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LAND CONTRACT IN RURAL AREAS LAW

Law of the People’s Republic of China on Land Contract in Rural Areas










(Adopted at the 29th Meeting of the Standing Committee of the Ninth National People’s Congress on August 29, 2002
and promulgated by Order No. 73 of the President of the People’s Republic of China on August 29, 2002) 

Contents 

Chapter I     General Provisions 

Chapter II    Household Contract 

  Section 1   Rights and Obligations of the Party Giving out the Contract and of the Contractor 

  Section 2   Principles and Procedures for Contracting 

  Section 3   Term of Contract and the Contract 

  Section 4   Protection of the Right to Land Contractual Management 

  Section 5   Circulation of the Right to Land Contractual Management 

Chapter III   Contract in Other Forms 

Chapter IV    Settlement of Disputes and Legal Responsibility 

Chapter V     Supplementary Provisions 

Chapter I 

General Provisions 

Article 1  In accordance with the Constitution, this Law is enacted for the purposes of stabilizing and improving the two-tier
management system that combines centralized and decentralized management on the basis of household contractual management, granting
to the peasants long-term and guaranteed land-use right, safeguarding the legitimate rights and interests of the parties to land
contracts in rural areas, and promoting the development of agriculture and rural economy and social stability in the countryside. 

Article 2  For purposes of this Law, land in rural areas includes the arable land, forestlands and grasslands owned collectively
by the peasants and by the State and used collectively by the peasants according to law, as well as other lands used for agriculture
according to law. 

Article 3  The State applies the contractual management system in respect of land in rural areas. 

Land contract in rural areas shall take the form of household contract within the collective economic organizations in the countryside,
while such land in rural areas as barren mountains, gullies, hills and beaches, which are not suited to the form of household contract,
may be contracted in such forms as bid invitation, auction and public consultation. 

Article 4  The State protects, in accordance with law, the long-term stability of the relationship of land contract in rural
areas. 

After the land in rural areas is contracted, the nature of ownership of the land shall remain unchanged. The contracted land may
not be purchased or sold. 

Article 5  Members of the collective economic organizations in rural areas shall, according to law, have the right to undertake
rural land contracts with their own collective economic organizations that give out the contracts. 

No organizations or individuals may deprive the members of the rural collective economic organizations of their right to undertake
contracts or illegally restrict such right. 

Article 6  In undertaking land contracts in rural areas, women shall enjoy equal rights with men. The legitimate rights and
interests of women shall be protected in contract. No organizations or individuals may deprive their rights to land contractual management,
which they are enpost_titled to, or infringe upon such right. 

Article 7  In land contract in rural areas, the principles of openness, fairness and impartiality shall be adhered to and the
relationship of interests among the State, the collective and the individual shall be correctly handled. 

Article 8  In undertaking land contract in rural areas, laws and administrative rules and regulations shall be observed, and
the rational development and sustainable use of land resources shall be maintained. Without approval granted according to law, no
contracted land may be used for non-agricultural development. 

The State encourages the peasants and the rural collective economic organizations to increase their input in land, improve soil fertility
and expand the capacity of agricultural production. 

Article 9  The State protects the legitimate rights and interests of the owners of the collective land and the right of the
contractors to land contractual management, which no organizations and individuals may infringe upon. 

Article 10  The State protects the circulation of the right to land contractual management, which is effected according to law,
on a voluntary basis and with compensation. 

Article 11  The competent administrative departments for agriculture and forestry under the State Council shall, in compliance
with their respective functions and duties defined by the State Council, be responsible for providing guidance to the administration
of the contracting of land in the rural areas throughout the country and to the administration of the contracts. The competent administrative
departments for agriculture and forestry under the local people’s governments at or above the county level shall, in compliance with
their respective functions and duties, be responsible for administration of the contracting of the rural land within their own administrative
areas and the administration of the contracts. The township (town) people’s governments shall be responsible for the administration
of the contracting of the rural land within their own administrative areas and of the contracts. 

Chapter II 

Household Contract 

Section 1 

Rights and Obligations of the Party 

Giving out the Contract and of the Contractor 

Article 12  Where the land owned collectively by the peasants belongs, in accordance with law, to collective ownership by the
peasants in a village, contracts shall be given out by the collective economic organization of the village or the villagers committee;
where the land is already owned collectively by the peasants of more than two rural collective economic organizations in a village,
contracts shall be given out respectively by the said organizations or villagers groups in the village. Where contracts are issued
by the rural collective economic organizations or villagers committees in a village, the ownership of the land owned collectively
by the peasants of the collective economic organizations in the village shall remain unchanged. 

Where rural land owned by the State but is used collectively by the peasants according to law, contracts shall be issued by the rural
collective economic organizations, villagers committees or villagers groups that use such land. 

Article 13  The party giving out the contracts shall enjoy the following rights: 

(1) giving out contracts for the rural land owned by the collective to which the party belongs or owned by the State but is used
by the said collective according to law; 

(2) exercising supervision over the rational use and protection of the land by the contractor in keeping with the purpose of use
agreed upon in the contract; 

(3) stopping the contractor from damaging the contracted land and agricultural resources; and 

(4) other rights provided for by laws and administrative rules and regulations. 

Article 14  The party giving out the contract shall have the following obligations: 

(1) maintaining the right of the contractor to land contractual management, and refraining from illegally modifying and revoking
the contract. 

(2) respecting the contractor’s right to make its own decision on production and operation, and refraining from interfering with
the normal production and operation conducted by the contractor according to law; 

(3) providing the contractor services in respect of production, technology, information, etc. as agreed upon in the contract; 

(4) carrying out the overall plan for land use worked out by the people’s government of the county or township (town) and making
arrangements for the construction of agricultural infrastructure within its own collective economic organization; and 

(5) other obligations provided for in laws and administrative rules and regulations. 

Article 15  The contractor of a household contract shall be the peasant household of the collective economic organization concerned. 

Article 16  The contractor shall enjoy the following rights: 

(1) enjoying in accordance with law the rights to use the land contracted, to reap the yields and to circulate the right to land
contractual management, and the right to make its own decision regarding the arrangements for production and operation as well as 
the disposition of the products; 

(2) enjoying in accordance with lawful right to obtain appropriate compensation for the contracted land that is requisitioned or
occupied according to law; and 

(3) other rights provided for in laws and administrative rules and regulations. 

Article 17  The contractor shall have the following obligations: 

(1) keeping or using the land for agricultural purposes, and refraining from using it for non-agricultural development; 

(2) protecting and rationally using the land in accordance with law, and refraining from causing permanent damage to the land; and 

(3) other obligations provided for in laws and administrative rules and regulations. 

Section 2 

Principles and Procedures for Contracting 

Article 18 The following principles shall be abided by in the contracting of land: 

(1) when arrangements are made for undertaking contracts in accordance with relevant provisions, members of the same collective economic
organization shall, according to law and on an equal footing, exercise the right to contract land, and they may, of their own free
will, give up such right; 

(2) democratic consultation, fairness and equitableness; 

(3) in accordance with the provisions of Article 12 of this Law, the contracting plan shall, according to law, be subject to consent
by not less than two-thirds of the members of the villagers assembly of the collective economic organization concerned or of the
villagers’ representatives; and 

(4) the contract procedures conform to the provisions of law. 

Article 19  Land shall be contracted out in accordance with the following procedures: 

(1) a contract-working team shall be elected by the villagers assembly of the collective economic organization concerned; 

(2) the contract-working team shall, in accordance with the provisions of laws and administrative rules and regulations, draw up
and announce its contracting plan; 

(3) convening, according to law, the villagers assembly of the collective economic organization concerned to adopt the contracting
plan through discussion; 

(4) making known to the public arrangements for the implementation of the contracting plan; and 

(5) concluding the contract. 

Section 3 

Term of the Contract and the Contract 

Article 20  The term of contract for arable land is 30 years. The term of contract for grassland ranges from 30 to 50 years.
The term of contract for forestland ranges from 30 to 70 years; the term of contract for forestland with special trees may, upon
approval by the competent administrative department for forestry under the State Council, be longer. 

Article 21  The party giving the contract shall sign a written contract with the contractor. 

A contract shall, in general, include the following clauses: 

(1) the names of the party giving out the contract and the contractor, and the names and domiciles of the responsible person of the
party giving out the contract and the representative of the contractor; 

(2) the name, location, area and quality grade of the contracted land; 

(3) the term of contract and the dates of beginning and end; 

(4) the purpose of use of the contracted land; 

(5) the rights and obligations of the party giving out the contract and the contractor; and 

(6) liability for breach of the contract. 

Article 22  A contract shall go into effect as of the date of its conclusion.  The contractor shall obtain the right to
land contractual management as of the date the contract goes into effect. 

Article 23  Local people’s governments at or above the county level shall issue to the contractor the certificate of the right
to land contractual management, or the certificate of forestry ownership, etc., and have them registered, thus confirming the right
to land contractual management. 

For the issuance of the certificates of the right to land or forestland contractual management, etc., no fees shall be collected
except for the cost of the certificates, which is to be collected in accordance with relevant provisions. 

Article 24  After a contract goes into effect, the party giving out the contract may neither modify nor revoke the contract
due to the change of the representative for the party giving out the contract or the responsible person concerned, or due to the
split or merger of the collective economic organization. 

Article 25  No State organs or their staff members may, taking advantage of their positions and powers, interfere with the contracting
of rural land or modify or revoke contracts. 

Section 4 

Protection of the Right to Land Contractual Management 

Article 26  During the term of contract, the party giving out the contract may not take back the contracted land. 

If during the term of contract, the whole family of the contractor moves into a small town and settles down there, the right of the
contractor to land contractual management shall, in accordance with the contractor’s wishes, be reserved, or the contractor shall
be allowed to circulate the said right according to law. 

If during the term of contract, the whole family of the contractor moves into a city divided into districts and his rural residence
registration is changed to non-rural residence registration, he shall turn his contracted arable land or grassland back to the party
giving out the contract. If the contractor fails to turn it back, the party giving out the contract may take back the contracted
arable land or grassland. 

When during the term of contract, the contractor turns back the contracted land, in which he has made investment, thus increasing
its production capacity, or the party giving out the contract takes it back according to law, the contractor shall have the right
to obtain appropriate compensation. 

Article 27  During the term of contract, the party giving out the contract may not readjust the contracted land. 

Where during the term of contract, such special circumstances as natural calamities that seriously damaged the contracted land make
it necessary to properly readjust the arable land or grasslands contracted by individual peasant households, the matter shall be
subject to consent by not less than two-thirds of the members of the villagers assembly of the collective economic organization concerned
or of the villagers’ representatives and shall be reported for approval to the competent administrative departments for agriculture,
etc. under the relevant township (town) people’s government and the people’s government at the county level. Where an agreement upon
no adjustments is concluded in the contract, such an agreement shall prevail. 

