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Provisional Measures on the Establishment of Sino-Foreign Joint-Venture Trading Companies on a Pilot Basis (September 30, 1996)

Article 1 With a view to further expanding opening up to the outside world and promoting the development of China's foreign trade, these Measures are hereby formulated in accordance with the Foreign Trade Law of the People's Republic of China and the Law of the People's Republic of China on Joint Ventures Using Chinese and Foreign Investment.

Article 2 These measures shall be applicable to ·Sine-foreign joint-venture trading companies (hereinafter referred to as "joint-venture trading companies") specialized in import and export trade which are established by foreign companies or enterprises (hereinafter referred to as "foreign companies") and Chinese companies or enterprises (herein after referred to as "Chinese companies") within the territory of China (the pilot places).

Article 3 A joint-venture trading company shall be a company of limited liabilities. The shares of the Chinese company in the registered capital of a joint-venture trading company shall be no less than 51 per cent, and that of the foreign company shall be at least 25 percent. The legal representative shall be appointed by the Chinese company.

Article 4 The establishment of a joint-venture trading company shall satisfy the following conditions upon its establishment:

1. The foreign company shall

(1) Enjoy a turnover of over US$5 billion in the year prior to the application;

(2) Enjoy an average annual trading volume of over US30 million with China in the three years prior to the application;
(3) Have established a representative office within the territory of China for more than three years or have made an investment of over US$30 million within the territory of China prior to the application.

2. The Chinese company shall

(1) Enjoy foreign trade rights;

(2) Enjoy an average annual foreign trade volume of over US$200 million, among which the export volume shall be no less than US$100 million in the three years prior to the application; and

(3) Have established more than three branches, subsidiaries and joint ventures outside China, each with an average annual turnover of over US$10 million in the three years prior to the application.

3. A joint-venture trading company shall

(l) Have a registered capital of no less than 100 million yuan;

(2) Have its own name and organization;

(3) Have its own operational venue, professionals and other necessary physical conditions compatible with its foreign trade operations.

Article 5 In applying for the establishment of a joint-venture trading company, the Chinese company shall submit through the local department responsible for foreign trade and economic co-operation, the following documents for examination to the national authorities in charge of foreign trade and economic co-operation:.

1. A project proposal a feasibility study report signed by both the Chinese and foreign parties, the relevant contract and articles of association;

2. (Copies of ) Documents certifying the registrations of all Chinese and foreign parties, and documents certifying the credit worthiness and the legal representatives of the Chinese and foreign parties;

3. (Conies of) Certificates of approval of the enterprises invested by the foreign company in China or (copies of) certificates of approval of the representative office established in China, (copies of) business licenses and reports of registered capital verification issued by accounting firms registered in China;

4. (Copies of) Certificates of the registration of the branches, subsidiaries and joint ventures established by the Chinese company outside China;

5. Balance sheets of all Chinese and foreign parties in the recent three-years and certificates of confirmation issued by auditing organizations;

6. Business scope of the proposed joint-venture trading company; and

7. Other documents required by the competent State authorities responsible for foreign trade and economic cooperation

An approving certificate shall be issued by national authorities responsible for foreign trade and economic co-operation to a joint-venture trading company after the approval by the State Council following the examination by national authorities responsible for foreign trade and economic cooperation.

Article 6 Once an application for the establishment of a joint-venture trading company is approved by the State, the Chinese company shall go through, upon presentation of the approval certificate, the registration procedures with administrative authorities for industry and commerce within one month from the date of the approval, and shall go through the financial registration procedures with the competent financial authorities within one month from the date of the business registration.

Article 7 The foreign company shall make its contribution to the registered capital of the joint-venture trading company freely convertible currencies while the Chinese company may contribute in renminbi - the Chinese currency, in kind, intangible assets or other property rights. Partners in a joint-venture trading company shall pay up the full amount of their respective subscribed contributions within one month from the date of the issuance of the business license .

Article 8 A joint venture trading company shall undertake import and export of goods and technology either for for itself or on proxy within the approved business scope and shall not undertake other business without approval.

Article 9 A joint venture trading company which imports and exports commodities subject to State quota and licensing control shall file an application with competent authorities concerned according relevant State provisions, and shall only undertake import or export of such commodities upon approval of the application. A joint-venture trading company which imports and exports commodities subject to quota tendering of the State shall participate in the tendering in line with rules on tender invitation and.bidding of import and export commodities formulated by the competent authorities concerned.

Article 10 A joint-venture trading company shall settle, purchase and transfer foreign exchange according to relevant provisions applicable to State-owned foreign trading companies. A joint-venture trading company must maintain foreign exchange balance. Specific administrative rules for this purpose shall be formulated by the People's Bank of China in consultation with national authorities responsible for foreign trade and economic co-operation

Article 11 A joint-venture trading company shall pay taxes according to the State's taxation laws and regulations, while the State shall refund taxes for the exported products according to provisions on the export tax refund for State-owned foreign trading companies.

Article 12 A joint-venture trading company shall submit financial, accounting and statistical statements and reports to the local competent authorities in a timely fashion and in line with Chinese laws and regulations governing financial, accounting and statistical procedures.

Article 13 A joint-venture trading company shall apply for membership in a chamber of commerce for importers and exporters or association of enterprises with foreign investment and shall subordinate itself to the co-ordination of the chamber of commerce or association.

Article 14 A joint-venture trading company shall abide by laws and regulations of the People's Republic of China and subordinate itself to the jurisdiction of Chinese laws and regulations, and shall have it's legitimate rights and interests protected by Chinese laws and regulations.

A joint-venture trading company which has violated Chinese laws or regulations shall be dealt with according to relevant laws and regulations, and a joint-venture trading company which has violated these Measures shall de dealt with by the competent authorities administering foreign trade and economic co-operation.

Article 15 Joint-venture foreign trading companies set up by companies or enterprises in Hong Kong, Macao and Taiwan regions and companies or enterprises in the mainland of China shall be treated in reference to these Measures.

Article 16 The places for the experimentation and the number of pilot companies shall be determined by the State Council. For the time being, the pilot program shall be conducted only in the Pudong New Area in Shanghai and in the Shenzhen Special Economic Zone.

Article 17 These Measures shall enter into force on the date of enactment, and the power of interpretation is vested in the national competent authorities for foreign trade and economic co-operation.

(The English translation is for reference only).

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