The State Council

Regulations for the Implementation of the Law of the People’s Republic of China on Chinese-foreign Equity Joint Ventures

the State Council

September 20, 1983

Chapter I General Provisions

Article 1

These Regulations are formulated with a view to facilitating the smooth implementation of the Law of the People’s Republic of China
on Chinese-foreign Equity Joint Ventures (hereinafter referred to as the Law on Chinese-foreign Equity Joint Ventures).

Article 2

Chinese-foreign equity joint ventures (hereinafter referred to as joint ventures) established within China’s territory in accordance
with the Law on Chinese-foreign Equity Joint Ventures are legal persons in China and are subject to the jurisdiction of Chinese laws
and enjoy protection thereof.

Article 3

Joint ventures established within China’s territory shall be able to promote the development of China’s economy and the raising of
scientific and technological levels for the benefit of socialist modernization. Joint ventures permitted to be established are mainly
in the following industries:

(1)

energy development, the building material, chemical and metallurgical industries;

(2)

machine manufacturing, instrument and meter industries and offshore oil exploitation equipment manufacturing;

(3)

electronics and computer industries, and communication equipment manufacturing;

(4)

light, textile, foodstuffs, medicine, medical apparatus and packaging industries;

(5)

agriculture, animal husbandry and aquiculture;

(6)

tourism and service trades.

Article 4

Joint ventures to be applied for their establishment shall lay stress on economic results and shall comply with one or several of
the following requirements:

(1)

they shall adopt advanced technical equipment and scientific managerial methods which help increase the variety, improve the quality
and raise the output of products and save energy and materials;

(2)

they shall prove to be conducive to technical renovation of enterprises and be able to bring about quicker returns and bigger profits
with less investment;

(3)

they shall help expand exports and thereby increase foreign currency receipts;

(4)

they shall help train technical and managerial personnel.

Article 5

Application for establishing joint ventures shall not be approved if they involve any of the following circumstances:

(1)

detriment to China’s sovereignty;

(2)

violation of Chinese Law;

(3)

nonconformity with the requirements of the development of China’s national economy;

(4)

environmental pollution;

(5)

obvious inequity in the agreements, contracts and articles of association signed, impairing the rights and interests of one of the
parties.

Article 6

Unless otherwise stipulated, the government department in charge of the Chinese joint venturer in a joint venture shall be the department
in charge of the joint venture (hereinafter referred to as the department in charge). If a joint venture has two or more Chinese
joint venturers which are under different departments or from different regions, the departments and regions concerned shall, through
consultation, designate a department in charge.

Departments in charge are responsible for providing guidance and assistance and exercising supervision over the joint ventures.

Article 7

A joint venture has the right to independently conduct business operations and management within the scope as prescribed by Chinese
laws and regulations, and by the agreement, contract and articles of association of the joint venture. The departments concerned
shall provide support and assistance.

Chapter II Establishment and Registration

Article 8

The establishment of a joint venture in China is subject to examination and approval by the Ministry of Foreign Economic Relations
and Trade of the People’s Republic of China (hereinafter referred to as the MOFERT). Upon approval, an Approval Certificate shall
be issued by the MOFERT.

The MOFERT may entrust the people’s governments in the related provinces, autonomous regions, and municipalities directly under the
Central Government or relevant ministries or bureaus under the State Council (hereinafter referred to as the entrusted office) with
the power to examine and approve the establishment of joint ventures that comply with the following conditions:

(1)

the total amount of investment is within the limit set by the State Council and the source of capital of the Chinese venturers has
been ascertained;

(2)

no additional allocation of raw materials by the State is required and the national balance as to fuel, power, transportation and
foreign trade export quotas is not affected.

The entrusted office, after approving the establishment of a joint venture, shall report the same to the MOFERT for the record. An
Approval Certificate shall be issued by the MOFERT.

(The MOFERT and the entrusted office will hereinafter be generally referred to as the examining and approving authorities.)

