Article 1 These Rules are enacted in accordance with the Law of the People's Republic of China on Chinese-Foreign Contractual Joint Ventures.

Article 2 The establishment of Chinese-foreign contractual joint ventures （hereinafter referred to as contractual joint ventures） within the territory of China shall meet the development policies and industrial policies of the state and shall abide by the state provisions on the direction of investment of foreign funded enterprises.

Article 3 Contractual joint ventures shall develop their own business freely in accordance with the law and conduct operational and managerial activities within the scope of the approved agreements， contracts and articles of association of the contractual joint ventures without any interference from any organizations or individuals.

Article 4 Contractual joint ventures include those having attained the status of Chinese legal persons and those not having attained the status of Chinese legal persons in accordance with the law.

Where special provisions are provided for in Chapter IX of these Rules， such provisions shall apply to the contractual joint ventures which do not have the status of legal persons.

Article 5 The competent department of the Chinese party of the contractual joint venture is also that of the contractual joint venture. Where there are two or more Chinese parties， the authority for examination and approval shall consult with the relevant departments to determine one department to be the competent one， with the exceptions of those provided for by law or administrative regulations.

The department responsible for the contractual joint venture shall coordinate the relevant matters concerning the contractual joint venture and provide assistance in accordance with law.

Article 6 The establishment of contractual joint ventures shall be examined and approved either by the Ministry of Foreign Trade and Economic Cooperation or by the department or local people's government authorized by the State Council.

Where a contractual joint venture is established under one of the following circumstances， the contractual joint venture shall be examined and approved by the department or the local people's government authorized by the State Council：

1. Where the total investment amount is within the limit of the amount stipulated by the State Council which can be examined and approved by the department or the local people's government authorized by the State Council；
2. Where the capital is raised by the contractual joint venture， and the construction or production conditions are not required to be balanced by the state；
3. Where the export of products does not require to receive the export quota or permit as granted by the relevant state departments responsible， or although such a quota or permit is required， the relevant state departments responsible have agreed to grant them before the project proposal is submitted；
4. Where there are other cases examined and approved by the department or the local people's government authorized by the State Council as stipulated by law or by administrative regulations.

Article 7 Where a contractual joint venture is established, the following documents must be submitted to the examination and approval authority by the Chinese party:

1. The project proposal for establishing a contractual joint venture， together with any documents which have been examined and approved by the department responsible；
2. The feasibility study report jointly conducted by all parties to the contractual joint venture， together with any documents which have been examined and approved by the department responsible；
3. The agreement， contract and articles of association of the contractual joint venture signed by the legal representatives or authorized representatives of the parties to the contractual joint venture；
4. The business licenses or registration certificates of the parties to the contractual joint venture， and their credit certificates and the valid documents of their legal representatives； where the foreign party is a natural person， valid certifying documents showing his or her identity， his or her personal details and credit information should be provided；
5. The name list of the chairman， vice-chairman and directors of the board of directors or the director， vice-director and members of the joint management committee as decided in consultation by the parties to the contractual joint venture；
6. Other documents whose submission is required by the examination and approval authority.

The documents listed in the preceding paragraph shall be submitted in Chinese with the exception of the documents listed in Item （4） provided by the foreign party； the documents listed in Items （2）， （3） and （5） may be simultaneously submitted in a foreign language, as decided in consultation by the parties to the contractual joint venture.

The examination and approval authority shall decide whether to grant approval within 45 days of receiving all the documents stipulated; in cases where the examination and approval authority thinks that the documents submitted are incomplete or unsuitable, it has the right to demand the parties to the contractual joint venture to complete or amend them within the appointed time limit.

Article 8 The Ministry of Foreign Trade and Economic Cooperation shall issue certificate of approval to a contractual joint venture whose establishment has been approved by the Ministry of Foreign Trade and Economic Cooperation and the department authorized by the State Council.

The local people's government shall issue certificate of approval to a contractual joint venture whose establishment has been approved by the relevant local people's government as authorized by the State Council， and these documents of approval shall within 30 days as from the date of approval be submitted to the Ministry of Foreign Trade and Economic Cooperation for the record.

A contractual joint venture whose establishment has been approved shall apply to the authority for the administration of industry and commerce for registration and to obtain a business licence in accordance with the law.

