CIRCULAR OF THE MINISTRY OF FINANCE ON PRINTING AND DISTRIBUTING THE PROVISIONAL MEASURES FOR FISCAL AND FINANCIAL ADMINISTRATION OF SUBSIDY FUND FOR FIXED ASSETS INVESTMENT IN THE CENTRAL BUDGET

Ministry of Finance

Circular of the Ministry of Finance on Printing and Distributing the Provisional Measures for Fiscal and Financial Administration
of Subsidy Fund for Fixed Assets Investment in the Central Budget

Cai Jian [2005] No.355

Relevant Ministries and Commissions under the State Council, relevant authorities directly under the State Council, Departments (Bureaus)
of Finance in all provinces, autonomous regions, municipalities directly under the Central Government and cities specially designated
in the state plan, Bureau of Finance of the Xinjiang Production and Construction Corps, and relevant enterprises administered by
the Central Authorities:

In order to strengthen and improve the budgetary administration of subsidy fund for fixed asset investment in the Central budget,
and to enhance the effectiveness of financial funds, the Ministry of Finance formulates the Provisional Measures for Fiscal and Financial
Administration of Subsidy Fund for Fixed Assets Investment in the Central Budget in accordance with the Budget Law of the People’s
Republic of China, the Measures for the Implementation of the Budget Law of the People’s Republic of China, the Decision of the State
Council on Reforming the Investment System, the Provisions on the Financial Administration of Basic Constructions and other laws
and administrative regulations, and it is hereby printed and distributed. And any problem occurring during the implementation shall
be reported to the Ministry of Finance.

Ministry of Finance

July 26, 2005 Annex:Provisional Measures for Fiscal and Financial Administration of Subsidy Fund for Fixed Assets Investment in the Central Budget

Chapter I General Provisions

Article 1

These Measures are formulated in accordance with the Budget Law of the People’s Republic of China, the Measures for the Implementation
of the Budget Law of the People’s Republic of China, the Decision of the State Council on Reforming the Investment System, the Provisions
on the Financial Administration of Basic Constructions and other laws and administrative regulations, for the purposes of strengthen
the budgetary administration of subsidy fund for fixed assets investment in the Central budget (hereafter referred to as the investment
subsidy) and of enhancing the effectiveness of financial funds.

Article 2

The “investment subsidy” as mentioned in these Measures refers to the investment subsidy funds arranged by the fixed assets investment
in the Central budget (including the funds for treasury bonds projects), and exclusively granted to the appropriate fixed assets
investment projects.

Chapter II Application Scope of Investment Subsidy

Article 3

The investment subsidy shall mainly be applicable in the economic and social fields supported by the government, which mainly include:

(1)

Infrastructure Projects of Public Benefit and for Public Use;

(2)

Projects for Protecting and Improving ecological environment;

(3)

Projects for Promoting the economic and social development in the less-developed regions;

(4)

Projects for Promoting the progress of science and technology and the industrialization of high and new technologies; and

(5)

Other projects in line with the relevant State provisions.

Article 4

The investment subsidy shall be arranged in accordance with the needs of the State’s ‘acroeconomic regulations and with the priorities
determined by the State. And the investment subsidy for a project shall not, in principle, exceed 50% of the total investment of
the project hereof.

Article 5

The investment subsidy may be allocated once for all or in several times in accordance with the construction and implementation progress
of a project.

Chapter III Budgetary Administration of Project Subject to Investment Subsidy

Article 6

The finance authorities shall strengthen the budgetary administration of the investment subsidy funds, practice a method of “budget
allocation coming after examination”, conduct a strict examination on the budget allocation, and allocate the budget for the project
subject to investment subsidy in accordance with the procedure governing the budget administration.

Article 7

In any one of the following circumstances, the finance authorities may suspend or cease the allocation of budget:

(1)

where the investment plan fails to comply with the arrangement principle and priorities defined by the State Council;

(2)

where a project has already applied for other investment subsidies;

(3)

where a project fails to fulfill the capital construction procedure;

(4)

where opinions fail to be issued from the local finance authorities while the financial match-up from the local financial authorities
is needed;

(5)

where promise fails to be granted from the local finance authorities while such a promise is required;

(6)

where opinions fail to be issued from the finance authorities at the same level, while the operational funds are needed from the finance
authorities hereof after the completion of a project;

(7)

where the project unit fails to conduct tendering and bidding or governmental procurement in accordance with the relevant provisions;

(8)

where the audit authorities, financial supervision institutions and assessment institutions find the project unit has violated the
state laws and regulations;

(9)

where the project unit is complained for its acts in violation of laws and regulations; or

(10)

other acts in violation the provisions in the State laws and regulations and these Measures.

Article 8

Once the budget for a project subject to investment subsidy is allocated, it shall strictly be implemented, and bear no readjustments
with the exception of the special circumstances. And such a project as needs readjustment shall be strictly subject to the relevant
provisions governing the budget readjustment.

Article 9

The investment subsidy granted by the Central Authorities to a local project shall be integrated into the local budgetary administration
of the corresponding level.