Article 9

The following procedures shall be followed in the establishment of a joint venture:

(1)

it is the Chinese joint venturer in a joint venture that shall submit to its department in charge a project proposal and a preliminary
feasibility study report of the joint venture to be established with foreign joint venturer. The proposal and the preliminary feasibility
study report. upon examination and approval by the department in charge, shall be submitted to the examining and approving authorities
for final approval. The parties to the venture shall then conduct work centering around the feasibility study, and then proceed on
this basis, to negotiate and sign joint venture agreement, contract and articles of association;

(2)

when applying for the establishment of a joint venture, the Chinese joint venturer is responsible for the submission of the following
documents to the examining and approving authorities:

(a)

a written application for the establishment of the joint venture;

(b)

the feasibility study report jointly prepared by the parties to the venture;

(c)

joint venture agreement, contract and articles of association signed by representatives authorized by the parties to the venture;

(d)

list of candidates for chairman and vice-chairman of board of directors and directors nominated by the parties to the venture;

(e)

written opinions concerning the establishment of the said venture of the department in charge and the people’s government of the province,
autonomous region or municipality directly under the Central Government where the joint venture is located.

The aforesaid documents shall be written in Chinese. Documents (b), (c) and (d) may be written simultaneously in a foreign language
agreed upon by the parties to the joint venture. Both versions are equally authentic.

Article 10

Upon receipt of the documents stipulated in Article 9 (2). the examining and approving authorities shall, within 3 months, decide
whether to approve or disapprove them. Should anything inappropriate be found in any of the aforementioned documents, the examining
and approving authorities shall demand an amendment within a limited time. Otherwise, no approval shall be granted.

Article 11

The applicant shall, within one month as of the receipt of the Approval Certificate, register with the administrative department for
industry and commerce of the province, autonomous region or municipality directly under the Central Government in accordance with
the provisions of the Measures of the People’s Republic of China for the Administration of the Registration of Chinese-foreign Equity
Joint Ventures (hereinafter referred to as registration administration office). The date of the issuance of its business licence
is the date of the formal establishment of the joint venture.

Article 12

Any foreign investor who intends to establish a joint venture in China but is unable to find a specific co-operator in China may submit
a preliminary plan for the joint venture project and entrust the China International Trust and Investment Corporation (CITIC) or
a trust and investment corporation of a province, autonomous region or municipality directly under the Central Government, or a relevant
government department or a non-governmental organization, to recommend Chinese co-operators.

Article 13

The “joint venture agreement” mentioned in this Chapter refers to the document agreed upon by the parties to the joint venture on
some major points and principles governing the establishment of the joint venture.

“Joint venture contract” refers to the document agreed upon and concluded by the parties to the joint venture on their mutual rights
and obligations.

“Articles of association” refers to the document agreed upon by the parties to the joint venture specifying the purpose, organizational
principles and method of management of the joint venture in compliance with the principles of the joint venture contract.

Where the joint venture agreement comes into conflict with the contract, the latter shall prevail.

The parties to the joint venture may agree to sign the contract and articles of association only, without signing an agreement.

Article 14

A joint venture contract shall include the following main items:

(1)

the names, the countries of registration, the legal addresses of parties to the joint venture, and the names, positions and nationalities
of the legal representatives thereof;

(2)

name of the joint venture, its legal address, purpose and the scope and scale of business;

(3)

total amount of investment and registered capital of the joint venture, amount, proportion and forms of investment to be contributed
by each party to the joint venture, the time limit for contributing investment, stipulations concerning incomplete contributions,
and assignments of investments;

(4)

the proportion of profit to be shared and losses to be borne by each party;

(5)

the composition of the board of directors, the distribution of the number of directors, and the responsibilities, powers and means
of employment of the general manager, deputy general manager and high-ranking managerial personnel;

(6)

the main production equipment and technology to be adopted and their source of supply;

(7)

the ways and means of purchasing raw materials and selling finished products, and the ratio of products sold within Chinese territory
to those sold abroad;

(8)

arrangements for receipts and expenditures in foreign currency;

(9)

principles governing the handling of finance, accounting and auditing;

(10)

stipulations concerning labour management, wages, welfare, and labour insurance;

(11)

the duration of the joint venture, its dissolution and the procedures for liquidation;

(12)

the liabilities for breach of contract;

(13)

ways and procedures for settling disputes between the parties to the joint venture;

(14)

the language(s) used for the contract and the conditions for putting the contract into force.

The Attachment to the contract of a joint venture shall be equally authentic as the contract itself.

Article 15

Chinese laws shall apply to the conclusion, validity, interpretation and execution of a joint venture contract, as well as to the
settlement of disputes.

