The Revised Equity Joint Venture Law and WTO Accession

On March 15 2001, the Fourth Session of the Ninth National People's Congress passed the revised PRC Sino-Foreign Equity Joint Venture Law (中华人民共和国中外合资经营企业法)(Revised EJV Law). The revisions provide an interesting case study into China's ability to meet the requirements of WTO membership.

As expected, the revisions are ostensibly designed to satisfy the requirements of WTO membership, in particular the requirement of 'national treatment'. For example, under the Revised EJV Law, Chinese-foreign equity joint ventures (EJVs) are no longer required to procure insurance from a Chinese insurance company. Now, EJVs may obtain insurance from any insurance company in China. In addition, the Revised EJV Law abandons the requirement under the previous EJV Law that states that EJVs must give priority to domestically purchased raw materials, fuel and parts. These amendments are clearly designed to remove legal restrictions that discriminate in favour of domestic Chinese enterprises.

Recent revisions to the PRC Sino-Foreign Co-operative Joint Venture Law (中华人民共和国中外合作经营企业法) and the PRC Wholly Foreign-owned Enterprise Law (中华人民共和国外资企业法)abandon the requirement that co-operative joint ventures and wholly foreign-owned enterprises balance their foreign exchange. The Revised EJV Law does not clarify whether EJVs are now also exempt from the foreign exchange balancing requirement. However, this omission relates to the fact that the previous EJV Law did not explicitly impose a foreign exchange balancing requirement. The foreign exchange balancing requirement is contained in Article 75 of the PRC Sino-foreign Equity Joint Venture Law Implementing Regulations (中华人民共和国中外合资经营企业法实施条例) (EJV Implementing Regulations). In any event, notwithstanding this omission, officials of the Ministry of Foreign Trade and Economic Co-operation (MOFTEC) have confirmed that the foreign exchange balancing requirement vis-a-vis EJVs is now defunct and the EJV Implementing Regulations will be amended accordingly.