Article 9 Under any of the following circumstances， approval will not be granted to an applicant for establishment of a contractual joint venture：

1. Harming state sovereignty or social public interests;
2. Endangering state safety;
3. Causing pollution to the environment;
4. Other circumstances which violate the law, administrative regulations or state industrial policies.

Article 10 The term “agreement of the contractual joint venture” as stipulated in these Rules refers to the written document drawn up by the parties to the contractual joint venture after they have come to an agreement on the principles for establishing the venture and major projects.

The term “contract of the contractual joint venture” as stipulated in these Rules refers to the written document drawn up by the parties to the contractual joint venture after they have come to an agreement upon the rights and obligations of the parties for the establishment of the venture.

The term “articles of association of the contractual joint venture” as stipulated in these Rules refers to the written document drawn up by the parties to the contractual joint venture according to the agreements made in the contract of the contractual joint venture and agreed upon by all parties to the contractual joint venture， agreeing on such matters as the organizational principles and the methods of management and operation.

In cases where discrepancies exist between the agreement or articles of association of the contractual joint venture and the contract of the contractual joint venture， the contract of the contractual joint venture shall prevail.

The parties to the contractual joint venture also have the right not to conclude the agreement of the contractual joint venture.

Article 11 The agreement， the contract and the articles of association of the contractual joint venture shall enter into force as of the day when the certificate of approval is issued by the examination and approval authority. During the period of cooperation， any major changes to the agreement， the contract or articles of association of the contractual joint venture must be approved by the examination and approval authority.

Article 12 The contract of the contractual joint venture shall clearly state the following:

1. The name， place of registration， domicile of and the name， position and nationality of the legal representatives of each party to the contractual joint venture （where the foreign party is a natural person， his or her name， nationality， and domicile）;
2. The name， domicile and scope of business of the contractual joint venture;
3. The total investment sum and the registered capital of the contractual joint venture， the manner and time limit of the investment or conditions for cooperation provided by each party to the contractual joint venture;
4. The transfer of investments or conditions provided by the parties to the contractual joint venture;
5. The distribution of earnings or products and the sharing of risks and losses among each party to the contractual joint venture;
6. The composition of the board of directors or the joint management committee of the contractual joint venture and the number of people assigned to be directors or committee members， the powers， and the measures for the appointment and dismissal of the general manager and other high-ranking managers;
7. The major equipment used for production， the productive technology and their source；
8. Marketing arrangements for products sold inside and outside Chinese territory；
9. Plans for revenue and expenditure regarding foreign currency;
10. The period of operation， dissolution and liquidation of the contractual joint venture;
11. Other obligations of the parties to the contractual joint venture and responsibilities for breach of the contract;
12. The operational principles for finance， accounting and auditing;
13. The settlement of disputes between the parties to the contractual joint venture;
14. The procedures for amending the contract of the contractual joint venture.

Article 13 The articles of association of the contractual joint venture shall clearly state the following:

1. The name and domicile of the contractual joint venture;
2. The business scope and the period of cooperation of the contractual joint venture;
3. The name， place of registration， domicile of and the name， position and nationality of the legal representatives of each party to the contractual joint venture （where the foreign party is a natural person， his or her name， nationality and domicile）;
4. The total investment sum and the registered capital of the contractual joint venture， the manner and time limit of the investment or the conditions for cooperation provided by each party to the contractual joint venture;
5. The distribution of earnings or products and the sharing of risks and losses among each party of the contractual joint venture;
6. The composition， powers and rules of procedure of the board of directors or the joint management committee， the terms of office of directors of the board of directors or members of the joint management committee， the powers of the chairman and vice-chairman of the board of directors， and the director and vice-director of the joint management committee;
7. The establishment， powers and working procedures of management organs， the powers， the measures for appointment and dismissal of the general manager and other high-ranking managers;
8. Provisions relating to such labour management as recruitment， training， work contracts， wages， social insurance， welfare， on-the-job safety and hygiene of the staff members;
9. Systems of finance， accounting and auditing of the contractual joint venture;
10. The procedures for the dissolution and liquidation of the contractual joint venture；
11. The procedures for amending the articles of association of the contractual joint venture.

Article 14 A contractual joint venture which has attained the status in accordance with the law shall be a limited liability company. The parties to the venture shall be liable to the contractual joint venture within the extent of their investment or within their extent of the conditions for cooperation contributed， with the exception of those cases otherwise agreed in the contract.

