Laws of the People's Republic of China

The State Administration of Foreign Exchange

Provisions Governing the Foreign Exchange of Chinese Investors in Chinese-foreign Equity Joint Ventures and Contractual Joint Ventures

the State Administration of Foreign Exchange

January 7, 1989

The following Provisions are enacted to strengthen control over the foreign exchange of Chinese investors in Chinese-foreign equity joint ventures and contractual joint ventures (hereinafter referred to as joint ventures), ensure the healthy development of these ventures, and protect the interests of the State.

Article 1

The Chinese investor in a joint venture may, starting from the day the joint venture obtains its business licence, retain all the foreign exchange it earns in the first five-year, and 50% of it after the five-year period.

Article 2

When Chinese employees of a joint venture go abroad on duty together with foreign employees out of the need of business, the expenses abroad of the Chinese employees may be reimbursed for what they have actually spent according to the standards set by the joint venture.

Article 3

When Chinese employees of a joint venture go abroad on duty alone, their expenses may be computed according to the standards set by the joint venture, while the actual sum to be spent shall be computed with reference to the standards set by the state for those going abroad on public duties.

Article 4

The surplus foreign exchange resulting from the difference between the sum received according to the standards of joint venture and that spent abroad by Chinese employees according to the State standards may be settled with the bank as foreign exchange receipts of the Chinese investor in the joint venture, which may retain a portion of it by presenting the exchange memos to and completing the formalities with the exchange control authorities.

Article 5

The Chinese investor of a joint venture shall settle with the bank the foreign exchange it has received as wages of the Chinese employees, and the foreign exchange for its services, from industrial property, as dividends etc. and may retain a portion of the foreign exchange by presenting the exchange memos to and completing the formalities with the exchange control authorities.

Article 6

Unless approved by the exchange control authorities, the Chinese investor of a joint venture may be punished by the said authorities for any of the following actions, on the merit of each case and in accordance with the "Rules for the Implementation of Penalty on Offenses Against Exchange Control":

(1)

depositing those foreign exchange receipts that are required by State regulations to be settled with the bank in the foreign exchange accounts of the joint venture, instead of settling these receipts with the State bank;

(2)

using such foreign exchange to import commodities or defray other expenses through the bank accounts of the joint venture; or

(3)

depositing such foreign exchange abroad.

Article 7

The right to interpret these provisions resides in the State Administration of Exchange Control.

Article 8

These Provisions shall enter into force on March 1, 1989.