Article 28  The following land shall be used for readjustment of contracted land or for contracting out to new inhabitants: 

(1) land reserved, according to law, by collective economic organizations; 

(2) land increased through reclamation according to law, etc.; and 

(3) land turned back, according to law or on a voluntary basis, by contractors; or 

Article 29  During the term of contract, the contractor may, of his own free will, turn back the contracted land to the party
giving out the contract. Where a contractor wishes to do the same, he shall, six months in advance, inform the party giving out the
contract of the matter in written form. Where a contractor turns back the contracted land during the term of contract, he may no
longer request to undertake a contract for land within the term. 

Article 30  During the term of contract, a woman gets married and undertakes no contract for land in the place of her new residence,
the party giving out the contract may not take back her originally contracted land; and where a divorced woman or a woman bereaved
of her husband still lives at her original residence or does not live at her original residence but undertakes no contract for land
at her new residence, the party giving out the contract may not take back her originally contracted land. 

Article 31  The benefits derived from the contract which are due to contractor shall be inherited in accordance with the provisions
of the Succession Law. 

In case a contractor for forestland is dead, his/her successor may, within the term of contract, continue to undertake the contract. 

Section 5 

Circulation of the Right to Land Contractual Management 

Article 32  The right to land contractual management obtained through household contract may, according to law, be circulated
by subcontracting, leasing, exchanging, transferring or other means. 

Article 33  The right to land contractual management shall be circulated in adherence to the following principles: 

(1) that consultation on an equal footing, voluntariness and compensation, and no organizations or individuals may compel the contractor
to circulate his right to land contractual management or prevent him from doing so; 

(2) that no change shall be made in the nature of the land ownership or the purpose of use of the land designed for agriculture; 

(3) that the term of the circulation may not exceed the remaining period of the term of contract; 

(4) that the transferee shall have the capability for agricultural operation; and 

(5) that under equal conditions, members of the collective economic organization concerned shall enjoy priority. 

Article 34  In the circulation of the right to land contractual management, the contractor shall be the subject. The contractor
shall have the right to make his own decision, according to law, on whether to circulate the right to land contractual management
and on the means by which to circulate the right. 

Article 35  During the term of contract, the party giving out the contract may not unilaterally revoke the contract, nor, under
the pretext that the minority is subordinate to the majority, compel the contractor to give up or modify his right to land contractual
management, nor take back the contracted land by reason of the need to divide the land into “grain rations fields” and “responsibility
fields” in order to contract it out through bid invitation, or take back the contracted land to pay off its debts. 

Article 36  Such fees as the subcontract charges, rent and transfer charges to be collected for the circulation of the right
to land contractual management shall be decided on by the two parties through consultation. Proceeds derived from the circulation
shall belong to the contractor, which no organizations or individuals may retain or withhold without authorization. 

Article 37  Where the right to land contractual management is circulated by means of subcontract, lease, exchange, transfer
or by other means, the two parties shall conclude a written contract. Where transfer is adopted for circulation, the matter shall
be subject to consent by the party giving out the contract; and where subcontract, lease, exchange or other means is adopted for
circulation, the matter shall be reported to the party giving out the contract for the record. 

In general, the contract for the circulation of the right to land contractual management shall include the following clauses: 

(1) the names and domiciles of the two parties; 

(2) the name, location, area and quality grade of land concerned; 

(3) the term of circulation and the dates of beginning and end; 

(4) the purpose of use of the land concerned; 

(5) the rights and obligations of the two parties; 

(6) the price for the right circulated and the method of payment; and 

(7) liabilities for breach of the contract. 

Article 38  Where the parities to the circulation of the right to land contractual management by means of exchange or transfer
request registration, they shall apply for registration to the local people’s government at or above he county level. If he above
is not registered, no one may oppose the third party acting in good faith. 

Article 39  The contractor may, within a certain period of time, subcontract or lease part or all of the right to land contractual
management to the third party, but the contractual relationship between the contractor and the party giving out the contract shall
remain unchanged. 

Where the period in which the contractor lets another person do farm work on his behalf does not exceed one year, a written contract
may be dispensed with. 

Article 40  Contractors may, for the convenience of farming or for their own needs, exchange between themselves their right
to contractual management of the land belonging to the same collective economic organization. 

Article 41  Where a contractor has a stable non-agricultural occupation or a stable source of income, he may, with the consent
of the party giving out the contract, transfer the total or part of his right to land contractual management to another peasant household
engaged in agricultural production and management, and this peasant household shall establish a new contractual relationship with
the party giving out the contract, thereupon the contractual relationship on this land between the former contractor and the party
giving out the contract is terminated. 

Article 42  For the purpose of developing the agricultural economy, the contractors may, of their own free will, jointly pool
their rights to land contractual management as shares to engage in cooperative agricultural production. 

Article 43  Where the contractor makes investment in his contacted land and thus increases the productive capacity of the land,
he shall have the right to obtain an appropriate compensation when his right to land contractual management is circulated according
to law. 

Chapter III 

Contract by Other Means 

Article 44   The provisions in this Chapter shall be applicable to such land in the rural areas as barren mountains, gullies,
hills and beaches which are not suited to household contract but are contracted through bid invitation, auction, public consultation,
etc. 

Article 45  Where rural land is contracted by other means, a contract shall be concluded. Matters such as the rights and obligations
of the parties and the term of contract shall be determined through consultation by the two parties. Where land is contracted through
bid invitation or auction, the contracting fees shall be determined through public competitive bidding and competitive pricing; and
where land is contracted through public consultation, etc., the contracting fees shall be determined by the two parties through discussion. 

Article 46  Barren mountains, gullies, hills and beaches may directly be undertaken for contractual management by such means
as bid invitation, auction and public consultation, or may also be undertaken for contractual management or for joint-stock cooperative
management after the rights to land contractual management are converted into shares and distributed to the members of the collective
economic organization concerned. 

Persons who enter into contracts for barren mountains, gullies, hills and beaches shall abide by the provisions of the relevant laws
and administrative rules and regulations, prevent soil erosion and protect the ecological environment. 

Article 47  Where rural land is contracted by other means, under equal conditions, the members of the collective economic organization
concerned shall have the priority to undertake the contract. 

Article 48  Where the party giving out contracts gives out the contracts for rural land to units or individuals other than the
ones of the collective economic organization concerned, the matter shall first subject to consent by not less than two-thirds of
the members of the villagers assembly, or of the villagers’ representatives, of the collective economic organization concerned and
it shall be submitted to the township (town) people’s government for approval. 

Where units or individuals other than the ones of the collective economic organization concerned undertake contracts, the contracts
shall be concluded only after examination of the credit position and management capability of the contractors. 

Article 49  Where a person enters into a contract for rural land through bid invitation, auction or public consultation and,
after registration according to law, obtains the certificate of the right to land contractual management or the certificate of the
right to forestland contractual management, his right to land contractual management may, according to law, be circulated though
transfer, lease, pooling of rights as shares, mortgage or other means. 

Article 50  Where the right to land contractual management is obtained through bid invitation, auction or public consultation
and when the contractor is dead, the benefits derived from the contract which are due him shall be inherited in accordance with the
provisions of the Succession Law; and within the term of contract his successor may continue to execute the contract. 

Chapter IV 

Settlement of Disputes and Legal Responsibility 

Article 51  Where dispute arises over the contractual management of land, the two parties may settle the dispute though consultation
and may request the villagers assembly or the township (town) people’s government to help settle the dispute though mediation. 

Where the parties are not willing to have it settled through consultation or mediation or consultation or mediation is not successful,
they may apply to an arbitral body in charge of rural land contracts for arbitration, or directly bring a suit in the People’s Court. 

Article 52  Where the parties are not satisfied with the arbitral ruling made by the arbitral body in charge of rural land contracts,
they may bring a suit in the People’s Court within 30 days from the date they receive the ruling in writing. If they fail to file
a suit before expiration of the prescribed time limit, the written ruling shall thereupon become legally effective. 

Article 53  Any organizations or individuals that infringe upon the contractor’s right to land contractual management shall
bear civil responsibility. 

Article 54  Where the party giving out the contract commits one of the following acts, it shall bear such civil responsibilities
as desisting from the infringement, returning the original articles, restoring the original state, forestalling damages, eliminating
dangers and compensating losses: 

(1) interfering with the right to decision-making for production and management enjoyed by a contractor according to law; 

(2) taking back or readjusting the contracted land in violation of the provisions of this Law; 

(3) compelling a contractor to circulate his right to land contractual management or preventing a contractor from doing so; 

(4) circulating the right to land contractual management by compelling a contractor to give up or modify his right to land contractual
management on the pretext that the minority is subordinate to the majority; 

(5) taking back the contracted land by reason of the need to divide the land into “grain rations fields” and “responsibility fields”
in order to contract out the land though bid invitation; 

(6) taking back the contracted land to pay off its debts; 

(7) depriving women of the right to land contractual management that they enjoy according to law or infringing on such right; and 

(8) other acts infringing upon the right to land contractual management. 

Article 55  Any agreements in a contract concluded against the will of a contractor or in violation of the relevant compulsory
provisions of laws and administrative rules and regulations against the taking back and readjusting of the contracted land shall
be invalid. 

Article 56  Where a party fails to perform the obligations in a contract or the obligations it performs are at variance with
the ones agreed upon, it shall, in accordance with the provisions in the Contract Law of the People’s Republic of China, bear responsibility
for breach of the contract. 

Article 57  Any circulation of the right to land contractual management by a contractor under the compulsion of an organization
or individual shall be invalid. 

Article 58  Any organization or individual that, without authorization, detains or withholds the proceeds derived from the circulation
of the right to land contractual management shall return such proceeds. 

Article 59   Any unit or individual that, in violation of the regulations on land administration, requisitions or occupies
land or embezzles or misappropriates the compensations paid for the land requisitioned, which constitutes a crime, it/he shall be
investigated for criminal responsibility in accordance with law; and if damages are caused to others, it/he shall bear such responsibilities
as paying compensation for the damages. 

Article 60  Where a contractor, in violation of law, uses the contracted land for non-agricultural development, the relevant
competent administrative department of the local people’s government at or above the county level shall, according to law, impose
punishment on him. 

Where a contractor causes permanent damages to the contracted land, the party giving out the contract shall have the right to put
a stop to it and to demand the contractor to compensate the losses entailed. 