The contractual joint venture is liable for covering the debts of the venture with all its assets.

Article 15 The total investment sum in the contractual joint venture means the investment total which need be contributed according to the scale of production and management as stipulated in the contract and the articles of association of the contractual joint venture.

Article 16 The registered capital of the contractual joint venture means the total capital contributed by the parties to the contractual joint venture as registered in the administrative organs for industry and commerce for the purpose of establishing the contractual joint venture. The registered capital may be expressed in Renminbi Yuan or in another convertible foreign currency as agreed by the parties to the contractual joint venture.

The registered capital of the contractual joint venture may not decrease in the period of cooperation. However， incases where changes occurring in the total investment sum and the scale of production or operation mean that there is a real need to reduce the registered capital， approval must be granted by the authority for examination and approval.

Article 17 The parties to the contractual joint venture shall provide investment for the venture or conditions for cooperation in accordance with the provisions of the relevant laws or administrative regulations and the agreement in the contract of the contractual joint venture.

Article 18 The investment or conditions for cooperation contributed by the parties to the contractual joint venture maybe provided in cash or in kind， including industrial property rights， specialized technology， the right to the use of land or other property rights.

In cases where the investment or conditions for cooperation contributed by the Chinese parties are part of the state assets， they shall be valued according to the provisions of the relevant laws and administrative regulations.

In cases where the contractual joint venture has attained the status of Chinese legal person in accordance with the law， the investment contributed by foreign parties shall usually not be less than 25% of the registered capital of the contractual joint venture. In cases where the contractual joint venture has not attained the status of Chinese legal person， the specific requirements as to the investment or conditions contributed by the parties to the contractual joint venture shall be stipulated by the Ministry of Foreign Trade and Economic Cooperation.

Article 19 The parties to the contractual joint venture may contribute their own property or property rights as investment or conditions for cooperation， and may not raise mortgages or other forms of guarantee on the contributed investment or conditions for cooperation.

Article 20 The parties to the contractual joint venture shall， according to the production and management needs of the contractual joint venture and in accordance with the provisions of the relevant laws or administrative regulations， agree upon within the contract of the contractual joint venture a deadline before which each party shall provide investment or conditions for cooperation in the contractual joint venture.

In cases where each party to the contractual joint venture has not provided the investment or conditions for cooperation in the agreement in the contractual joint venture's contract， the administrative authority for industry and commerce shall prescribe a time limit for him to provide； in cases where investment has not been made before the time limit， the authority for examination and approval shall revoke the certificate of approval of the contractual joint venture， and the administrative authority for industry and commerce shall revoke the business licence of the contractual joint venture and shall publicly announce this decision.

Article 21 In cases where one party to the contractual joint venture has not provided investment or conditions for cooperation in accordance with the contract of the contractual joint venture， he shall be liable for violating the contract to the other party who has provided investment and conditions for cooperation in accordance with the contract of the contractual joint venture.

Article 22 The investments or conditions for cooperation provided by the parties to the contractual joint venture shall be verified by a Chinese certified public accountant who shall provide a verification report. The contractual joint venture shall issue certificates of investment to the parties to the venture on the basis of the report. The certificates of investment shall clearly state the following:

1. The name of the contractual joint venture;
2. The date of establishment of the contractual joint venture;
3. The designation or name of each party to the contractual joint venture;
4. The contents of the investment or conditions for cooperation contributed by the parties to the contractual joint venture;
5. The date on which the parties to the contractual joint venture provided the investment or conditions for cooperation;
6. The serial number and the date of issue of the investment certificate.

Copies of the investment certificate shall be submitted to the examination and approval authority and the administrative authority for industry and commerce.

Article 23 If the parties to the contractual joint venture transfer all or some of the rights stipulated in the contract of the contractual joint venture to each other， or if one party to the venture transfers all or some of the rights stipulated in the contract to a party other than the other party to the venture， the written consent of the other party must be obtained and submitted to the examination and approval authority for approval.

The examination and approval authority shall decide whether or not to grant approval within 30 days of receiving the document regarding the transfer.

Article 24 The contractual joint venture shall establish a board of directors or a joint management committee. The board of directors or the joint management committee is the authoritative organization of the contractual joint venture， deciding the major issues of the contractual joint venture according to the provisions of the articles of association of the contractual joint venture.