Article 16

The Articles of association of a joint venture shall include the following main items:

(1)

the name of the joint venture and its legal address;

(2)

the purpose, business scope and duration of the joint venture;

(3)

the names, countries of registration and legal addresses of parties to the joint venture, and the names, positions and nationalities
of the legal representatives thereof;

(4)

the total amount of investment, registered capital of the joint venture, each party’s investment proportion, stipulations concerning
the assignment of investment, the proportions of profit distribution and losses to be borne by parties to the joint venture;

(5)

the composition of the board of directors, its responsibilities, powers and rules of procedure, the term of office of the directors,
and the responsibilities of its chairman and vice-chairman;

(6)

the setting up of management organizations, rules for handling routine affairs, the responsibilities of the general manager, deputy
general manager and other high-ranking managerial personnel, and the method of their appointment and dismissal;

(7)

principles governing financial, accounting and auditing systems;

(8)

dissolution and liquidation;

(9)

procedures for amendment of the articles of association.

Article 17

The agreement, contract and articles of association shall come into force upon approval by the examining and approving authorities.
The same applies to amendments thereof.

Article 18

The examining and approval authorities and the registration administration office are responsible for supervising and checking on
the execution of the joint venture contracts and articles of association.

Chapter III Form of Organization and Registered Capital

Article 19

A joint venture is a limited liability company.

Each party to the joint venture is liable to the joint venture within the limit of the capital subscribed by it.

Article 20

The total amount of investment (including loans) of a joint venture refers to the sum of capital construction funds and the circulating
funds needed for the joint venture’s production scale as stipulated in the contract and the articles of association of the joint
venture.

Article 21

The registered capital of a joint venture refers to the total amount of investment registered at the registration administration office
for the establishment of the joint venture. It shall be the total amount of investment subscribed by parties to the joint venture.

The registered capital shall generally be represented in Renminbi, or may be in a foreign currency agreed upon by the parties to the
joint venture.

Article 22

A joint venture shall not reduce its registered capital during the term of the joint venture.

Article 23

If one party to the joint venture intends to assign all or part of its investment subscribed to a third party, consent shall be obtained
from the other party to the joint venture, and approval from the examining and approving authorities is required.

When one party assigns all or part of its investment to a third party, the other party has pre-emptive right.

When one party assigns its investment subscribed to a third party, the terms of assignment shall not be more favourable than those
to the other party to the joint venture.

No assignment shall be effective should there be any violation of the above stipulations.

Article 24

Any increase, assignment or other disposal of the registered capital of a joint venture shall be approved at a meeting of the board
of directors and submitted to the original examining and approving authorities for approval.

Registration procedures for changes shall be handled at the original registration administration office.

Chapter IV Ways of Contributing Investment

Article 25

Each joint venturer may invest in cash or may contribute buildings, factory premises, equipment or other materials, industrial property,
proprietary technology, or right to the use of a site, appraised at appropriate prices, as investment. If the investment is in the
form of buildings, premises, equipment or other materials, industrial property or proprietary technology, the prices shall be determined
through consultation by the parties to the joint venture on the basis of fairness and reasonableness, or they shall be evaluated
by a third party accepted and invited by the parties to the joint venture.

Article 26

The foreign currency contributed by the foreign joint venturer shall be converted into Renminbi according to the exchange rate quoted
by the State Administration of Foreign Exchange Control of the People’s Republic of China (hereinafter referred to as the State Administration
of Foreign Exchange Control) on the day of its submission or be cross exchanged into the foreign currency as agreed upon.

Should the cash Renminbi contributed by the Chinese joint venturer be converted into foreign currency, it shall be converted according
to the exchange rate quoted by the State Administration of Foreign Exchange Control on the day of its submission.

Article 27

The machinery, equipment and other materials contributed as investment by the foreign joint venturer shall meet the following conditions:

(1)

they are indispensable to the production of the joint venture;

(2)

China is unable to manufacture them, or can manufacture them only at too high a price, or their technical performance and time of
availability cannot meet the requirement;

(3)

the price fixed shall not be higher than the current international market price for similar equipment or materials.

Article 28

The industrial property or proprietary technology contributed by the foreign joint venturer as investment shall meet one of the following
conditions:

(1)

capable of manufacturing new products urgently needed in China or products suitable for export;

(2)

capable of markedly improving the performance, quality of existing products and raising productivity;

(3)

capable of notably saving raw materials, fuel or power.

Article 29

Foreign joint ventures who contribute industrial property or proprietary technology as investment shall present relevant documentation
on the industrial property or proprietary technology, including photocopies of the patent certificates or trademark registration
certificates, statements of validity, their technical characteristics, practical value, the basis for calculating the price and the
price agreement signed with the Chinese joint ventures. All these shall serve as an Attachment to the contract.

