Article 7 The new profit of an equity joint venture shall be distributed among the parties to the venture in proportion to their respective contributions to the registered capital, after payment out of its gross profit of the equity joint venture income tax, pursuant to the provisions of the tax laws of the People's Republic of China, and after deduction from the gross profit of a reserve fund, a bonus and welfare fund for workers and staff members and a venture expansion fund, as stipulated in the venture's articles of association. An equity joint venture may, in accordance with provisions of the relevant laws and administrative rules and regulations of the state on taxation, enjoy preferential treatment for reduction of or exemption from taxes.
A foreign joint venturer that reinvests its share of the net profit within the territory of China may apply for partial refund of the income tax already paid.
Article 8 An equity joint venture shall, on the strength of its business license, open a foreign exchange account with a bank or any other financial institution which is permitted by the state agency for foreign exchange control to handle foreign exchange transactions. An equity joint ventures shall handle its foreign exchange transactions in accordance with the regulations on foreign exchange control of the People's Republic of China. An equity joint venture may, in its business operations, directly raise funds from foreign banks.
The various kinds of insurance coverage of an equity joint venture shall be furnished by Chinese insurance companies.
Article 9 The production and business operating plans of an equity joint venture shall be submitted to the competent authorities for record and shall be implemented through economic contracts.
In its purchase of required raw and semi-processed materials, fuels, auxiliary equipment, etc., an equity joint venture should give first priority to purchases in China. It may also make such purchases directly on the world market with foreign exchange raised byitself.
An equity joint venture shall be encouraged to market its products outside China. It may sell its export products on foreign markets directly or through associated agencies or China's foreign trade agencies. Its products may also be sold on the Chinese market. When necessary, an equity joint venture may set up branches and sub branches outside China.
Article 10 The net profit which a foreign joint venturer receives as its share after performing its obligations under the laws, and the agreements or the contract, the funds it receives upon the expiration of the venture's term of operation or its early termination, and its other funds may be remitted abroad in accordance with foreign exchange control regulations and in the currency or currencies specified in the contract concerning the equity joint venture.
A foreign joint venturer shall be encouraged to deposit in the Bank of China the foreign exchange which it is entitled to remit abroad.
Article 11 The wages, salaries or other legitimate income earned by a foreign worker or staff member of an equity joint venture, after payment of the individual income tax under the tax laws of the People's Republic of China, may be remitted abroad in accordance with foreign exchange control regulations.
Article 12 based on different lines of trade and different circumstances, arrangements for the duration of equity joint ventures may be made differently through agreement by the parties to the venture. Equity joint ventures engaged in certain lines of trade shall specify their duration in the contracts, while equity joint ventures engaged in certain other lines of trade may choose to or not to specify their duration in the contracts. Where an equity joint venture
has had its duration specified and the parties to the venture agree to extend the duration, the venture shall file an application for the purpose with the examination and approval authorities six months before its expiration. The examination and approval authorities shall, within one month after receipt of the application, decide on its approval or disapproval.
Article 13 In case of heavy losses, failure of a party to perform its obligations under the contract and the articles of association, or force majeure etc., the parties to the joint venture may terminate the contract through their consultation and agreement, subject to approval by the examination and approval authorities and to registration with the state's competent department in charge of industry and commerce administration. In cases of losses caused by a breach of contract, the financial responsibility shall be borne by the party that has breached the contract.
Article 14 Disputes arising between the parties to an equity joint venture which the board of directors has failed to settle through consultation may be settled through mediation or arbitration by an arbitration agency of China or through arbitration by anotherarbitration agency agreed upon by the parties.
Article 15 This Law shall enter into force as of the date of promulgation. The power to amend this Law is vested in the National People's Congress.