Article 25 The board of directors or the joint management committee shall be composed of not less than three members， and their distribution shall be determined through consultation by the Chinese and foreign parties with reference to the investment or conditions for cooperation contributed by each party.

Article 26 The members of the board of directors or the joint management committee shall be appointed or dismissed by the Chinese and the foreign party respectively. The method of the selection of the chairman and vice-chairman of the board of directors or the director and vice-director of the joint management committee shall be stipulated in the articles of association of the contractual joint venture. Where the Chinese or the foreign party assumes the chairmanship of the board of directors or the directorship of the joint management committee， the other party shall assume the vice-chairmanship or the vice-directorship.

Article 27 The term of office of the members of the board of directors or the joint management committee shall be specified in the articles of association of the contractual joint venture； however， each term may not be longer than three years. At the expiration of a director's or a committee member's term， he may serve another term if re-appointed.

Article 28 Meetings of the board of directors or the joint management committee shall be convened at least once a year and shall be convened and presided over by the chairman or the director. When the chairman or the director is unable to perform his duties due to special reasons， the vice-chairman， the vice-director or another board or committee member as designated by the chairman or the director shall convene and presided over the meeting. A meeting of the board of directors or the joint management committee may be convened upon proposal made by one-third or more of the directors or committee members.

Meetings of the board of directors or the joint management committee may be held only if two-thirds or more of the directors or committee members are present. Directors or committee members who are unable to attend the meetings of the board of directors or the joint management committee shall entrust a representative in writing to attend and to vote. A resolution made at a meeting of the board of directors or joint management committee requires the approval of half or more of all the directors or committee members before it passes. A director or a committee member who does not attend the meeting of the board of directors or the joint management committee without any just cause， and does not entrust are presentative to attend on his behalf is deemed to have been present at the meeting of the board of directors or joint management committee and to have abstained from voting.

All directors or committee members shall be notified ten days before a meeting of the board of directors or joint management committee is convened.

The meetings of the board of directors or the joint management committee may use means of communication to pass a resolution.

Article 29 A resolution on the following matters must be adopted unanimously by all directors or committee members attending the meeting of the board of the directors or the joint management committee:

1. An amendment of the articles of association of the contractual joint venture;
2. An increase or decrease in the registered capital of the contractual joint venture;
3. The dissolution of the contractual joint venture;
4. The mortgage of the assets of the contractual joint venture;
5. A merger， division or change in the corporate form of the contractual joint venture;
6. Other matters agreed by the parties to the contractual joint venture which must be adopted unanimously by all directors or committee members present at the meeting of the board of the directors or joint management committee.

Article 30 Except as otherwise stipulated in these Rules， the methods of discussion and voting procedures used in the meetings of the board of directors or the joint management committee shall be stipulated in the articles of association of the contractual joint venture.

Article 31 The chairman or the director is the legal representative of the contractual joint venture. In cases when the chairman or the director is unable to perform his duties due to special reasons， he must authorize the vice-chairman， the vice-director or another director or committee member to represent the contractual joint venture in its external relations.

Article 32 The contractual joint venture shall have one general manager who shall be responsible for the day-to-day operation and management of the contractual joint venture and shall be responsible to the board of directors or the joint management committee.

The general manager of the contractual joint venture shall be appointed and dismissed by the board of directors or the joint management committee.

Article 33 The general manager and the other high-ranking managers may be either Chinese or foreign citizens.

Directors or committee members， as appointed by the board of directors or the joint management committee， may concurrently hold the position of general manager or other high-ranking managers of the contractual joint venture.

Article 34 When the general manager or other high-ranking managers are not competent at their jobs， neglect their duties seriously or engage in fraudulent practices or embezzlement， they may be dismissed through a resolution adopted by the board of directors or the joint management committee; in cases where damage is done to the contractual joint venture， the liability for the damages shall be awarded in accordance with law.

Article 35 When a contractual joint venture， after its establishment， entrusts a third party with its operation and management， unanimous consent must be obtained from the board of the directors or the joint management committee， and a contract entrusting the operation and management shall be signed with the person thus entrusted.

