Article 1  These MEASURES are formulated in accordance with the "Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures", the "Law of the People's Republic of China on Chinese-Foreign Joint Ventures" and other related laws and regulations with a view to widening the opening up to the outside world, promoting the reform and development of commercial enterprises, giving impetus to the building up of the domestic market and the healthy and orderly expansion in utilizing foreign investment for launching pilot projects in the commercial area.

Article 2  These MEASURES are applicable to foreign companies or enterprises establishing Chinese-Foreign Equity or Contractual Commercial Joint Ventures in China with Chinese companies or enterprises  (hereinafter referred to in short as XOMMERCIAL JOINT VENTURES ). Establishment of solely foreign owned commercial enterprises is not allowed for the time being.

Article 3  COMMERCIAL JOINT VENTURES to be established must conform to the development plans of commerce of the cities in which they are located and be able to bring in internationally advanced marketing techniques and management experience, promote the modernization of domestic commerce and spur exports of Chinese products to bring about good economic results and social benefits.

Article 4  Regions for the establishment of COMMERCIAL JOINT VENTURES shall be designated by the State Council. At present, these regions are confined to Provincial capitals, capitals of Autonomous Regions, Municipalities Directly under the Central Government and Municipalities Separately Listed in the State Plan (hereinafter referred to as Pilot Regions).

Article 5  Investors of COMMBRCIAL JOINT VENTURES shall possess the following qualifications:

1.  foreign partners of the joint venture or major members among the foreign partners (hereinafter referred to as Foreign partners of the joint venture) shall be enterprises with considerable economic strength, advanced management experience of commercial operations and marketing techniques, extensive worldwide marketing networks and excellent reputation and business record and capable of spurring export of Chinese products through the COMMERCIAL JOINT VENTURE to be established.

Foreign Partners of the Joint Venture applying for the establishment of a COMMERCIAL JOINT VENTURE for retail business shall have an annual average sales revenue of over US￥2 billion in the 3 years prior to the application and its asset value in the year before the application shall be over US￥200 million.

Foreign Partners of the Joint venture applying for the establishment of a XOMMERCIAL JOINT VENTURE for wholesale business shall have an annual average wholesale volume of over US￥2.5 billion in the 3 years prior to the application and its asset value in the year before the application shall be over US￥300 million.

2.  Chinese partners of the joint venture or major members among the Chinese partners (hereinafter referred to as Chinese Partners of the Joint venture ) shall be distribution enterprises with considerable economic strength and business capabilities whose asset value in the year before the application is over RMB50 million yuan (30 million in the case of enterprises in Central and Western China). Where the Chinese Partner of the Joint venture is a commercial enterprise, its annual average sales revenue in the 3 years prior to the application shall be over RMB300 million (200 million in the case of enterprises in Central and Western China );where the Chinese Partner of the Joint venture is a foreign trade enterprise, its annual average of import and export for its own account shall be over US￥50 million (wherein the export value shall be not less than US￥30 million).  

Article 6  COMMERCIAL JOINT VENTURES shall conform to the following qualifications:

1. conform to the relevant stipulations of related Chinese laws and regulations;

2. Conform to the development plans of commerce of the city in which it is located;

3. The registered capital of the COMMERCIAL JOINT VENTURE engaging in retail business is no less than RMB50 million yuan, or RMB30 million yuan in the case of Central and Western China, and the registered capital of the COMMERCIAL JOINT VENTURE engaging in wholesale business is no less than RMB80 million yuan, or RMB60 million yuan in the case of Central and Western China;

4. For COMMERCIAL JOINT VENTURES run in the form of over 3 chainstores (convenience stores, specialty stores and exclusive stores excepted), the ratio of investment of the Chinese Partners shall be over 51%, where the Foreign Partners may be allowed to have a controlling share, upon approval of the State Council, provided the business record of the COMMERCIAL JOINT VENTORE in question is good and the Foreign Partner has purchased large quantities of products from the country and has expanded further the export of Chinese products with the aid of the worldwide marketing networks of the Foreign Partner;