Article 61  Where a State organ or its staff member, taking advantage of its/his positions and powers, infringes upon the right
to land contractual management by interfering with rural land contract, modifying or revokin

CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION CONCERNING THE ISSUE THAT ENTERPRISES WITH FOREIGN INVESTMENT ENGAGED IN CABLE CAR SERVICE FOR TOURISM ARE NOT PRODUCTIVE ENTERPRISES

The State Administration of Taxation

Circular of the State Administration of Taxation Concerning the Issue that Enterprises with Foreign Investment Engaged in Cable Car
Service for Tourism are not Productive Enterprises

GuoShuiFa [2003] No.36

March 28, 2003

State taxation bureaus and local taxation bureaus of provinces, autonomous regions, municipalities directly under the Central Government
and municipalities separately listed on the state plan:

It is investigated that some localities regarded enterprises with foreign investment engaged in cable car service for tourism as productive
enterprises and offered them corresponding preferential tax treatment. In order to implement tax law correctly, it is hereby clarified
as follows:

According to the stipulation on productive enterprise scope in Article 72 of the Rules for the Implementation of Income Tax Law of
the People’s Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, Enterprises with foreign investment
engaged in cable car service for tourism are not productive enterprises. Those enterprises, which have been offered corresponding
preferential tax treatment as productive enterprises, should pay the reduced or remitted tax retroactively with 3 months after receiving
the circular, but they needn’t pay late fee.

 
The State Administration of Taxation
2003-03-28

 




CIRCULAR OF THE STATE ADMINISTRATION OF FOREIGN EXCHANGE ON DOMESTIC INSTITUTIONS USING RENMINBI AS PRICING CURRENCY IN FOREIGN TRADES

The State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange on Domestic Institutions Using Renminbi as Pricing Currency in Foreign Trades

HuiFa [2003] No.29

March 3, 2003

Branches and foreign exchange administration departments under the State Administration of Foreign Exchange in provinces, autonomous
regions and municipalities directly under the Central Government, and branch administrations of Shenzhen, Dalian, Qingdao, Xiamen,
Ningbo; and Chinese-capital designated banks of foreign exchange:

In response to requests from some domestic institutions to use Renminbi as pricing currency in foreign trade agreements and with a
view to promoting smooth development of foreign trade and to further strengthening capacity of international competition of domestic
institutions by adopting more flexible method of settlement in foreign trade transactions, the Circular on relevant provisions is
hereby issued after consideration:

I.

The domestic institutions may use Renminbi as pricing currency in signing import/export contracts.

II.

Where domestic institutions use Renminbi as pricing currency in export contracts, the foreign exchange shall be duly collected in
whole at the exchange rate quoted by the bank on the date of settlement in the course of handling procedures of collecting export
foreign exchange earnings.

III.

Where domestic institutions use Renminbi as pricing currency in import contracts, the payment to foreign party shall be made in foreign
exchange in any of the currency listed by domestic banks after converting the amount of Renminbi stipulated in the contract at the
exchange rate quoted by the bank on the date of settlement in the course of handling procedures of payment to foreign parties under
the import business.

IV.

Where domestic institutions use Renminbi as pricing currency in contracts and in making Customs declarations, they shall handle verification
procedures for export collection and import payment of foreign exchange in accordance with relevant regulations.

V.

The Circular shall enter into force as of the date of its promulgation.

Upon receipt, all branches shall promptly transmit the Circular to their respective subordinate sub-branches and concerned units while
all Chinese-capital designated banks of foreign exchange shall promptly transmit it to their branches and sub-branches. Please feedback
timely to the State Administration of Foreign Exchange any problems encountered in the course of implementation of the Circular.

 
The State Administration of Foreign Exchange
2003-03-03

 




SUPPLEMENTARY CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION CONCERNING THE PREFERENTIAL POLICY OF ENTERPRISE INCOME TAX FOR ENTERPRISES WITH FOREIGN INVESTMENT WITH ADDITIONAL INVESTMENT

The State Administration of Taxation

Supplementary Circular of the State Administration of Taxation Concerning the Preferential Policy of Enterprise Income Tax for Enterprises
with Foreign Investment with Additional Investment

GuoShuiHan [2003] No.368

March 28, 2003

For the purpose of implementing the Circular of the State Administration of Taxation and Ministry of Finance Concerning the Preferential
Policy of Enterprise Income Tax for Enterprise with Foreign Investment with Additional Investments (CaiShuiZi [2002] No.56), some
related issues are hereby further specified:

I.

About the scope of hortative items

According to the provisions of the Circular of the State Administration of Taxation on Implementation of New Guidance Catalogue for
Foreign-invested Industries, the hortative items stipulated in the CaiShuiZi [2002] No.56 refer to the foreign investment items with
additional investments approved before April 1, 2002, which are regarded as the hortative items and Limited-type B listed in the
Guidance Catalogue for Foreign-Invested Industries promulgated by the former State Development and Plan Commission and other relative
departments in 1997. The foreign-invested items with additional investments that are approved after April 1, 2002 are regarded as
the hortative items specified in the Guidance Catalogue for Foreign-invested Industries promulgated by the former National Development
and Plan Commission and other relative departments in 2002.

II.

About calculation of the incremental registered capitals after multiple additional investments

All the production items formed through multiple additional investments after initial investment of an enterprise with foreign ivestment,
which have not enjoyed any preferential treatment of fixed-term abatement or exemption of taxes (except for the additional investments
that have not formed production items) may be merged into one item for calculating the its new incremental registered capital. If
this new incremental registered capital meets with the requirements specified in Article 1 of CaiShuiZi [2002] No.56, it may enjoy
preferential treatment of fixed-term abatement or exemption of taxes for the independent item after the merge.

III.

About calculation of original registered capital

The “original registered capital” specified in CaiShuiZi [2002] No.56 refers to the registered capital formed before the enterprise
with foreign ivestment inputs additional investments on the new production items or on the merged items specified in Article 2 of
this Circular.

IV.

About calculation of preferential periods of abatement or exemption of taxes for the additional investments

For the production item formed from merging multiple additional investments of an enterprise with foreign ivestment, which enjoys
a preferential treatment of fixed-term of tax abatement or exemption according to Article 2 of this Circular, the preferential period
shall be calculated from the year in which the enterprise begins to obtains profits from the production item formed since the first
additional investment. The enterprise shall begins to enjoy the residual preferential treatments in the preferential period of tax
abatement or exemption from the year in which the additional investments reach the requirements specified in CaiShuiZi [2002] No.56.



 
The State Administration of Taxation
2003-03-28

 







CIRCULAR OF THE STATE ADMINISTRATION OF FOREIGN EXCHANGE ON IMPROVING THE ADMINISTRATION OF FOREIGN EXCHANGE IN FOREIGN DIRECT INVESTMENTS

The State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange on Improving the Administration of Foreign Exchange in Foreign Direct Investments

HuiFa [2003] No.30

March 3, 2003

Branches and foreign exchange administration departments under the State Administration of Foreign Exchange in provinces, autonomous
regions and municipalities directly under the Central Government, and branch administrations of Shenzhen, Dalian, Qingdao, Xiamen,
Ningbo; and headquarters of Chinese-capital designated banks of foreign exchange:

In order to adapt to the new international investment trend, introduce overseas investments through multiple channels, continuously
perfect the administration on foreign exchanges in foreign investments and further improve the environment for foreign investments,
some issues concerning the administration of foreign exchange in foreign direct investments is hereby circularized:

I.

Administration of the Accounts of and Capital Contributions by Foreign Investors

1.

A foreign investor who makes direct investment or engages in activities relevant to direct investment in China without establishing
enterprise with foreign investment in China may apply to the administration of foreign exchange in the locality of the project to
open a special foreign investor’s foreign exchange account in the name of the investor. A foreign investor is permitted to open only
one special foreign exchange account of multiple currencies at a bank except for otherwise approved by administration of foreign
exchange. This kind of accounts shall be classified into following four categories based on the uses:

(1)

Investment accounts. After obtaining non-legal person business license, foreign investors who engage in construction contracting,
joint exploration, development and exploitation of natural resources or venture capital investment may apply to open investment accounts
to deposit foreign exchange funds relevant to payment therefor.

(2)

Acquisition accounts. Foreign investors who plan to establish enterprises with foreign investment in China may, if it is necessary
to purchase land use right and attached real properties thereon, machinery and equipment or other assets in China at initial stage,
apply to open the acquisition accounts after the asset purchase contracts come into force, in order for depositing funds for paying
for acquisition.

(3)

Expense accounts. Foreign investors who plan to establish enterprises with foreign investment in China may, if it is necessary to
conduct market research, planning and preparatory works for establishment of institutions in China at initial stage, open the expense
account upon obtaining the notice for advance examination and approval of the company name from the administrations of industry and
commerce, in order for depositing foreign exchange funds for payments.

(4)

Security accounts. Prior to making investments in China, if the foreign investors are required to provide to domestic institutions
security funds in accordance with relevant stipulations and contract provisions, they may apply to open security fund accounts within
the time period prescribed by the contracts in order to deposit and pay foreign exchange security funds. In applying to open special
foreign exchange accounts, the foreign investors shall provide to the administrations of foreign exchange documents certifying the
truthfulness and legality of the investments, and the administrations of foreign exchange shall decide upper limits on the amounts
at the relevant accounts, the extended deposit duration and scope of settlements, etc. and shall conduct routine supervision (see
Attachment 1). Funds to the special foreign exchange accounts of the foreign investors shall be input in the form of exchange instead
of cash deposit. Settlements and transfers of funds in the accounts shall be verified by the administrations of foreign exchange
on a case-by-case basis (see Attachment 2 and 3). Where a foreign investor has established an enterprise with foreign investment
in China, any balance remained in the special foreign exchange account in the form of acquisition, expense and security accounts
may be transferred to the capital account of the enterprise. On strength of relevant approval documents issued by the administration
of foreign exchange, funds settled and transferred under the above accounts shall be regarded as the capital contribution of the
foreign investor and capital verification may be conducted accordingly. Where the foreign investor has not established an enterprise
with foreign investment in China, the foreign investor may go through the procedures for sales/purchases of foreign exchange in respect
of the balance and remit it abroad on strength of relevant approval documents issued by the administration of foreign exchange.

2.