The contractual joint venture shall submit such documents as the resolution of the board of directors or joint management committee， the signed contract entrusting the operation and management and the credit certificate of the person thus entrusted to the examination and approval authority for approval. The examination and approval authority shall decide whether or not to grant approval within 30 days of receiving the relevant documents.

Article 36 The contractual joint venture shall formulate its own plans regarding production and operation in accordance with the scope of the business and the scale of operation and production approved.

Government departments may not force contractual joint ventures to carry out plans regarding production and operation determined by a government department.

Article 37 The contractual joint venture may decide by itself whether to buy the machinery， equipment， raw materials， fuel， components， auxiliary equipment， means of transportation and office appliances etc. used by the contractual joint venture (hereinafter referred to as goods and materials) inside or outside the Chinese territory.

Article 38 The state shall encourage the contractual joint venture to sell its products on the international market. The contractual joint venture may sell its products on the international market by itself， or may entrust foreign sales organizations or foreign trade companies in China to sell its products on a commission basis or distribute its products.

The sale price of the products of the contractual joint venture shall be determined by the contractual joint venture in accordance with law.

Article 39 The machinery， equipment， components and other materials imported by the foreign party as investment and the machinery， equipment， components and other materials imported by the contractual joint venture as required for the purposes of production and operation using funds which are part of the total invested amount are exempt from import duty and circulation tax during the process of importation. The tax-free goods and materials mentioned above， after being approved to be resold within Chinese territory or used as domestic sales， shall be taxed or the overdue tax upon them shall be paid.

Article 40 The contractual joint venture may not export products at a price which is clearly lower than a reasonable price for the same type of product on the international market， nor may the contractual joint venture import goods and materials at a price which is clearly higher than that of the same type of product on international market.

Article 41 The contractual joint venture shall sell its products in accordance with the agreement as approved in the contract of the contractual joint venture.

Article 42 Where the commodities imported or exported by the contractual joint venture are those which are controlled by import or export permits or quotas， the application procedures must be handled in accordance with the relevant state provisions.

Article 43 The Chinese and foreign parties may distribute the earnings by distributing the profit， distributing the products or by other means as decided through consultation by all parties to the contractual joint venture.

Where earnings are distributed through the method of distributing the product or other methods， the amount of tax to be paid shall be calculated in accordance with the relevant regulations of the tax law.

Article 44 Where it has been agreed upon by the Chinese and foreign parties in the contract of the contractual joint venture that upon the expiration of the period of the venture's operation all the fixed assets of the contractual joint venture shall be returned gratis to the Chinese party， the foreign party may， in the period of the venture's operation， apply to recover the investment ahead of time in the following ways:

1. On the basis of distribution according to the investment or conditions for cooperation provided， it may be agreed in the contract of the contractual joint venture to increase the foreign party's proportion in the distribution of earnings;
2. Upon examination and approval of the financial and tax authorities in accordance with the relevant state tax provisions， the foreign party may recover its investment prior to the payment of income tax;
3. Other methods of recovering investment which have been approved by the financial and tax authorities and the examination and approval authorities.

If the foreign party is to recover its investment ahead of time during the period of the venture's operation according to the provisions of the preceding paragraph， the Chinese and foreign parties shall be liable for the debts of the contractual joint venture as stipulated in the relevant law and agreed upon in the contract of the contractual joint venture.

Article 45 The foreign party who， in accordance with the provisions of Items （2） and （3） of Article 44 of these Rules， is applying to recover its investment ahead of time shall clearly state the total investment sum which it wishes to recover ahead of time， the time schedule and the method of recovery. When the application has been examined and approved by the financial and tax authorities， it shall be submitted to the examination and approval authorities for examination and approval.

The foreign party may not recover its investment before losses incurred by the contractual joint venture are recompensed.

Article 46 The contractual joint venture shall employ an certified public accountant in China to check the accounts and verify them in accordance with the relevant state regulations. Each party to the contractual joint venture may， together with the other parties or by itself， entrust an certified public accountant in China to check the accounts. The accountants' fees shall be paid by the party by whom he is employed.

Article 47 The period of operation of a contractual joint venture shall be determined by the Chinese and foreign parties through consultation， and shall be clearly specified in the contract of the contractual joint venture.