For COMMERCIA JOINT VENTURES with less than 3 branches (including 3) and convenience stores, specialty stores and exclusive stores run in the form of chain stores, the ratio of investment of Chinese Partners shall be no less than 35%;

For COMMERCIAL JOINT VENTURES ingaging in wholesale business (including retail business with concurrent business in wholesale) the ratio of investment of the Chinese Partner shall be 51% or over;

5. Branches of COMMERCIAL JOINT VENTURES are confined to direct investments by the Foreign and Chinese Partners. Directly run chain stores of direct marketing are, for the time being, not allowed to take the form of free chains and franchised chains or the like;

6. The duration of business operation shall be no more than 30 years, or 40 years in the case of Central and Western China.

Article 7  For contracts signed between the Foreign Partner and the COMMERCIAL JOINT VENTURE relating to the licensing of trade marks and brand names and transfers of technology, the total amount of fees drawn by the Foreign partner pertaining thereto shall not exceed 0.3% of the Sales revenue (excluding value added tax) of the COMMERCIAL JOINT VENTURE in the current year, and such drawings shall not exceed 10 years.

Article 8  Procedures for the establishment of COMMERCIAL JOINT VENTURES are as follows:

Chinese Partners shall submit a report on feasibility studies (in substitution for project proposal) together with related papers to the Economic and Trade commission (Economic Commission, Planning and Economic Commission, the same below) at the Pilot Region, which shall in turn submit it jointly with the authorities in charge of domestic commerce to the State Economic and Trade Commission in accordance with prescribed procedures. The State Economic and Trade Commission will then examine it for approval after referring to the Ministry of Foreign Trade and Economic Cooperation for opinion.

After approval of the report of feasibility studies (in substitution for project proposal), the contract and articles of the venture shall be submitted by the foreign trade and economic cooperation department in the Pilot Region to the Ministry of Foreign Trade and Economic Cooperation in accordance with the prescribed procedures for approval of the said Ministry.

The approved COMMERCIAL JOINT VENTURE shall, within 1 month after receipt of the approval certificate, approach the State administrative authorities for industry and commerce to complete formalities of registration on the strength of the "Approval certificate of Foreign Funded Enterprises" issued by the Ministry of Foreign Trade and Economic Cooperation.

Article 9  Applications for the establishment of COMMERCILA JOINT VENTURES shall require the following documents:

1. Reporting documents for feasibility studies:

(1) Report on feasibility studies (in substitution for project proposal) compiled jointly by the Parties to the Joint Venture;

(2) Bankers` credit certificate, registration certificate (duplicate) amd certificate of legal representative of the Parties to the Joint Venture (duplicate);

(3) Balance sheets and statements of profit and loss of the Parties to the Joint Venture in the recent 3 years as audited by Chartered Public Accountants;

(4) (In case the Chinese Partner to the venture invests with State-owned assets) Confirmation document from the administrative authorities for State-owned assets on the appraisal report for state-owned assets intended for investment by the Chinese Partner;

(5) Categories of commodities intended to handle by the COMMERCIAL JOINT VENTURE to be established;

(6) Other papers relating thereto.

2. Reporting documents for the contract and articles of association:

(1) Reporting documents on feasibility studies and the documents of approval relating thereto;

(2) Contract and Articles of Association of the COMMERCIAL JOINT VENTURE to be established signed by authorized representatives of the Parties to the Joint Venture;

(3) Catalogue of Commodities for Import and Export;

(4) Name list of members of the Board of Directors of the COMMERCIAL JOINT VENTURE to be established and letters of appointment of the Directors of the Parties to the Joint Venture;

(5) Notice of Prior Approval of the Name of the Enterprise issued by the State Administration of Industry and Commerce;

(6) Other papers relating thereto.

Unless noted as duplicates, the above mentioned documents must be original documents. Letters of authorization from legal representatives must accompany signatures of non-legal representatives.