Where foreign investors make capital contributions to enterprises with foreign investment in China from funds in offshore accounts
opened with banks authorized by People’s Bank of China to conduct offshore businesses, the transfers of foreign exchange funds from
offshore accounts to the capital accounts of the enterprises in China shall not require approvals of administration of foreign exchange.
However, when the enterprises with foreign investment go through the procedures for capital verification inquiry, the banks receiving
the remittances shall mark with “offshore funds” in the response letter to the inquiry letter in respect of the funds. Where a foreign
investor makes capital contribution to an enterprise with foreign investment from non-resident individual exchange account opened
at a bank in China, the administration of foreign exchange shall issue relevant approval documents (see Attachment 4) on foreign
exchange businesses under capital items after verifying relevant submitted documents inerrant. Based on the approval documents, the
bank shall carry out transfer of the fund from the non-resident individual exchange account to the capital account of enterprise
with foreign investment in China, and the enterprise shall go through the procedures of capital verification as well as registration
of foreign investment/exchange. Upon obtaining consent from the State Administration of Foreign Exchange, a branch with large business
volume may grant the power of examination and approval on transfer of the above funds to designated foreign exchange banks that shall
perform relevant duties such as examination, statistics, supervision and report for the record etc. Designated foreign exchange banks
authorized with the above power shall implement strict internal control system and shall have been no record of grossly violating
foreign exchange regulations in latest three years. When the enterprise with foreign investment go through the capital verification
inquiry procedures, the bank receiving the fund shall mark with “non-resident individual transfer in China” in the response letter
to the inquiry letter in respect of the fund.

3.

In addition to making capital contributions in a way of freely convertible currencies, imported equipments and other material items,
intangible properties and RMB-denominated profits etc., foreign investors may contribute to the registered capitals of enterprises
with foreign investment in the following ways with approval from administrations of foreign exchange:

(1)

The enterprises with foreign investment increase the enterprise capitals by transferring the development funds and reserve funds
(or capital public reserves and surplus reserves) etc. into the registered capitals;

(2)

The enterprises with foreign investment increase the enterprise capitals by transferring their unallocated profits, dividends payable
and interests accrued therefrom etc. to registered capitals;

(3)

The enterprises with foreign investment increase capitals by transferring of the principals and current interests of registered foreign
debts of the foreign parties into registered capitals; or

(4)

The foreign investors make reinvestments in the way of properties gained through early recouped investments or assets derived from
liquidation, stock equity transfer or reduction of registered capitals from enterprises with foreign investment in which they have
invested. Where the foreign investors make capital contributions in any of the above ways, the administrations of foreign exchange
shall issue relevant approval documents (see Attachment 5 and 6) on foreign exchange businesses under capital item after verifying
relevant submitted documents and their authentications. Based on the approval documents, the banks shall carry out relevant transfers
of the funds in China, and the enterprises shall go through the procedures for capital verification inquiry as well as registrations
of foreign investments and foreign exchanges.

4.

Where foreign investors and investment-type enterprises with foreign investment acquire stock equities of domestic enterprises, they
shall pay considerations (i.e. the prices paid by foreign parties to Chinese parties for buying the stock equities of the latter
which may be in form of foreign exchange funds owned by the foreign investors and investment-type enterprises with foreign investment,
RMB-denominated profits from other enterprises with foreign investment in which they have invested and other assets legally obtained)
for purchases of the stock equities in accordance with the provisions of laws, regulations and stipulations of transfer contracts
reached between the two parties, and make foreign investments and foreign exchange registrations on receipt of foreign exchange for
equity transfers with the administrations of foreign exchange at the localities of the transferors by themselves or by the transferors
under their authorizations. Where payment of considerations of equity purchases are made in a lump sum, the foreign investment and
foreign exchange registrations in respect of the proceeds earned through the transfers shall be made within 5 days of receipt of
the considerations and where payments thereof is made by installments, foreign investment and foreign exchange registrations shall
be made in respect of each of the installments within 5 days of receipt of each installment. Before foreign investors have paid in
full the considerations for share transfers, their ownership equity in the acquired enterprises shall be fixed in accordance with
the ratio that has actually been paid and foreign exchange businesses such as stock equity transfers, reduction of registered capitals,
liquidation and profit remittances shall be handled accordingly. The administrations of foreign exchange shall handle foreign investment
and foreign exchange registrations on receipt of foreign exchange for equity transfers and shall issue relevant certificates (see
Attachment 7) after verifying relevant documents submitted by foreign investors and their authentications. The certificates on foreign
investments and foreign exchange registrations on receipt of foreign exchange for equity transfers are valid documents certifying
that the considerations payable by foreign parties for stock equity transfers have been received, and they shall also serve as important
bases for the acquired enterprises to make foreign investment and foreign exchange registrations. All Branches and Foreign Exchange
Administration Offices shall summarize and report to the State Administration on monthly basis the data on foreign investments and
foreign exchange registrations on receipt of foreign exchange for equity transfers (including number and amount registered) and the
data on inflow of other types of foreign investments in the form of Report on Foreign Investment and Foreign Exchange Registration
(see Attachment 8) as newly issued. The former form o the Report on Foreign Investment and Foreign Exchange Registration shall cease
to be used from the date of entering into force of the Circular.

5.

Where non-investment type enterprises with foreign investment establish enterprises or acquire enterprises in China in accordance
with Interim Provisions on Investments in China by Enterprises with Foreign Investment promulgated jointly by the Ministry of Economic
and Trade Cooperation and the State Administration for Industry and Commerce, the invested enterprises with no foreign capitals are
permitted exempt from going through the procedures for foreign investment and foreign exchange registration and capital verification
and request for certificate for foreign exchange. The administration of foreign exchange shall on strength of Enterprise Legal Person
Business License, which has been issued by the administrations of industry and commerce to the invested enterprise and which is marked
with “with investment from enterprise with foreign investment”, treat the invested enterprise as an enterprise with foreign investment
in its raising of funds from abroad. The administrations of foreign exchange shall not approve transfers of foreign exchange funds
within China between the non-investment type enterprises with foreign investment and the enterprises they invested, and between different
enterprises invested by the non-investment type enterprises. In case of special circumstances in which this type of transfer within
China is necessarily required, the branches and the foreign exchange administration departments shall report to the State Administration.

6.

A domestic enterprise to which the ratio of foreign investor’s capital contribution is below 25% shall complete foreign exchange registration
of enterprise with foreign investment and go through the procedures for verification inquiry as well as foreign investment and foreign
exchange registration in accordance with relevant provisions on strength of an approval certificate for enterprise with foreign investment
which is issued by foreign economic and trade department and is mark with “ratio of foreign investment below 25%” as well as a foreign
investment business license issued by department in charge of administration of industry and commerce and marked with “ratio of foreign
investment below 25%”.

II.

Capital Verification Inquiry and Foreign Investment and Foreign Exchange Registration The capital verification inquiries of enterprise
with foreign investment and foreign investment and foreign exchange registrations shall be handled in accordance with the following
principles:

1.

In establishing enterprise with foreign investment, if the foreign exchange capital contributed by a foreign investor exceeds the
upper limit of the capital account of the enterprise, once such excess is no more than 1% of the upper limit and no more than $10,000
US equivalent in absolute value, the administration of foreign exchange shall handle the capital verification inquiry as well as
foreign investment and foreign exchange registration based on the actual amount contributed. If the amount of foreign exchange contributed
to the enterprise for stock equity participation is in excess of the sum reached by multiplying its ratio of equity with the amount
of registered capital of the enterprise due to appreciation of the enterprise’s capital, the excess shall be included into the upper
limit of the capital account of the enterprise. The principle set forth in the above paragraph shall still apply to the entry of
foreign exchange fund in excess of the limit.

2.

Where a foreign investor who contributes investment in tangible assets the enterprise with foreign investment entrusts an accounting
firm to make inquiry with administration of foreign exchange, if there is inconsistency between the value of such assets as appraised
by an appraisal institution under the commodities inspection administration and the value declared in the Customs Declaration when
importing such assets, the administration of foreign exchange shall adopt the value as appraised by the former for the purpose of
capital verification inquiry and foreign investment and foreign exchange registration.

3.

Where a foreign investor who contributes only intangible assets to an enterprise with foreign investment entrusts an accounting firm
to make inquiry with administration of foreign exchange, it shall list the contributed intangible assets in the Schedule attached
to the Letter of Inquiry on Foreign Party’s Capital Contribution, based on which the administration of foreign exchange shall make
foreign investment and foreign exchange registration for the contribution of the intangible assets and shall indicate in the Response
Letter to the Letter of Inquiry on Foreign Party’s Capital Contribution that “the intangible assets of the foreign party has been
registered with the number of registration XXXX. This letter is only valid for certificating that it has been registered.”

4.

Where a foreign investor makes investment or equity participation at a premium, or where the value of in-kind contribution made by
the foreign investor is appraised at a value higher than the declared value to the Customs, or where due to fluctuation of exchange
rate or other similar causes, the actual amount contributed to the enterprise with foreign investment exceeds the amount of registered
capital of the enterprise with foreign investment, the administration of foreign exchange shall register the registered capital of
the enterprise as well as its actual amount of contribution due to the premium.

5.

Where the enterprise that “processes raw documents on clients’ demands, assembles parts for the clients and process according to the
clients’ samples or engages in compensation trade” who intends to transform into enterprise with foreign investment entrusts accounting
firms to make inquiry with administration of foreign exchange, it shall submit relevant documents to the administration of foreign
exchange, and after examination and confirmation that the equipment to be invested for the transformation is imported goods for which
payment abroad has not been made, the administration of foreign exchange shall issue Response Letter to the Letter of Inquiry on
Foreign Party’s Capital Contribution in accordance with the value specified in the appraisal report on value of commodities and make
foreign investment and foreign exchange registration(see Attachment 9).

6.

Where the name of the foreign investor to a enterprise with foreign investment is inconsistent with the name of the overseas payer
who made payment for the investment, the administration of foreign exchange shall handle capital verification inquiry and make foreign
investment and foreign exchange registration for it but indicate that “there is inconsistency between the payer and the investor”
in the Response Letter to the Letter of Inquiry on Foreign Party’s Capital Contribution.

7.

For easy queries from different localities, the administration of foreign exchange shall indicate the names of relevant contract persons
and their telephone numbers when issuing approval documents for capital item foreign exchange business to enterprises with foreign
investment.

8.

Where any designated foreign exchange bank is found to open accounts for enterprises without permission, making entry of capital in
excess of limits etc in violation of provisions on account administration, the administration of foreign exchange shall impose sanctions
on it in accordance with provisions of Provisions of Administration of Domestic Foreign Exchange Account. Where any enterprise is
found to forge or alter documents or documents such as approval documents for capital item foreign exchange business, letters of
response that administration of foreign exchange issues for designated foreign exchange banks, Customs declaration for imported goods
etc., the administration of foreign exchange shall transfer such case to judicial organs for handling. If it is found that the accounting
firm failed to make capital verification inquiry or the inquiry is made incompliant with prescribed procedures after it issues the
capital verification report to enterprises, the administration of foreign exchange shall order such accounting firm to go through
the capital verification inquiry procedures as remedial measures and notify its violation to the association of certified public
accountants of its locality. No further inquiries from such accounting firm shall be accepted before the association of certified
public accountants of its locality makes formal punishment decision to it. The Branches and Foreign Exchange Administration Offices
shall report the names of the accounting firms that acted in violation of regulations again after having been punished to the State
Administration who shall announce the names at the website of the State Administration of Foreign Exchange and other media and shall
make recommendations to enterprises to be prudent in their choice of accounting firms. In the course of going through capital verification
inquiry procedures as remedial measures by accounting firms failed to make the inquiry or the inquiry was made not in compliance
with prescribed procedures, if it is found that the capital verification report issued by it is a false verification report, the
administration of foreign exchange shall transfer the case to judicial organs to handle and shall notify the administration of industry
and commerce at its locality.

