8. What principles govern the sharing of a Sino-foreign joint-venture enterprise?

Answer: The investors distribute profits in proportion to their investments.

9. What is the minimum investment a foreign investor must make in a joint-venture or wholly foreign-owned enterprise?

Answer: The minimum investment made by a foreign investor in general must not be less than $100,000 for a Sino-foreign joint-venture enterprise and $200,000 for a wholly foreign-owned enterprise.

10. What is the proportional requirement for foreign investment to be made in a Sino-foreign joint-venture enterprise?

Answer: Foreign investment must not be less than 25 percent of the registered capital of the joint-venture enterprise.

11. In what ways can capital contributions be made to a Sino-foreign joint-venture enterprise?

Answer: The parties to the joint-venture enterprise may make capital contributions in currencies, or with their buildings, plant buildings, machinery, equipment or other materials, industrial property rights, private technologies and venue-use rights after being priced. The parties to the enterprise are not allowed to pull out their invested capital during the period of cooperation.

12. What if the foreign investor of a Sino-foreign joint-venture enterprise withdraws its investment?

Answer:

(1) The board of directors should decide to terminate the cooperation ahead of schedule;

(2) The joint-venture company should be liquidated according to law;

(3) The post-liquidation properties should be distributed in proportion to the capital contributions of the Chinese and foreign investors.

13. What if the accounting year of a foreign-invested enterprise does not coincide with the calendar year?

Answer: If a foreign-invested enterprise finds it difficult to calculate its taxable income according to the tax year specified in the tax law, it may apply to the local tax authorities for permitting. The enterprise must take the accounting year after the enterprise has operated for 12 full months as its tax year.

14. Can a registered foreign-invested enterprise reduce or increase its registered capital?

Answer: A foreign-invested enterprise may increase its registered capital during the period of operation, subject to the unanimous approval by the board of directors meeting in a resolution and the approval of the original examining and approving authorities. If the increased registered capital to be applied for exceeds the limit of the examination and approval power of the original examining and approving organ, the original examining and approving organ should report to the examining and approving organ at the higher level for examination and approval.

A foreign-invested enterprise is generally not allowed to reduce its registered capital. If the enterprise has legitimate reasons for reducing its registered capital, it should report to the original examining and approving organ for approval according to the relevant state stipulations.

15. Can an established foreign-invested enterprise expand its scope of business?

Answer: If a foreign-invested enterprise intends to expand its scope of business during the period of operation, it may report to the original examining and approving organ for approval under the precondition that the registered capital of the enterprises subscribed by the investors are paid up.

16. Can a Sino-foreign joint-venture enterprise or a Sino-foreign cooperative enterprise turn into a wholly foreign-owned enterprise?

Answer: If a foreign-invested joint-venture enterprise or a foreign-invested cooperative enterprise intends to turn into a wholly foreign-owned enterprise and if such a conversion is allowed by State policy, the board of directors of the enterprise must reach a unanimous agreement and adopt a resolution and submit the resolution according to the relevant stipulations to the original examining and approving organ for approval.