Article 10  State-owned distribution enterprises investing in the establishment of COMMERCIAL JOINT VENTURES must have their visible and invisible assets to be invested appraised by an appraising agency confirmed by the administrative authorities for State-owned assets in a scientific and fair way according to the stipulations of the "Measures for the administration of Appraisals of State-owned Assets". Results of the appraisals shall, upon confirmation by the administrative authorities for State-owned assets at the Provincial level or above, be taken as the basis for the fixing the prices for the State-owned assets so invested.

Article 11  The applications of established COMMERCIAL JOINT VENTURES for doing wholesale business concurrently, setting up branches, or changing partners of the Joint Venture shall be approved by the Ministry of Foreign Trade and Economic Cooperation after seeking consent by the State Economic and Trade Commission; Other changes of established COMMERCIAL JOINT VENTURES shall be reported to the original approving authorities for approval according to the relevant stipulations relating to foreign funded enterprises currently in force. At the time submitting the applications, the following documents shall be presented by the COMMERCIAL JOINT VENTURES concerned:

1. Application report;

2. Report on the status of business operations of the Joint Venture;

3. Certificate of verification on the investment of the Joint venture;

4. Report on the status of exports of the Joint Venture accompanied by documents of evidence;

5. Related resolutions of the Board of Directors;

6. Agreements concerning amendments to the contract and articles of association;

7. Other papers pertaining thereto.

The Joint venture concerned shall complete formalities for the registration of the changes and other formalities, if any, at the State administration of industry and commerce within 1 month from the date of approval for the amendments to the contract and articles of association.

Article 12  Scope of operations of the COMMERCIAL JOINT VENTURES:

1. Scope of operations of COMMERCIAL JOINT VENTURES engaging in retail business:

(1) Retail business (including distributorship and consignment);

(2) Exportation of domestic products;

(3) Import and Export of commodities within its own business scope;

(4) Business in related supporting services.

2. Scope of operations of COMMERCIAL JOINT VENTURES engaging in wholesale business:

Domestic wholesale of commodities of native produce or imported within its own business scope and export of domestic products.

Article 13  COMMERCIAL JOINT VENTURES engaging in retail business may engage in wholesale business concurrently upon approval.

Article 14 COMMERCIAL JOINT VENTURES may not act as agents for import and export business.

Article 15  COMMERCIAL JOINT VENTURES engaging in business of commodities governed by special stipulations of the State or subject to import and export licensing shall complete formalities of approval in accordance with the relevant stipulations of the State.

The total value of imports of COMMERCIAL JOINT VENTURES in a year shall not exceed 30% of total sales of the Joint venture during the same year.

Article 16  COMMERCIAL JOINT VENTURES shall abide by the Laws, Rules and Regulations of the People's republic of China, they are subject to the jurisdiction of Chinese Laws, Rules and Regulations under which their proper business operations and legitimate rights and interests are duly protected.

Article 17  All regions shall strictly follow the stipulations of these MEASURES in the establishment of COMMERCIAL JOINT VENTURES. Cases in violation of these MEASURES shall be investigated and  dealt with by the Ministry of Foreign Trade and Economic Cooperation jointly with the State Administration of Industry and Commerce. The Economic and Trade Commissions and Foreign Trade departments of the various regions shall, jointly with related departments, follow timely the status of pilot operations, conscientiously summarize experiences and appropriately resolve problems arising out of these operations.

Article 18  The State Economic and Trade Commission, Ministry of Foreign Trade and Economic Cooperation and State Administration of Industry and Commerce and other authorized agencies shall exercise supervision and control over the FOREIGN FUNDED COMMERCIAL JOINT VENTURES according to Law.

Article 19  Investors form Hongkong Special Administrative Region, Macao and Taiwan investing in the establishment of COMMERCIAL JOINT VENTURES on the mainland shall be treated in reference to these MEASURES.

Article 20  Interpretation of these MEASURES rests with the State Economic and Trade commission and the Ministry of Foreign Trade and Economic Cooperation.

Article 21  These MEASURES shall become effective from the date of promulgation.