III.

Administration of Registered Capital Reduction of Enterprise with Foreign Investment and Adjustment to Some Administration Business

1.

Where a foreign investor’s capital contribution to a enterprise with foreign investment is reduced, which involves sale/purchase of
foreign exchange, the administration of foreign exchange shall issue approval document for foreign exchange business under capital
item (see Attachment 10) after examination on relevant documents submitted by the enterprise, based on which the foreign investor
shall go through the procedures of the purchase, payment and remittance abroad of exchanges in respect of the reduced capital. Where
the reduction is for the purpose of reducing losses on the accounting books of the enterprise with foreign investment, or that the
amount reduced is the unpaid capital contribution of the foreign investor, the administration of foreign exchange shall not grant
approval to the foreign investor to re-invest such amount in China or to pay the amount out of china by the enterprise with foreign
investment.

2.

The mechanism of paid-up capital prescribed by Company Law of the People’s Republic of China shall apply to the capital contributions
to be made by foreign parties in companies limited-by-shares with foreign investment and fund management companies with foreign participations.
When companies falling into the two categories makes application to administration of foreign exchange to open enterprise with foreign
investment capital account, they do not need to present the enterprise legal person business licenses for enterprises with foreign
investment issued by the administration of industry and commerce. By presenting respective approval certificates for companies limited-by-shares
with foreign investment issued by foreign economic and trade department, the enterprise with foreign investment approval certificate
issued by foreign economic and trade department and approval for commencement of business issued by CSRC, the company limited-by-shares
with foreign investment and fund management company with foreign participation may go through relevant procedures. Relevant provisions
on documents to be provided by companies falling into the above two categories for establishment of capital accounts and making enterprise
with foreign investment foreign exchange registrations shall still be implemented.

3.

During the course of handling foreign exchange business, if the administration of foreign exchange needs to examine capital verification
report of the enterprise with foreign investment, the Response Letter to the Letter of Inquiry on Foreign Party’s Capital Contribution
shall be examined simultaneously in the case that capital verification report is issued after May 1, 2002. If auditing report of
enterprise with foreign investment needs to be examined in the course of handling foreign exchange business, the administration of
foreign exchange shall simultaneously examine the Foreign Exchange Balance Sheet of the enterprise with foreign investment in the
case that the auditing report is issued after the year of 2002.

4.

In order to further improve the efficiency in supervision on capital settlement and facilitate the operation of investment capital
by enterprises, the documents required to be examined by banks in accordance with operating procedures to be followed by authorized
banks in settlement of capital in foreign exchange which is stipulated in the Circular of State Administration of Foreign Exchange
Concerning Reform on Ways of Management of Settlement of Capital by Foreign Investment (HuiFa [2002] No. 59) shall be simplified
into the following three ones:

(1)

A written application of the enterprise, indicating the account number of the capital account of the enterprise, situation of capital
entry, currency for settlement, amount and usage etc.);

(2)

The Foreign Exchange Registration Certificate;

(3)

Other supplementary documents required in light of the circumstances. Other examination requirements shall as usual be in accordance
with relevant provisions of the Circular of State Administration of Foreign Exchange Concerning Reform on Ways of Management of Settlement
of Capital by Foreign Investment (HuiFa [2002] No. 59) and the operating procedures.

5.

Where a Chinese-foreign cooperative enterprise pays in form of depreciation of fixed assets or amortization of intangible assets to
the foreign party for early recouping of its investment amount (including fixed returns), the examination on “guarantee letter” provided
in Operating Procedures for Management of Foreign Exchange Business under Capital Item (HuiFa [2001] No. 38) is hereby amended as
follows:

(1)

If the Chinese-foreign cooperative enterprise has outstanding debts (bank loan or shareholder’s loan from foreign investor), the
foreign investor shall provide guarantee letter in corresponding amount from a foreign-invested financial institution in China;

(2)

If the outstanding debt of the Chinese-foreign cooperative enterprise is shareholder’s loan provided by foreign investor, a guarantee
letter issued by the foreign investor stating that it unconditionally undertakes joint and severally liability with the contractual
joint venture may be in lieu of the above letter of guarantee issued by the financial institutions.

(3)

If the Chinese-foreign cooperative enterprise has no debts, no letter of guarantee shall be provided by the foreign investor. Other
examination requirements shall as usual be in accordance with relevant provisions of the Operating procedures for Administration
of Foreign Exchange Business under Capital Item.

IV.

Othe Matters

1.

The term “administration of foreign exchange ” mentioned in this Circular refers to the State Administration of Foreign Exchange,
various branches, foreign exchange administration departments and Sub-branches within their jurisdictions.

2.

All branches and foreign exchange administration departments are required to transmit the following parts involving bank operations
to the designated foreign exchange banks within their jurisdiction:

(1)

Article 1 , 2 and 3 of Part I, Administration of the Accounts of and Capital Contributions by Foreign Investors, as well as Attachments
1 to 6 of this Circular;

(2)

Article 1 and Paragraph 1, Article 8 of Part II, Capital Verification Inquiry and Foreign Investment and Foreign Exchange Registration;
and

(3)

Article 4 of Part III, Administration of Registered Capital Reduction of Enterprise with Foreign Investment and Adjustment to Some
Administration Business.

3.

This Circular shall enter into force as of April 1, 2003. If there is any question in the implementation, please contact the Capital
Item Administration Department of the State Administration of Foreign Exchange through the telephone number 010-68402254.

Attachments:

1. Examination and approval on open, alteration and cancellation of foreign investor’s special foreign exchange account(omitted);

2. Examination and approval on settlement of funds in foreign investor’s special foreign exchange account (four categories in all)
(omitted);

3. Examination and approval on transfer of funds from foreign investor’s special foreign exchange account (four categories in all)
to enterprise with foreign investment’s capital in China (omitted);

4. Examination and approval on transfer of foreign exchange funds from non-resident individual exchange account opened with banks
in China by foreign investors to capital account of enterprise with foreign investment (omitted);

5. Examination and approval on transferring of development fund, reserve fund (or capital public reserve and surplus reserve), unallocated
profits, dividends payable and interests accrued therefrom, principal and accrued interest of registered foreign debt of the foreign
parties etc. into registered capital of the enterprise (omitted);

6. Examination and approval on reinvestment to be made by foreign investors by property gained through early recouped investment or
assets derived from liquidation, stock equity transfer or reduction of registered capital from enterprise with foreign investment
in which they have invested (omitted);

7. Registration on foreign investment and foreign exchange in respect of proceeds of foreign exchange paid as consideration by foreign
investors for purchase stock equity of Chinese party (omitted);

8. Report on foreign investment and foreign exchange registration in the region on yearly and monthly basis (form) (omitted);

9. Examination and approval on capital verification inquiry and Examination and approval on for the enterprises that “process raw
documents on clients’ demands, assemble parts for the clients and process according to the clients’ samples or engage in compensation
trade” who intends to transform into enterprise with foreign investment (omitted);

10. Examination and approval on reduction of registered capital by foreign parties in the enterprise with foreign investment (omitted).



 
The State Administration of Foreign Exchange
2003-03-03

 







CIRCULAR OF THE STATE ADMINISTRATION OF FOREIGN EXCHANGE CONCERNING ADMINISTRATION OF FOREIGN EXCHANGE OF FUND MANAGEMENT COMPANIES WITH FOREIGN SHARES

Circular of the State Administration of Foreign Exchange Concerning Administration of Foreign Exchange of Fund Management Companies
with Foreign Shares

HuiFa [2003] No.44
March 29, 2003

Branches and foreign exchange administration departments under the State Administration of Foreign Exchange in provinces, autonomous
regions and municipalities directly under the Central Government, and branch administrations of Shenzhen, Dalian, Qingdao, Xiamen,
Ningbo:

For the purpose of regulating the administration on foreign exchange of fund management companies with foreign shares, this Circular
is hereby issued to you concerning administration of foreign exchange of the fund management companies with foreign shares:

I.

“Fund management companies with foreign shares” mentioned in this Circular shall include the fund management companies which corporate
form are changed through acquirement by transfer of or through subscribing stock equity of a domestic fund management company by
foreign shareholders, or the fund management companies established through joint capital contribution by foreign shareholders and
domestic shareholders.

II.

No fund management company with foreign shares shall open foreign exchange account before obtaining approval from the China Securities
Regulatory Commission (hereinafter referred to as the “CSRC”) for granting commencement of its business.

(I)

Where the CSRC has granted approval for commencement of business to a fund management company established through joint capital contribution
by domestic shareholders and foreign shareholders, the company may apply to local administration of foreign exchange for opening
foreign exchange capital account at a domestic designated bank of foreign exchange by presenting the following documents and materials:

1.

A written application to open account;

2.

Joint venture agreement/contract;

3.

The approval document from the CSRC for granting commencement of its business.

4.

The Approval Certificate of Foreign Investment Enterprise issued by the foreign economic and trade department;

5.

The Notice for Advance Examination and Approval of an Enterprise Name issued by the administration of industry and commerce of the
State; and

6.

Other documents and materials required by the Administration of Foreign Exchange.

(II)

A fund management company with foreign shares which corporate nature has been changed through subscribing the stock equity of an already
established domestic fund management company by foreign shareholders may apply to local administration of foreign exchange to open
foreign exchange capital account at a domestic-designated foreign exchange bank by presenting the necessary documents including subscription
agreement/contract, approval documents of CSRC and approval certificate of foreign economic and trade department.

III.

Verification on input of capital fund from foreign shareholders into a fund management company with foreign shares shall be conducted
in accordance with this Circular of Ministry of Finance and the State Administration of Foreign Exchange on Further Strengthening
Capital Verifications on Enterprises with Foreign Investment and on Improving the System of Foreign Investment and Foreign Exchange
Registration (CaiKuai [2002] No.1017).

IV.

The scope of income for a foreign exchange capital account of the fund management company with foreign shares shall be the capital
contribution remitted by foreign shareholders. The scope of expenditure shall be payment under current account and other foreign
exchange payments approved by the administration of foreign exchange.

