Law of the People’s Republic of China on Sino-foreign Contractual Joint Ventures (Amended in 2017)
Promulgation Authority: Standing Committee of the National People’s Congress
Release Date: 2017-11-04
Effective on: 2017-11-05
Chinese Name: 中华人民共和国中外合作经营企业法（2017修正）
（Adopted 13 April 1988 at the 1st Session of the 7th National People’s Congress
Revised on 31 October 2000 at the 18th Meeting of the Standing Committee of the National People’s Congress pursuant to the Decision on Revision of the “Law of the People’s Republic of China on Sino-foreign Contractual joint ventures”
Revised on 3 September 2016 pursuant to the Decision of the Standing Committee of the National People’s Congress on Revision of Four Laws Including the Law of the People’s Republic of China on Wholly Foreign-owned Enterprises
Revised on 7 November 2016 pursuant to the Decision of the Standing Committee of the National People’s Congress on Revision of 12 Laws Including the “Foreign Trade Law of the People’s Republic of China”
Revised on 4 November 2017 pursuant to the Decision of the Standing Committee of the National People’s Congress on Revision of 11 Laws Including the Accounting Law of the People’s Republic of China passed by the 30th Session of the Standing Committee of the Twelfth National People’s Congress）
Article 1This Law is formulated in order to expand economic co-operation and technological exchange with foreign parties and to encourage foreign enterprises and other economic entities or individuals (hereinafter referred to as foreign partners) to establish joint Sino-foreign contractual joint ventures (hereinafter referred to as contractual joint ventures) within Chinese territory together with enterprises or other economic entities of the People’s Republic of China (hereinafter referred to as Chinese partners) in accordance with the principles of equality and mutual benefit.
Article 2When Chinese and foreign partners establish a contractual joint venture, provisions on such items as investment or terms for co-operation, distribution of earnings or products, sharing of risks and losses, method of business management and the ownership of property on the expiry of the contract term shall be prescribed in the contractual joint venture contract in accordance with the provisions of this Law.
A contractual joint venture, which complies with the provisions of Chinese law for a legal person, shall acquire the status of a Chinese legal person.
Article 3The State shall protect the legal rights and interests of contractual joint ventures as well as the Chinese and foreign partners in accordance with the law.
A contractual joint venture shall abide by the laws and regulations of the People’s Republic of China and shall not harm the public interests of Chinese society.
The relevant State organs shall supervise contractual joint ventures in accordance with the law.
Article 4The State shall encourage the establishment of export-oriented or technologically advanced production-type contractual joint ventures.
Article 5When applying to establish a contractual joint venture, the agreement, contract, articles of association and other relevant documents signed by the Chinese and foreign partners shall be submitted for examination and approval to the State Council department in charge of foreign economic relations and trade or a department or local government authorized by the State Council (hereinafter referred to as an examining and approving organ). The examining and approving organ shall make a decision on whether or not to approve the application within 45 days of its receipt.
Article 6Following approval of an application to establish a contractual joint venture, an application for registration and a business licence shall be made to the administration for industry and commerce within 30 days of receiving the certificate of approval. A contractual joint venture shall be deemed to be established from the date of issue of its business licence.
A contractual joint venture shall register with the taxation organ for tax purposes within 30 days of its establishment.
Article 7If, during the term of co-operation, the Chinese and foreign partners agree through consultation to make a major amendment to the contractual joint venture contract, the matter shall be reported to the examining and approving organ for approval. If the amendment involves items for official industrial or commercial registration or tax registration, procedures for registration of the amendment shall be conducted with the administration for industry and commerce or the taxation organ.
Article 8Investment or terms for co-operation by Chinese and foreign partners may be in the form of cash, kind, land-use rights, industrial property rights, non-patented technology and other property rights.
Article 9The Chinese and foreign partners shall discharge their obligations both to subscribe their investment in full and to provide conditions for co-operation on schedule, in accordance with the provisions of the laws and regulations and the provisions agreed on in the contractual joint venture contract. In the event of failure to fulfil such obligations, the administration for industry and commerce shall stipulate a deadline for fulfilment and, if obligations are still not fulfilled by the stipulated date, the examining and approving organ and the administration for industry and commerce shall handle the matter in accordance with the relevant regulations.
The investment or terms for co-operation to be contributed by Chinese and foreign partners shall be examined and verified by an accountant registered in China or a relevant organ and a certificate shall be issued.
Article 10.If any one party to Sino-foreign co-operation wishes to assign, in full or in part, its rights and liabilities as prescribed in the contractual joint venture contract, the agreement of the other party shall be obtained and the matter shall be reported to the examining and approving organ for approval.
Article 11A contractual joint venture shall conduct business management activities in accordance with the approved contractual joint venture contract and articles of association and its right of autonomy in the area of business management shall not be interfered with.
Article 12A contractual joint venture shall set up a board of directors, or a joint management body, to make decisions on major issues involving the contractual joint venture in accordance with the provisions of the contractual joint venture contract or articles of association. One party of the Chinese and foreign partners shall appoint a person to hold the position of chairman of the board of directors or head of the joint management body and a person appointed by the other party shall hold the position of deputy chairman of the board of directors or deputy head. The board of directors or the joint management body may decide on the appointment or engagement of a general manager to conduct the daily business management of the contractual joint venture. The general manager shall be responsible to the board of directors or the joint management body.
