of the Chinese and Foreign Parties, the vice chairman or deputy director shall then be from the other. The board of directors or the joint management body may have discretion to appoint or engage a general manager to be responsible for the daily operation and management of the CJV. The general manager shall be responsible to the board of directors or the joint management body.
Where a CJV is handed over, after its establishment, to a party other than the Chinese and Foreign Parties thereto for such other party's operation and management under authorization, such change must be subject to the consensus of the board of directors or the joint management body, and shall be reported to the relevant Examination and Approval Authority for approval, accompanied by going through the formalities for change of registration with the relevant administrative authority for industry and commerce.

 Article 13    Matters of the employees of a CJV, such as employment, dismissal, remuneration, welfare, labor protection, and labor insurance shall, pursuant to the law, be specified through concluding a contract.

 Article 14    The staff members of a CJV establish a labor union organization in accordance with the law to carry out labor union activities and safeguard the employees' lawful rights and interests.
A CJV shall provide, to the labor union of its own, the necessary conditions for carrying out activities.

 Article 15    A CJV must establish its account books within China and submit the account books in accordance with the relevant provisions, and must be subject to the supervision of the financial and taxation authorities.
Where a CJV violates the provisions in the preceding paragraph due to its failure to establish its account books in China, the relevant financial and taxation authorities may impose a fine thereon, and the relevant administrative authority for industry and commerce may order it to cease business operation or revoke its business license.

 Article 16    A CJV shall produce its business license to open a foreign exchange account in a bank or any other financial institution which has obtained the permit to operate foreign exchange services by the relevant State administrative department in charge of foreign exchange. Matters concerning the foreign exchange of a CJV shall be handled in accordance with the provisions of the State regarding foreign exchange administration.

 Article 17    A CJV may borrow loans from a financial institution either within China or outside China.
The loans and their guaranty used by the Chinese and Foreign Parties to a CJV as the investment or cooperation conditions shall be funded by the parties themselves.

 Article 18    All insurances of a CJV shall be covered by insurance institutions within China.

 Article 19    A CJV may, within the approved business scope, import the supplies that it needs and export the products that it has produced. The supplies such as raw materials and fuel as needed by a CJV within the approved business scope may be purchased on the domestic or international market based on the principles of fairness and reasonableness.

 Article 20    A CJV, pursuant to the stipulations of the State related to taxation, shall pay taxes and may be entitled to the preferential treatment of tax reduction or exemption.

 Article 21    The Chinese and Foreign Parties to a CJV shall distribute revenues or products and undertake risks and losses according to their agreement under the contract of the CJV.
Where the Chinese and Foreign Parties to a CJV agree to under the contract of the CJV that all fixed assets of the CJV shall be vested in the Chinese Party thereto upon expiry of the duration of the CJV, the methods for early recovery of investment by the Foreign Party thereto within the duration of the CJV may be set forth in the contract of the CJV.
Where the contract of a CJV states that the Foreign Party thereto shall recover investment before payment of the income taxes, an application must be filed with the relevant financial and taxation authorities that shall conduct examination and approval on the same in accordance with the relevant tax provisions of the State.
Where the Foreign Party to a CJV recovers its investment within the duration of the CJV in accordance with the preceding paragraph, the Chinese and Foreign Parties thereto shall be liable for the CJV's debts as specified in the provisions of the relevant laws and the contract of the CJV.

 Article 22    Profits obtained by the Foreign Parties in the performance of the obligations stipulated by the law and as agreed in a CJV contract, other lawful incomes, and funds distributed upon the termination of the CJV may be remitted abroad in accordance with the law.
Foreign employees of a CJV may, upon payment of individual income tax under the law, remit their salary-earnings and other legitimate incomes abroad.

 Article 23    A CJV shall, upon expiry of the duration thereof or early termination thereof, liquidate the assets, creditor's rights, and debts according to the statutory procedures. The Chinese and Foreign Parties to the CJV shall determine the ownership of the properties of the CJV pursuant to the provisions of the contract of the CJV.
In the event of expiry of the duration of a CJV or early termination thereof, the deregistration formalities shall be gone through with the administrative authority for industry and commerce and the taxation authority.

 Article 24    The duration of cooperative joint venture operation of a CJV shall be clearly specified in the contract of the CJV through consultation by the Chinese and Foreign Parties thereto. Where the Chinese and Foreign Parties to a CJV agree to extend the duration of cooperative joint venture operation, the application shall be filed with the relevant Examination and Approval Authority at least 180 days in advance before the duration expires. That authority shall, within 30 days of receiving the application, decide whether to grant the approval or not.

 Article 25    Any dispute arising from the performance of the contract or articles of association of a CJV by the Chinese and Foreign Parties thereto shall be resolved through consultation or mediation. Where the Chinese and Foreign Parties are unwilling to resolve it through consultation or mediation, or the consultation or mediation is unsuccessful, the dispute may be submitted to an arbitration institution in China or another arbitration institution pursuant to the arbitration clause in the contract of the CJV or a written arbitration agreement reached thereafter.
Where the Chinese and Foreign Parties have not agreed upon any arbitration clause in the contract of the CJV and they have not reached any written arbitration agreement thereafter, a lawsuit may be filed with a court in China.

 Article 26    The State Council department in charge of foreign economic relations and trade shall, in accordance with this Law, formulate the detailed implementing rules; and those rules shall take effect after being reported to and approved by the State Council.

 Article 27    This Law shall take effect as of the promulgation date.
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