V.

In case a fund management company with foreign shares needs to settle the exchange at the foreign exchange capital account, it shall
make application to the local administration of foreign exchange by presenting the following documents and materials, and handle
settlement procedures at a designated foreign exchange bank based on approval documents of the administration of foreign exchange:

(I)

A written application for settlement;

(II)

Vouchers representing usage of the settled fund or description of the same;

(III)

Bank statements of the foreign exchange capital account in current period of the company; and

(IV)

Other documents required by the administration of foreign exchange.

VI.

In the case a fund management with foreign shares needs to pay profits to foreign shareholders, it shall make applications to the
administration of foreign exchange at its locality by presenting the following documents and materials, and handle purchase and payment
of exchange procedures at designated foreign exchange bank on basis of approval documents of the administration of foreign exchange:

(I)

A written application for purchase and payment of exchange;

(II)

Tax payment receipt and tax declarations form;

(III)

Auditing report issued by an accounting firm on profits and profits distribution at the year of realization of profit of the company;

(IV)

Resolution passed by the board of directors of the company on profit distribution;

(V)

Bank statements of the foreign exchange capital account in current period of the company.

(VI)

Other materials required by the administration of foreign exchange.

ithin four months after the expiry of each fiscal year, the fund management with foreign shares that fails to purchase and remit outside
country the exchanges to pay profits to foreign shareholders due in that year shall report to the administration of foreign exchange
for record. The record documents of the administration of foreign exchange shall be the necessary document for purchase or remittance
of profits to foreign shareholders thereafter.

VII.

Where the corporate nature is changed through stock transfer from a domestic fund management company to foreign shareholders, such
fund management company shall report to the administration of foreign exchange for record at its locality within five working days
after obtaining formal approval documents from the CSRC. Where the transferor is a domestic organization, it shall make application
to the administration of foreign exchange at its locality, within five working days after receiving the foreign exchanges from the
transferee, and present the documents including written application, transfer agreement, approval document of the CSRC and approval
certificate of foreign economic and trade department.

VIII.

Where transfer of stock equity of a fund management company with foreign shares is approved by CSRC and foreign economic and trade
department, it shall report to the administration of foreign exchange at its locality record within five working days of obtaining
approval documents from the foreign economic and trade department. Where stock equity is transferred from foreign shareholders to
domestic organizations and the transferee needs to pay to the foreign investor for the transfer, it shall apply to the administration
of foreign exchange at its locality for approval of purchase and payment of exchange by presenting the following documents and materials:

(I)

A written application for purchase and payment of exchange;

(II)

The stock equity transfer agreement;

(III)

Approval documents from the CSRC and foreign economic and trade department granting approval to the transfer;

(IV)

Bank statements on all foreign exchange account of the transferee;

(V)

If proceeds are accrued by the transfer on part of the foreign party, the transferee shall present tax payment receipt on withholding
income tax.

(VI)

Other materials required by the administration of foreign exchange.

IX.

Where the foreign shareholder of a fund management company with foreign shares has obtained approval from the CSRC and foreign economic
and trade department to reduce or withdraw its investment therein, the company shall apply to the administration of foreign exchange
at its locality for approval of purchase and payment of exchange by presenting the following documents and materials:

(I)

A written application for purchase of exchange;

(II)

Resolution passed by the board of directors of the company on reduction (withdrawal) of investment by foreign party;

(III)

Approval documents from the CSRC and foreign economic and trade department granting approval to the reduction (withdrawal) of investment;

(IV)

Latest capital verification report and auditing report of the company issued by an accounting firm;

(V)

Bank statement of foreign exchange capital account of the company;

(VI)

If proceeds are accrued by the reduction (withdrawal) of investment on part of the foreign party, tax payment receipt on withholding
income tax shall be presented.

(VII)

Other materials required by the administration of foreign exchange.

X.

Fund management companies with foreign shares shall only conduct businesses specified by CSRC. Without approval of the State Administration
of Foreign Exchange, they shall not conduct any foreign exchange business under capital items such as financing from abroad or providing
guarantees to foreign parties etc.

XI.

The State Administration of Foreign Exchange and its branches shall have the power to make on-site investigations to the foreign exchange
capital account of fund management companies with foreign shares and to their settlement and payment of exchange. Fund management
companies with foreign shares shall actively render assistance to relevant investigations and shall not provide false information.

XII.

Where a fund management company with foreign shares acts in breach of this Circular and other regulations on administration of foreign
exchange, the State Administration of Foreign Exchange and its branches may impose sanctions on it in accordance with the Regulations
of the People’s Republic of China on Administration of Foreign Exchange and other regulations on foreign exchange control.

XIII.

This Circular shall enter into force as of May 1, 2003. The State Administration of Foreign Exchange shall be responsible for the
interpretation of this Circular.



 
The State Administration of Foreign Exchange
2003-03-29

 







CIRCULAR OF THE STATE ADMINISTRATION OF FOREIGN EXCHANGE CONCERNING CANCELING PARTIAL CATEGORIES FOR RECORDING IMPORT PAYMENTS IN FOREIGN EXCHANGE

The State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange Concerning Canceling Partial Categories for Recording Import Payments in
Foreign Exchange

HuiFa [2003] No.34

March 5, 2003

Branches and foreign exchange administration departments under the State Administration of Foreign Exchange in provinces, autonomous
regions and municipalities directly under the Central Government, and branch administrations of Shenzhen, Dalian, Qingdao, Xiamen,
Ningbo; and designated banks of foreign exchange:

In order to adapt to the new trend after China’s entry of WTO, further perfect the administration on the foreign exchange of current
account transactions and accelerate the development of foreign trades, the State Administration of Foreign Exchange has decided to
cancel partial categories for recording the import payments in foreign exchange to simply the procedures of verification of import
payments in foreign exchange for the importers. Some relevant issues are circularized hereby:

I.

Recording and registration requirements for three categories, including “transshipment trades of paying-first-and-then-collecting”,
“material used by overseas projects”, “prepayment over stipulated proportion and amount”, which are stipulated in the HuiGuoHanZi
[98] No.199, the Circular of Distributing the Provisions of Verification of Trade Facticities of Cancellation of Import Payments
in Foreign Exchange shall be canceled. As of the enforcement of this Circular, importers may directly go to banks to purchase/pay
foreign exchange under above three categories of transactions, by presenting the required payment warrants and commercial bills,
without needs to apply to the State Administration of Foreign Exchange or its branches (hereinafter referred to as AEF) for Record
Form for Import Payment in foreign exchange.

II.

When an importer purchases/pays foreign exchange under the “transshipment trade of paying-first-and-then-collecting”, it shall present
relevant commercial documents including import/export contract, verification form of import payments in foreign exchange (that may
be regarded as a declaration form), credit letter issued by buyer or payment guarantee that is issued by a foreign bank and has been
authenticated by a domestic bank for its testkey as well as all commercial documents in any settlement methods. When purchasing/paying
foreign exchange under the trade of “material used by overseas projects”, the importer shall present import/export contract, verification
form of import payments in foreign exchange (that may be regarded as a declaration form), commercial invoice or proforma invoice,
project contracting agreement or subcontracting agreement and all commercial documents in any settlement methods. In a case of or
purchasing/paying foreign exchange under the trade of “prepayment over stipulated proportion and amount”, the importer shall present
import/export contract, verification form of import payments in foreign exchange (that may be regarded as a declaration form), commercial
invoice or proforma invoice, commercial invoice or proforma invoice, and prepayment guarantee letter issued by a foreign bank and
has been authenticated by a domestic bank with its testkey or standby letter of credit.

III.

When the importer is filling in the Verification Form of Import Payments in Foreign Exchange (that may be regarded as a declaration
form), the item “Payment Nature” shall be filled with “Normal Payment in Foreign Exchange” for any of the above-mentioned three categories
of payments.

IV.

After the procedures for selling/paying foreign exchange are completed, the designated foreign exchange banks shall transmit the paper-based
verification documents and relevant electronic documents to AFE.

V.

After the importers have paid the foreign exchange for the items of the above-mentioned three categories, it shall go through the
verification procedures according to relevant government regulations governing the verification procedures for export proceeds and
import payments. The AFE shall, when dealing with the verifications of above categories, input “999999” for all the serial numbers
of the data record forms for the import payments in foreign exchange.

VI.

This Circular shall enter into force as of April 1, 2003. If any previous provisions are inconsistent with this Circular, this Circular
shall prevail.

All branches shall transmit this Circular to their central sub-branches, foreign-funded banks and relative units upon receiving this
Circular. As soon as the Chinese-capital designated banks of foreign exchange receive this Circular, they shall immediately transmit
it to their branches. They shall feedback any problem occurring in the course of implementation of this Circular to the Department
of Current Account Transactions Administration of the State Administration of Foreign Exchange.



 
The State Administration of Foreign Exchange
2003-03-05

 







ANNOUNCEMENT OF CHINA SECURITIES REGULATORY COMMISSION ON CANCELING THE SECOND GROUP OF ADMINISTRATIVE APPROVAL ITEMS AND ON CHANGING THE MANAGEMENT METHODS OF SOME ADMINISTRATIVE APPROVAL ITEMS

The China Securities Regulatory Commission

Announcement of China Securities Regulatory Commission on Canceling the Second Group of Administrative Approval Items and on Changing
the Management Methods of Some Administrative Approval Items

China Securities Regulatory Commission

April 1,2003

According to the requirements of the Decision of the State Council on Canceling the Second Group of Administrative Approval Items
and on Changing the Management Methods of a Group of Administrative Approval Items (GuoFa [2003] No.5), the relevant matters concerning
this commission’s cancellation of the second group of administrative approval items and the change of management methods of some
administrative approval items are hereby notified as follows:

1.

Since the day of issuance of the decision of the State Council, February 27, 2003, China Securities Regulatory Commission (the CSRC)
has cancelled the second group of administrative approval items (27 items, see the attachment for the specific item names and the
basis of establishment).

2.

The CSRC and the agencies thereof will no longer accept the relevant applications filed by the parties according to the administrative
approval items that have been cancelled, and will no longer make examination and approval of such applications that have been accepted.

3.

The CSRC will issue special circulars with respect to the subsequent management methods and follow-up work related to the cancelled
administrative approval items.

4.

The CSRS will start to sort out the departmental regulations and regulatory documents related to the second group of administrative
approval items that have been cancelled, and the result will be publicized.

5.

The CSRC has decided to change the management methods of 7 administrative approval items, namely: “ratification of the qualification
of securities practitioners”, “ratification of the qualification of securities investment consultation practitioners”, “record of
information of stock underwriters”, “assessment of the qualification of fund practitioners”, “ratification of the qualification of
futures practitioners”, “ratification of the texts of futures brokerage contracts”, as well as “ratification of the qualification
of futures investment consultation practitioners”. The above 7 administrative approval items shall be transferred to the Securities
Association of China and the China Futures Association for self-regulation. The CSRC will issue special circulars concerning the
relevant transfer and subsequent management work.