Article 30

The machinery, equipment or other materials, industrial property or proprietary technology contributed by foreign joint venturer as
investment shall be examined and approved by the department in charge of the Chinese joint venturer and then submitted to the examining
and approving authorities for further approval.

Article 31

The parties to the joint venture shall pay in all the investment subscribed according to the time limit stipulated in the contract.
Delay in payment or partial delay in payment shall be subject to a payment of investment on arrears or a compensation for the loss
as defined in the contract.

Article 32

After the investment is paid by the parties to the joint venture, a Chinese registered accountant shall verify it and provide a certificate
of verification, in accordance with which the joint venture shall issue to them investment certificates, which include the following
items: name of the joint venture; date, month and year of the establishment of the joint venture; names of the joint venturers and
the investment contributed; date, month and year of the contribution of the investment; and date, month and year of the issuance
of investment certificates.

Chapter V Board of Directors and Management Structure

Article 33

The highest authority of the joint venture shall be its board of directors, which shall decide all major issues concerning the joint
venture.

Article 34

The board of directors shall consist of no less than three members. The distribution of the number of directors shall be determined
through consultation by the parties to the joint venture with reference to the proportions of investment contributed.

The directors shall be appointed by the parties to the joint venture. The chairman of the board shall be appointed by the Chinese
joint venturer and its vice-chairman by the foreign joint venturer.

The term of office for the directors is four years. Their term of office may be renewed with the re-appointment by the parties to
the joint venture.

Article 35

The board of directors shall convene at least one meeting every year.The meeting shall be called and presided over by the chairman
of the board. Should the chairman be unable to call the meeting, he shall authorize the vice-chairman or a director to call and preside
over the meeting. The chairman may convene an interim meeting on the suggestion of more than one-third of the directors.

A board meeting requires a quorum of over two-thirds of the directors. Should a director be unable to attend, he may make a proxy
authorizing someone else to represent him and vote in his stead.

A board meeting shall usually be held at the location of the joint venture’s legal address.

Article 36

Decisions on the following items shall be made only after being unanimously agreed upon by the directors present at the board meeting:

(1)

amendment to the articles of association of the joint venture;

(2)

suspension or dissolution of the joint venture;

(3)

increase in or assignment of the registered capital of the joint venture;

(4)

merger of the joint venture with other economic organization.

Decision on other matters may be made according to the rules of procedure stipulated in the articles of association.

Article 37

The chairman of the board is the legal representative of the joint venture. Should the chairman be unable to perform his duties, he
shall authorize the vice-chairman of the board or a director to represent the joint venture.

Article 38

A joint venture shall establish a management office which shall be responsible for the day-to-day management and operations. The management
office shall have a general manager and several deputy general managers who assist the general manager in his work.

Article 39

The general manager shall carry out the decisions of the board meeting and organize and conduct the day-to-day management and operations
of the joint venture. Within the scope of authorization by the board, the general manager shall, externally, represent the joint
venture, and internally, have the right to appoint and dismiss his subordinates and exercise other powers as authorized by the board.

Article 40

The general manager and deputy general managers shall be engaged by the board of directors of the joint venture. These positions may
be held either by Chinese or foreign citizens.

At the instance of the board of directors, the chairman, vice-chairman or other directors of the board may concurrently be the general
manager, deputy general managers or other high-ranking managerial personnel of the joint venture.

In handling major issues, the general manager shall consult with the deputy general managers.

The general manager or deputy general managers shall not hold posts concurrently as general manager or deputy general managers of
other economic organizations. They shall not get involved in other economic organizations’ commercial competition against their own
joint venture.

Article 41

In case of graft or serious dereliction of duty on the part of the general manager, deputy general managers or other high-ranking
managerial personnel, they may be dismissed at any time by a decision of the board of directors.

Article 42

Establishment of branch offices (including sales offices) outside China or in regions of Hong Kong or Macao is subject to approval
by the MOFERT.

Chapter VI Introduction of Technology

Article 43

The introduction of technology mentioned in this Chapter refers to the acquisition of necessary technology by the joint venture by
means of technology transfer from a third party or a joint venturer.

Article 44

The technology to be introduced to the joint venture shall be appropriate and advanced and enable the venture’s products to display
conspicuous social economic results domestically or to be competitive on the international market.

Article 45

The right of the joint venture to do business independently shall be maintained when concluding such technology transfer agreements,
and relevant documentations shall be provided by the technology exporting party with reference to the provisions of Article 29 of
these Regulations.

