Lloyd's Maritime and Commercial Law Quarterly
RECENT DEVELOPMENT IN EQUITY JOINT VENTURE LAW IN THE PRC
Clement Shum*
The Law of the People’s Republic of China on Joint Ventures Using Chinese and Foreign Investment (the Equity Joint Venture Law) adopted on 1 July 1979 at the Second Session of the Fifth National People’s Congress has been amended in accordance with the decision taken by the Third Session of the Seventh National People’s Congress on 4 April 1990.1 Presenting the revision to delegates at the National People’s Congress on 28 March 1990, Foreign Economic Relations and Trade Minister Zheng Tuobin said the measures “better reflect China’s effort to open itself wider to the outside world and attract more foreign investment and promote economic development”.2 China’s top legislators were of the view that the amendments solved the problems which most concerned foreign investors, and were “a milestone to demonstrate the State’s determination to observe international practices based on the experiences of a decade of reforms”.3
Between 1979 and 1989, there were 21,739 foreign-funded projects in China, involving a total contractual investment of U.S.$33.801 billion, with U.S.$14.886 billion used. Among these projects, 12,195 were Chinese-foreign equity joint ventures worth some U.S.$12.55 billion, with U.S.$6.85 billion used. These joint ventures cover many fields of business in China. Among them are the China Schindler Elevator Co. Ltd. (China-Switzerland-Hong Kong), the Shanghai Volkswagen Automotive Co. Ltd. (China-Germany), the Beijing Matsushita Colour Kinescopes Co. Ltd. (China-Japan) and the Shanxi Antaibao Coal Mine (China-United States).4
Nationalization or requisition of joint ventures
A new paragraph has been added to Art. 2 of the Equity Joint Venture Law. It reads: “The state shall not nationalize or requisition any joint venture. Under special circumstances, when social and public interests require, joint ventures may be requisitioned in accordance with the legal procedure and appropriate compensation shall be made.”
It is rather unusual to find such a provision in the statute law of a socialist country. However, it should be noted that, under the current Chinese law, a provision in an international treaty to which the PRC is a signatory prevails when it
* Lecturer in Law, University of Newcastle, N.S.W.
1. Beijing Review, Vol. 33, No. 19, 7–13 May 1990, pp. 24–28,
2. S.C.M.P., 29 March, 1990.
3. China Daily (Business Weekly), 9 April 1990.
4. See supra, fn. 1, at p. 24.
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