6.

After the second group of administrative approval items are abolished and the management methods for some administrative approval
items are changed, the CSRS will, according to the principle of prudent regulation and through enactment of the management criteria
and standards, improve the regulatory means and strengthen the in-process inspection and ex post facto investigation and punishment
to further strengthen the protection of the investors and the supervision and management of the relevant business activities.

Attachment:Catalogue of the Second Group of Administrative Approval Items Canceled by China Securities Regulatory Commission (27 items)

No. Item Name Establishment Basis

1 Ratification of A-share settlement banks Measures for the Administration of Client Transaction Settlement Fund (Decree No.3 of 2001
of the CSRC)

2 Record of the contracts signed between securities companies and depository banks, or chief depository banks Measures for the Administration
of Client Transaction Settlement Fund (Decree No.3 of 2001 of the CSRC)

3 Record of the contracts signed between settlement companies and settlement banks Measures for the Administration of Client Transaction
Settlement Fund (Decree No.3 of 2001 of the CSRC)

4 Record of the documents of the members’ assembly of Stock Exchanges Measures for the Administration of Stock Exchanges (Decree No.4
of 2001 of the CSRC)

5 Record of the business agreements between securities registration and settlement institutions and Stock Exchanges Measures for the
Administration of Stock Exchanges (Decree No.4 of 2001 of the CSRC)

6 Record of the suspension or restoration of the trading of listed securities by Stock Exchanges Measures for the Administration of
Stock Exchanges (Decree No.4 of 2001 of the CSRC)

7 Approval of the suspension or restoration of the trading of listed securities by Stock Exchanges Measures for the Administration
of Stock Exchanges (Decree No.4 of 2001 of the CSRC)

8 Record of listing agreements Measures for the Administration of Stock Exchanges (Decree No.4 of 2001 of the CSRC)

9 Record of the internal administrative systems and work procedures of securities registration and settlement institutions on business,
finance and security etc Measures for the Administration of Stock Exchanges (Decree No.4 of 2001 of the CSRC)

10 Approval of the period for keeping of original business proofs fixed by securities registration and settlement institutions Measures
for the Administration of Stock Exchanges (Decree No.4 of 2001 of the CSRC)

11 Examination and approval for the services provided by Stock Exchanges for the transaction types that are not listed by them Measures
for the Administration of Stock Exchanges (Decree No.4 of 2001 of the CSRC)

12 Examination and acceptance of the preparation for establishment of securities companies Circular of the CSRC on distributing the
Several Opinions on Further Strengthening the Regulation of Securities Companies (ZhengJianJiGouZi [1999] No.14)

13 Examination and approval of the establishment of securities institutions abroad by non-securities institutions Circular of the
General Office of the State Council on Distributing the Provisions on the Functions, Internal Structures and Personnel Establishment
of China Securities Regulatory Commission (GuoBnaFa [1998] No.31)Measures for the Administration of Overseas Financial Institutions
(Decree No.1 of 1990 of the People’s Bank of China)

14 Ratification of the change, addition or reduction of representatives, deputy representatives, and staff members of foreign nationalities
or from Hong Kong, Macao and Taiwan by the representative offices in China of foreign securities institutions Circular of the CSRC
on Promulgation of the Measures for the Administration of Representative Offices in China of Foreign Securities Institutions (ZhengJianJiGouZi
[1996] No. 26)

15 Record of the employment of Chinese citizens to be ordinary staff members by the representative offices in China of foreign securities
institutions Circular of the CSRC on Promulgation of the Measures for the Administration of Representative Offices in China of Foreign
Securities Institutions (ZhengJianJiGouZi [1996] No. 26)

16 Ratification of the representatives and deputy representatives of the representative offices in China of foreign securities institutions
Circular of the CSRC on Promulgation of the Measures for the Administration of Representative Offices in China of Foreign Securities
Institutions (ZhengJianJiGouZi [1996] No. 26)

17 Examination and approval of the cancellation of securities institutions set up overseas by domestic non-securities institutions
Circular of the General Office of the State Council on Distributing the Provisions on the Functions, Internal Structures and Personnel
Establishment of China Securities Regulatory Commission (GuoBanFa [1998] No.31); Measures for the Administration of Overseas Financial
Institutions (Decree No.1 of 1990 of the People’s Bank of China); Circular of the People’s Bank of China and China Securities Regulatory
Commission on Distributing the Scheme on Handover of the Duties of Regulation of Securities Institutions (YinChuan [1998] No.30 )

18 Recommendation for the securities companies entering the Inter-bank borrowing market Circular of the People’s Bank of China on
Distributing the Provisions on the Administration of the Fund Management Companies’ Entering the Inter-bank Borrowing Market and
the Provisions on the Administration of the Securities Companies’ Entering the Inter-bank Borrowing Market (YinFa [1999] No.288)

19 Designation of the training institutions of securities practitioners Circular of the Securities Commission of the State Council
on Distributing the Interim Provisions on the Administration of the Qualification of Securities Practitioners (ZhengWeiFa [1995]
No.6)

20 Record of the personnel employed by securities intermediary institutions Circular of the Securities Commission of the State Council
on Distributing the Interim Provisions on the Administration of the Qualification of Securities Practitioners (ZhengWeiFa [1995]
No.6)

21 Record of the change of employers of securities practitioners Circular of the Securities Commission of the State Council on Distributing
the Interim Provisions on the Administration of the Qualification of Securities Practitioners (ZhengWeiFa [1995] No.6)

22 Record of the part-time jobs in non-commercial institutions of the managerial personnel and fund managers Promulgation of No.6
Rule of Implementation of the Interim Measures for the Administration of Securities and Investment Fund ?C Interim Provisions on
the Administration of the Qualification of Fund Practitioners (ZhengJianFa [1999] No.53)

23 Record of the appointment and dismissal of the assistants to the general manager and department managers of fund management companies
and fund trustee departments Promulgation of No.6 Rule of Implementation of the Interim Measures for the Administration of Securities
and Investment Fund ?C Interim Provisions on the Administration of the Qualification of Fund Practitioners (ZhengJianFa [1999] No.53)

24 Record of the relevant materials of establishment of offices within China by fund management companies Circular of the CSRC on
the Relevant Issues Concerning the Establishment of Branches within China by Fund Management Companies (ZhengJianJiJinZi [2000] No.
66)

25 Examination and approval for the establishment of futures and investment consultation institutions Circular of the Securities Commission
of the State Council on Promulgation of the Interim Measures for the Administration of Securities and Futures Investment Consultation
(ZhengWeiFa [1997] No.96)

26 Review of the letters of legal advice issued by Chinese lawyers concerning the issuing of stocks and listing overseas by overseas
companies involving domestic rights and interests Circular of the CSRS on the Relevant Issues Concerning the Issuing of Stocks and
Listing Abroad by Overseas Companies Involving Domestic Rights and Interests (ZhengJianFaXingZi [2000] No.72 )

27 Record of the agreements on listing of convertible company bonds Circular of the Securities Commission of the State Council on
Promulgation of the Interim Measures for the Administration of Convertible Company Bonds (ZhengWeiFa [1997] No.6)



 
The China Securities Regulatory Commission
2003-04-01

 







CIRCULAR OF THE STATE ADMINISTRATION OF FOREIGN EXCHANGE CONCERNING THE SALE AND PURCHASE OF FOREIGN EXCHANGE FOR THE NON-TRADE ITEMS UNSPECIFIED IN THE LAWS AND REGULATIONS CURRENTLY IN FORCE

The State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange Concerning the Sale and Purchase of Foreign Exchange for the Non-trade Items
Unspecified in the Laws and Regulations Currently in Force

HuiFa [2003] No.35

March 6, 2003

Branches and Foreign Exchange Administration Offices under the State Administration of Foreign Exchange at levels of provinces, autonomous
regions and municipalities directly under the Central Government, and branch administrations of Shenzhen, Dalian, Qingdao, Xiamen,
Ningbo; and Sino-capital designated banks of foreign exchange:

For the purpose of improving the administration on foreign exchange for non-trade items, settling the issues on sale and purchase
of foreign exchange for the non-trade items unspecified in the laws or regulations currently in force, and providing conveniences
for the real economic and trading activities of domestic organizations, the State Administration of Foreign Exchange decided to classifiably
administrate the non-trade items unspecified in the laws and regulations currently in force concerning foreign exchange administration
in accordance with the prospective provisions of the Regulations of the People’s Republic of China on Administration of Foreign Exchange,
the Administrative Provisions on Settlement, Sale and Purchase of Foreign Exchange, the Circular Concerning Submission of Taxation
Certificates for Sales and Purchase of Foreign Exchange under the Non-Trade Items and Partial Capital Items. A Circular on relative
issues is hereby distributed:

I.

For the sale/purchase of foreign exchange for a non-trade item unspecified in the laws and regulations currently in force, which sum
equivalent is no more than $50,000 (including $50,000), domestic organization may directly perform the transaction directly with
the designated bank of foreign exchange by presenting correlative documents, and the banks shall perform the sale/purchase after
verifying the authenticity. For the sale/purchase of foreign exchange for a non-trade item unspecified in the laws and regulations
currently in force, which sum equivalent is over $50,000 and no more than $500,000 (including $500,000), the domestic organization
shall apply to the branches of the State Administration of Foreign Exchange (hereinafter referred to as AFE). After obtaining the
verification certificate for the authenticity, the organization may make transactions with the designated bank of foreign exchange
by presenting the verification certificate issued by the AFE. For the sale/purchase of foreign exchange under non-trade items unspecified
in the laws and regulations currently in force, which sum equivalent is over $500,000 (excluding $500,000), the domestic organization
shall apply to the local AFE by presenting correlative documents for local AFE to report to the SAFE for approval. After being verified
by the SAFE, the organization may perform the sale/purchase of exchange at the designated bank of foreign exchange by presenting
verification certificate from the local AFE.

II.

The credit enterprises with export proceeds in foreign exchange without any violation of correlative regulations on foreign exchange
administration, the influencing importers with biggish import volume within the jurisdiction, and the institutions with frequent
foreign exchange incomes and expenses on non-trades, such as party, governmental and military organizations and scientific research
institutions at State-level, with a approval of the local branch AFE, may transact the sales/purchases of foreign exchange for non-trades
directly with the designated banks of foreign exchange by presenting relative documents, exempt from the limitation for the sum stipulated
in Article 1 of this Circular. The local AFEs may, according to the actual circumstances of local jurisdictions, formulate specific
approval requirements consistent with the provisions in this Article. The AFEs shall inform the local designated banks of foreign
exchange after verifying such domestic organizations, and transmit the list of verified domestic organizations to the Current Account
Transaction Administration Department of the State Administration of Foreign Exchange for record. For any verified domestic organization
in violation of the regulations on foreign exchange administration, the AFE shall notify the designated bank of foreign exchange
to immediately cancel its qualification.