After the establishment of a contractual joint venture, if a party other than the Chinese and foreign partners is engaged to manage the business, the unanimous agreement of the members of the board of directors or the joint management body must be obtained. The change shall be registered with the administration for industry and commerce.
Article 13Matters such as the recruitment and dismissal of employees, remuneration, welfare benefits, labour protection and labour insurance shall be stipulated in contracts signed in accordance with the law.
Article 14Contractual joint venture employees shall abide by the law in establishing a trade union organization for the promotion of trade union activities and the protection of their legal rights and interests.
A contractual joint venture shall provide its enterprise trade union with the necessary facilities for its activities.
Article 15A contractual joint venture shall establish books of account within the territory of the People’s Republic of China, shall submit accounting statements in accordance with regulations and shall accept supervision by the financial and taxation organs.
If a contractual joint venture violates the provisions of the previous paragraph and does not establish books of account within the Chinese territory, the taxation organ may issue a fine and the administration for industry and commerce may order the closure of operations or may revoke the business licence of the contractual joint venture.
Article 16A contractual joint venture shall present its business licence and open a foreign exchange account with a bank or other financial institution authorized by an organ of the State Administration of Exchange Control to engage in foreign exchange dealings.
The foreign exchange dealings of a contractual joint venture shall be handled in accordance with the relevant State provisions on exchange control.
Article 17A contractual joint venture may obtain a loan from a financial institution within Chinese territory or from overseas.
Any loan and the loan guarantee raised by a Chinese or foreign partner for investment or for a contractual provision shall be arranged by the respective party.
Article 18The various kinds of insurance required by a contractual joint venture shall be furnished by an insurance organization within Chinese territory.
Article 19A contractual joint venture may, within its approved scope of operations, import goods and materials it requires and export the resulting manufactured products. A contractual joint venture may, within its approved scope of operations and in accordance with the principle of fairness and reasonableness, purchase raw materials, fuel and other requirements from both domestic and international markets.
Article 20.A contractual joint venture may also enjoy favourable treatment in the form of a reduction of or exemption from tax payments, following its payment of taxes due in accordance with the relevant State regulations.
Article 21Chinese and foreign partners shall distribute income or products and shall bear the responsibility for risks or losses in accordance with the provisions stipulated in the contractual joint venture contract.
When the Chinese and foreign partners agree in the contractual joint venture contract that, on the expiry of the duration of the term of co-operation, all the fixed assets of the contractual joint venture shall revert to ownership by the Chinese partner, methods to allow the foreign partner to recover its investment within the term of co-operation may be stipulated in the contractual joint venture contract.
When the foreign partner recoups its investment within the period of co-operation according to the provisions of the previous paragraph, the Chinese and foreign partners shall be responsible for the liabilities of the contractual joint venture in accordance with the provisions of the relevant laws and the stipulations of the contractual joint venture contract.
Article 22Dividends remaining after a foreign partner has fulfilled all obligations as prescribed in the laws and regulations and the stipulations of the contractual joint venture contract, and other legal income and funds distributed by the contractual joint venture at the termination of co-operation may be remitted abroad in accordance with the law.
Income in the form of wages or other legal earnings of employees of foreign nationality of a contractual joint venture may be remitted abroad after payment of individual income tax in accordance with the law.
Article 23On the expiry or premature termination of the term of a contractual joint venture, assets, claims and debts shall be liquidated in accordance with legal procedures. Chinese and foreign partners shall determine ownership of contractual joint venture property in accordance with the stipulations of the contractual joint venture contract.
On the expiry or premature termination of the term of a contractual joint venture, the procedures for the cancellation of registration shall be carried out with the administration for industry and commerce and the taxation organ.
Article 24The duration of the term of co-operation of a contractual joint venture shall be determined through a consultation by the Chinese and foreign partners and specified in the contractual joint venture contract. If the Chinese and foreign partners agree to extend the term of co-operation, an application shall be submitted to the examining and approving organ 180 days before the expiry of the term of co-operation. The examining and approving organ shall decide whether or not to approve the application within 30 days of receipt.
Article 25For establishment of cooperative joint venture enterprises which are not subject to the implementation of special administrative measures for admission stipulated by the State, examination and approval matters stipulated in Article 5, Article 7, Article 10, and Article 24 of this Law shall be subject to filing administration. Special administrative measures for admission stipulated by the State shall be promulgated by the State Council or promulgated with approval by the State Council.
Article 26If a dispute arises between Chinese and foreign partners over the implementation of a contractual joint venture contract, the matter shall be resolved through consultation or mediation. If the Chinese and foreign partners are unwilling to use consultation or mediation to resolve the dispute or if consultation or mediation fail to produce a result, the matter may be submitted to a Chinese arbitral body or another arbitral body for arbitration in accordance with the provisions on arbitration in the contractual joint venture contract or an arbitral agreement concluded in writing after the dispute has arisen.
If the Chinese and foreign partners have not included provisions on arbitration in the contractual joint venture contract and fail to conclude a written arbitral agreement after a dispute has arisen, a suit may be filed in a Chinese court.
Article 27The State Council department in charge of foreign economic relations and trade shall formulate implementing rules in accordance with the provisions of this Law, to be implemented following their approval by the State Council.
Article 28This Law shall take effect from the date of promulgation.