Where the parties to the contractual joint venture agree through consultation to extend the period of operation of the contractual joint venture after the expiration of its period of operation， they shall apply to the examination and approval authority 180 days prior to the expiration of the venture's term， explaining the conditions of implementation of the existing contract of the contractual joint venture and the reason for extending the venture's term， and shall submit an agreement reached between all parties to the venture on such matters as the rights and obligations of each party. The examination and approval authority shall decide whether or not to grant approval within 30 days of receiving the application.

Where approval is granted to extend the period of operation， the contractual joint venture shall apply to the administrative authority for industry and commerce to alter the registration on the basis of the document of approval. The extended period of operation shall be calculated as of the first day after the expiration of the operation period.

Where it has been agreed upon in the contract of the contractual joint venture that the foreign party may recover its investment ahead of time and the investment has already been recovered， the operation period of the contractual joint venture may not be extended； however， where the foreign party increases its investment， as agreed by all the parties through consultation， they may apply to the examination and approval authority to extend the period of operation in accordance with Paragraph 2 of this Article.

Article 48 The contractual joint venture may dissolve in any of the following situations:

1. The expiration of the operation period;
2. The contractual joint venture is incurring serious losses， or suffering from serious losses due to circumstances beyond their control， and is unable to continue to operate;
3. One or more of the Chinese or foreign parties do not perform the obligations stipulated in the contract or the articles of association of the contractual joint venture， which causes the venture to be unable to continue to operate;
4. Other causes for dissolving the venture exist， which are stipulated as thus in the contract or the articles of association of the contractual joint venture;
5. The contractual joint venture is closed down for violating laws or administrative regulations in accordance with the law.

Where the situations listed in Items （2） and （4） of the preceding paragraph occur， the board of directors or the joint management committee of the contractual joint venture shall come to a decision and shall submit it to the examination and approval authority for approval. Where the situations listed in Item （3） of the preceding paragraph occur， the Chinese or foreign party or parties who do not perform the obligations stipulated in the contract or the articles of association of the venture shall be held liable to other parties who are carrying out the contract for compensating them for losses resulting thereof； one party or the parties carrying out the contract have the right to apply to the examination and approval authority to dissolve the contractual joint venture.

Article 49 The liquidation of the contractual joint venture shall be dealt with according to the provisions of the contractor the articles of association of the contractual joint venture.

Article 50 Contractual joint ventures which have not attained the status of legal person and the parties to such venture shall be liable for civil responsibility according to the relevant provisions of Chinese civil law.

Article 51 Contractual joint ventures which have not attained the status of legal person shall register the investments or conditions for cooperation provided by the parties to the venture with the administrative authority for industry and commerce.

Article 52 The investments or conditions for cooperation provided by the parties to a contractual joint venture which has not attained the status of legal person shall be owned by the respective parties. Where all parties to the contractual joint venture are in agreement， these may be co-owned by all parties， or part of them may be owned by respective parties while other parts may be co-owned. The properties accumulated during the operation of the contractual joint venture belong to all parties to the venture.

The investment or conditions for cooperation provided by the parties to the contractual joint venture which has not attained the status of legal person shall be managed and used by the whole venture. One single party may not dispose of the properties without the authorized consent of the other parties.

Article 53 A contractual joint venture which has not attained the status of legal person may have a joint management committee. The committee shall be made up of representatives appointed by the parties to the venture and shall represent the respective parties in co-managing the venture.

The joint management committee shall make all the major decisions concerning the contractual joint venture.

Article 54 A contractual joint venture which has not attained the status of legal person must set up joint account books at the place where the venture is located; the parties to the venture must set up their own respective account books.

Article 55 Chinese law shall apply to the conclusion， validity， explanation， performance and dispute settlement of the contract of the contractual joint venture.

Article 56 Provisions of the relevant laws and administrative regulations shall apply to matters which are not specified in these Rules including finance， accounting， auditing， foreign currency， tax， labor management， trade unions and other matters.

Article 57 Any company， enterprise or other economic organization or individual from Hong Kong， Macao or Taiwan regions or any Chinese citizen living abroad who wishes to establish a contractual joint venture shall go through the procedures with reference to these Rules.

Article 58 These Rules shall come into force as of the date of promulgation.

注意事项：

在本英文翻译版本同汉语原版本出现任何不符时，以汉语版本为准。

Important Notice:

In case of this English version has any discrepancy with the original version in Chinese, the Chinese version shall prevail.