III.

When designated banks of foreign exchange audit the authenticity of the sales/purchases of foreign exchange for non-trade items unspecified
in the laws and regulations currently in force, they shall audit the written applications, contracts/agreements, invoices (payment
notices) and taxation warrants provided by the domestic organizations.

IV.

When the AFEs audit the authenticities of the sales/purchases of foreign exchange for non-trade items unspecified in the laws and
regulations currently in force, they shall audit the written applications, contracts/agreements, invoices (payment notices), taxation
warrants and other relevant documents provided by the domestic organizations. Meanwhile, they shall also enhance the internal controls,
establish and implement an administrative system of authorization by levels, and decide the items with biggish sum or with uncompleted
documents through collective discussions.

V.

When the AFEs and the designated banks of foreign exchange audit the authenticity of the sales/purchases of foreign exchange for non-trade
items unspecified in the laws and regulations currently in force, they shall audit the original documents, indicate the date and
amount of the sales/purchases of foreign exchange on the original documents, seal the documents with official seals, and keep the
copies for 3 years for future reference.

VI.

The designated banks of foreign exchange shall record all the transactions of sales/purchases of foreign exchange for non-trade items
unspecified in the laws and regulations currently in force which have been handled by them, fill in the Registration Form of Sales/Purchases
of Foreign Exchange for Special Non-Trade Items (Attachment) that shall be submitted to local AFEs within the first 5 working days
at the beginning of each quarter and shall be submitted by the local AFEs (foreign exchange administration department) to the State
Administration of Foreign Exchange within the first 10 working days at the beginning of each quarter.

VII.

This Circular shall enter into force as of April 1, 2003.

Each local AFE (foreign exchange administration department) shall transmit this Circular to the central branch offices and foreign-invested
banks immediately within its jurisdiction upon receiving it. Each Sino-capital designated bank of foreign exchange shall transmit
this Circular immediately to its branch banks after receiving it. They shall feedback any problem occurring in the course of implementation
of this Circular immediately to the Current Account Transaction Administration Department of the State Administration of Foreign
Exchange.

Attachment: Registration Form of Sales/Purchase of Foreign Exchange for Special Non-Trade Items (omitted)



 
The State Administration of Foreign Exchange
2003-03-06

 







CIRCULAR ON DOING WELL IN ONGOING REGULATORY AND DOVETAILING WORKS UPON CANCELING THE SECOND GROUP OF ADMINISTRATIVE APPROVAL ITEMS AND CHANGING THE MANAGEMENT METHODS OF SOME ADMINISTRATIVE APPROVAL ITEMS

The China Securities Regulatory Commission

Circular on Doing Well in Ongoing Regulatory and Dovetailing Works Upon Canceling the Second Group of Administrative Approval Items
and Changing the Management Methods of Some Administrative Approval Items

ZhengJianFa [2003] No.17

April 1, 2003

Securities regulatory offices, agencies and special agencies, stock exchanges and futures exchanges, Shanghai and Shenzhen Stock Exchanges
Securities Regulatory Agencies, China Association of Securities and China Association of Futures, China Securities Registration and
Settlement Company, and each department of the SCRC:

On March 27, 2003, the State Council promulgated the Decision on Canceling the Second Group of Administrative Approval Items and on
Changing the Management Methods of a Group of Administrative Approval Items (GuoFa [2003] No.5) (hereinafter referred to as the “Decision”).
With a view to carry out and implement the spirits of the Decisions and do well in the ongoing regulatory and dovetailing works upon
cancellation of the second group of administrative approval items and change of management methods of some administrative approval
items, here is to notify you of the following matters:

1.

For the administrative approval items revoked in the Decision (see the attachment), the CSRC and its agencies will no longer accept,
or examine and approve if accepted already.

2.

For the ongoing regulatory and dovetailing works upon cancellation of the relevant administrative approval items, please enforce as
per the ongoing management modes determined in the attachment.

3.

For the change of management methods of some administrative approval items, please do well in the transfer of the relevant works to
the professional associations, put forth the self-disciplinary principles of professional associations, guide them to formulate operational
procedures and establish the self-disciplinary mechanism.

4.

According to the requirements for the Decision and this Circular, please research on and timely cope with the circumstances and problems
that may occur upon the cancellation of the relevant administrative approval items and change of the management methods for some
administrative approval items, earnestly do well in the ongoing regulatory and dovetailing works, and prevent any disconnection in
management. In case of any material circumstance, please report timely to the CSRC.

Attachment:Follow-up and Dovetailing of the Ongoing Management Methods and Work Upon Cancellation of the Second Group of Administrative Approval
Items of China Securities Regulatory Commission
htm/e03060.htmNo

￿￿

No.

Item Name Cancelled 

Ongoing Management and Work Dovetailing

1  

Ratification of A-share settlement banks  

The Securities Registration and Settlement Company shall formulate the standards and criteria for ratification of A-share
settlement banks

2  

Record of the contracts signed between securities companies and depository banks, or chief depository banks  

Within seven days upon signature of the contracts with depository banks and chief depository banks, the securities companies
shall report the copies of the contracts in question to the CSRC and the local CSRC agency.

3  

Record of the contracts signed between settlement companies and settlement banks  

The Securities Registration and Settlement Company shall report its sample format of the contracts signed with the settlement
banks to the CSRC.

4  

Record of the documents of the members￿￿ assembly of Stock Exchanges  

The Stock Exchanges shall within ten working days upon the members￿￿ assembly of Stock Exchanges submit all the documents
and relevant circumstances to the CSRC

5  

Record of the business agreements between securities registration and settlement institutions and Stock Exchanges
 

The securities registration and settlement institutions shall submit the business agreements signed or modified with the
Stock Exchanges to the CSRC.

6  

Record of the suspension or restoration of the trading of listed securities by Stock Exchanges  

The CSRC shall not examine and approve such administrative examination and approval items but strengthen the examination
and inspection on the stop or resumption of the listing of the Stock Exchanges

7  

Approval of the suspension or restoration of the trading of listed securities by Stock Exchanges  

Same as above (ditto)

8  

Record of listing agreements  

The CSRC shall no longer examine and approve such administrative examination and approval items

9  

Record of the internal administrative systems and work procedures of securities registration and settlement institutions
on business, finance and security etc  

The internal management system and risk prevention system formulated by the securities registration and settlement institutions
should be reported to the CSRC.

10  

Approval of the period for keeping of original business proofs fixed by securities registration and settlement institutions
 

Enforced according to Article 53 of the Securities Law of the PRC.

11  

Examination and approval for the services provided by Stock Exchanges for the transaction types that are not listed by them
 

In case of providing services for the transactions types that are not listed on their stock exchanges, the Stock Exchanges
shall report the relevant circumstances to the CSRC.

12  

Examination and acceptance of the preparation for establishment of securities companies  

The CSRC shall no longer examine and approve such administrative examination and approval items

13  

Examination and approval of the establishment of securities institutions abroad by non-securities institutions
 

The CSRC shall no longer examine and approve such administrative examination and approval items

14  

Ratification of the change, addition or reduction of representatives, deputy representatives, and staff members of foreign
nationalities or from Hong Kong, Macao and Taiwan by the representative offices in China of foreign securities
institutions  

Upon change, addition or reduction of representatives, deputy representatives, and staff members of foreign nationalities
or from Hong Kong, Macao and Taiwan by the representative offices in China of foreign securities institutions,
the name list, identity certification and resumes should be reported to the CSRC and the local CSRC agencies

15  

Record of the employment of Chinese citizens to be ordinary staff members by the representative offices in China of foreign
securities institutions  

Ditto

16  

Ratification of the representatives and deputy representatives of the representative offices in China of foreign securities
institutions  

Ditto

17  

Examination and approval of the cancellation of securities institutions set up overseas by domestic non-securities institutions
 

The CSRC shall no longer examine and approve such administrative examination and approval items

18  

Recommendation for the securities companies entering the Inter-bank borrowing market  

The securities companies may apply for with the People￿￿s Bank of China or other competent authorities. If the People￿￿s
Bank of China or other competent authorities require for opinions to be issued by the CSRC, the CSRC shall coordinate
accordingly

19  

Designation of the training institutions of securities practitioners  

Handled with according to the relevant provisions of the China Association of Securities

20  

Record of the personnel employed by securities intermediary institutions  

Handled with according to the relevant provisions of the China Association of Securities

21  

Record of the change of employers of securities practitioners  

Handled with according to the relevant provisions of the China Association of Securities

22  

Record of the part-time jobs in non-commercial institutions of the managerial personnel and fund managers  

The fund management companies shall report to the CSRC the part-time jobs in non-commercial institutions of the managerial
personnel and fund managers

23  

Record of the appointment and dismissal of the assistants to the general manager and department managers of fund management
companies and fund trustee departments  

The engagement and dismissal of the assistant General Managers and departmental managers of fund management companies and
fund custodian departments should be reported together with the submission of the database information for fund
supervision

24  

Record of the relevant materials of establishment of offices within China by fund management companies  

Within 25 working days upon establishing offices in the territory of China, the fund management companies shall report the
relevant content, including the time and place for establishing such offices, the responsible persons and contact
mode; and the acts of the offices should be undertaken by the fund management companies as a part of the regulations
on the fund management companies by the CSRC.

25  

Examination and approval for the establishment of futures and investment consultation institutions  

The CSRC shall no longer examine and approve such administrative examination and approval items but review and ratify the
qualifications of the futures investment advisory institutions for futures investment advisory services, and
issue the Qualification Permits for Futures Investment Advisory Services. For the institutions that project to apply
for the qualifications for futures investment advisory services, their practitioners shall have obtained the Qualification
Certificate for futures investment consultation issued by China Association of Futures

26  

Review of the letters of legal advice issued by Chinese lawyers concerning the issuing of stocks and listing overseas by
overseas companies involving domestic rights and interests  

The CSRC shall no longer examine and approve such administrative examination and approval items

27  

Record of the agreements on listing of convertible company bonds  

The CSRC shall no longer examine and approve such administrative examination and approval items

￿￿




CONSTITUTION ACT, 1982 – page 22

NOTES (1) The enacting clause was repealed by the Statute Law Revision Act, 1893, 56-57 Vict., c. 14 (U.K.). It read as...