Article 46

The technology transfer agreements concluded by a joint venture shall be examined and agreed to by the department in charge of the
joint venture and then submitted for approval to the examining and approving authorities.

Technology transfer agreements shall comply with the following stipulations:

(1)

Fees for the use of technology shall be fair and reasonable. Payments are generally made in royalties, and the royalty rate shall
not be higher than the obtaining standard international rate, which shall be calculated on the basis of net sales of the products
turned out with the relevant technology or in other reasonable ways agreed upon by both parties.

(2)

Unless otherwise agreed upon by both parties, the technology exporting party shall not put any restrictions on the quantity, price
or region of sale of the products that are to be exported by the technology importing party.

(3)

The term for a technology transfer agreement is generally not longer than 10 years.

(4)

After the expiration of a technology transfer agreement, the technology importing party shall have the right to continue to use the
technology.

(5)

Conditions for mutual exchange of information on the improvement of technology by both parties of the technology transfer agreement
shall be reciprocal.

(6)

The technology importing party shall have the right to buy the equipment, parts and raw materials needed from sources they deem suitable.

(7)

No irrational restrictive clauses prohibited under Chinese law and regulations shall be included.

Chapter VII Right to the Use of Site and Fees

Article 47

Joint ventures shall practise economy in the use of land for their premises. Any joint venture requiring the use of a site shall file
an application with local departments of the municipal (county) government in charge of land and obtain the right to use a site after
securing approval and signing a contract. The acreage, location, purpose and contract period and fee for the right to use a site
(hereinafter referred to as site use fee), rights and obligations of the two contracting parties and penalty provisions for breach
of contract shall be stipulated in explicit terms in the contract.

Article 48

If the Chinese joint venturer already has the right to the use of site for the joint venture, it may use the right as part of its
investment. The monetary equivalent of this investment shall be the same as the site use fee otherwise paid for acquiring a site
of similar conditions.

Article 49

The standards for site use fee shall be set by the people’s government of the province, autonomous region or municipality directly
under the Central Government where the joint venture is located in the light of the purpose of use, geographic and environmental
conditions, expenses for requisition, demolition and resettlement and the joint venture’s requirements for infrastructure, and filed
with the MOFERT and the state department in charge of land for the record.

Article 50

Joint ventures engaged in agriculture and animal husbandry may, with the consent of the people’s government of the province, autonomous
region or municipality directly under the Central Government, pay a percentage of the joint venture’s revenues from its business
operations as site use fees to the local department in charge of land.

Projects of a development nature in economically under-developed areas may receive special preferential treatment in respect of site
use fees with the consent of the local people’s government.

Article 51

The rates of site use fees shall not be subject to adjustment in the first 5 years beginning from the day the land is used. After
that, the interval in between the necessary adjustments to be made according to the development of the economy, changes in supply
and demand, and changes in geographic and environmental conditions shall not be less than three years.

Site use fee as part of the investment by the Chinese joint venture shall not be subject to adjustment during the contract period.

Article 52

The fee for the right to the use of a site obtained by a joint venture according to Article 47 of these Regulations shall be paid
annually from the day to use the land stipulated in the contract. For the first calendar year, the venture will pay a half-year fee
if it has used the land for over 6 months; if less than 6 months, the site use fee shall be exempted. During the contract period,
if the rate of site use fee is adjusted, the joint venture shall pay it according to the new rate from the year of adjustment.

Article 53

Joint ventures that have permission to use a site shall only have the right to the use of it but no ownership. Assignment of the right
to use land is forbidden.

Chapter VIII Planning, Purchasing and Selling

Article 54

A joint venture shall work out a capital construction plan (including labour force required for the construction, building materials,
water, power and gas supply) according to the approved feasibility study report, and the plan shall be included in the capital construction
plan of the department in charge of the joint venture, which shall give priority in arranging supplies and ensured the execution
of the plan.

Article 55

Funds earmarked for capital construction of a joint venture shall be put under unified management of the bank where the venture has
opened an account.

Article 56

A joint venture shall work out a production and operating plan in accordance with the scope of operation and scale of production stipulated
in the contract. The plan shall be carried out with the approval of the board of directors and filed with the department in charge
of the joint venture for the record.

Departments in charge of the joint ventures and planning administration departments at all levels shall not prescribe mandatory production
and operation plans for joint ventures.

Article 57

In its purchase of required machinery, equipment, raw materials, fuel, parts, means of transport and office equipment, etc. (hereinafter
referred to as materials), a joint venture has the right to decide whether it buys them in China or from abroad. However, where t