Chapter IV Appropriation of Investment Subsidy Funds and Financial Administration

Article 10

The finance authorities shall appropriate funds in accordance with the budget of a project subject to investment subsidy, provisions
on centralized payment of the national treasury, and the basic construction procedure etc..

Article 11

The investment subsidy funds shall be appropriated at the same percentage with the local match-up funds, bank loans and other funds.
The finance authorities, when appropriating investment subsidy funds, shall, with reference to the application of a project unit
and in accordance with the budget of a project subject to investment subsidy, take into full consideration the construction progress
of a project, the appropriation progress of the relevant construction funds and other factors.

Article 12

The investment subsidy for a project under the administration of the Central Authorities, shall be appropriated to the authorities
in charge (including the enterprises under the administration of the Central Authorities) by the Ministry of Finance, and then shall
be timely appropriated to the project unit by the authorities in charge hereof; and the investment subsidy for a project under the
administration of the local authorities, shall be appropriated to the local finance authorities by the State revenue, and then shall
be appropriated to the project unit by the local finance authorities hereof. And a project subject to the centralized payment of
the national treasury shall be subject to the relevant provisions.

Article 13

Anyone in any one of the following circumstances shall be ordered to redress within a limited period by the finance authorities, and,
if it fails to do so when the period hereof expires, its subsidy funds shall be reduced, ceased or recalled.

(1)

Where the project unit provides the unauthentic information to gain the investment subsidy by cheating;

(2)

Where the project unit transfers, misappropriates or embezzles the investment subsidy;

(3)

Where the match-up funds fail to be executed or to be granted for a long time;

(4)

Where the project unit fails to finish the pre-project work as required or failing to construct and implement as prescribed;

(5)

Where the project unit alters unauthorizedly the main construction content and standard, situations such as over-budget, over-scale,
over-standard etc. occurring;

(6)

Where the project unit fails to conduct tendering and bidding and governmental procurement in accordance with the relevant provisions;

(7)

Where the project unit is complained for its acts in violation of laws and regulations; or

(8)

Other acts in violation the provisions in the State laws and regulations and these Measures.

Article 14

After receiving the investment subsidy, a project unit shall earmark it for its specified purposes only, separately establish an account
for examination and assessment, and conducting a financial treatment on these items as follows:

(1)

The investment subsidy for a non-business construction project shall be subject to the relevant provisions governing the financial
allocation; and

(2)

The investment subsidy for a business construction project shall managed as capital reserves, and, if the project unit agrees to a
capital increase and a share expansion, may be managed as the State capital.

The investment subsidy granted by the Central Authorities to the local projects shall be with reference to these Measures, and, it
may be subject to the provisions of a local government, if any.

Chapter V Supervision and Inspection

Article 15

The relevant authorities in charge under the State Council and the provincial finance authorities in charge shall strengthen the supervision
and inspection on the arrangement and utilization of the investment subsidy, and organize aperiodically inspection groups or entrust
the local resident financial supervision offices of the Ministry of Finance and other institutions to conduct selective inspections
on the project units using the investment subsidy every year, so as to ascertain that the investment subsidy is used in line with
the provisions and arrangements. And a project unit using the investment subsidy shall, before the end of each year, submit a report
on the use of the investment to the finance authorities at the corresponding level subsidy, and make a copy for the local resident
financial supervision office of the Ministry of Finance.

Article 16

All the authorities shall conduct key inspections on these items as follows, and formulate inspection results in accordance with the
relevant provisions; and such an items as is beyond the power of the authorities hereof shall be transferred to other authorities
in accordance with laws and regulations, which shall be reported to the Ministry of Finance. And the local resident financial supervision
office of the Ministry of Finance shall in situ monitor and hand in to the national treasury the recallable funds under the item
of “Other Revenues”.

(1)

To examine whether the project is implemented as prescribed, whether the project unit uses the investment subsidy as prescribed. And
recall the appropriated investment subsidy funds to the national treasury if the project unit unauthorizedly alters the main construction
content and standard or fails to use the investment subsidy as prescribed;

(2)

Whether the project unit conducts tendering and bidding and governmental procurement in accordance the relevant provisions;

(3)

Whether the investment subsidy funds undergo a financial treatment as prescribed, and timely redress any who fails to treat as prescribed;
and

(4)

To examine the total amount of the investment subsidy for a project and the actually granted amount of other funds sources as listed
in the project budget after the project is completed. Such a project whose total amount of investment subsidy exceeds 50% of its
total investment shall be transferred to an administration of direct investment or capital infusion, and shall undergo a re-determination
of investment ratio in accordance with the relevant provisions and with the funds actually granted by all the investors; and the
finance authorities at the corresponding level shall designate the relevant institutions, on behalf of the State, to exercise the
right of proprietor or investor in accordance with laws and regulations.

Article 17

All the relevant authorities and project units shall manage and use the investment subsidy in accordance with the State provisions,
and self-consciously accept the supervision and inspection from the finance and audit authorities.

Article 18

With regard to anyone who, in violation of the relevant provisions, practices fraudulences, gains by cheating, retains and embezzles
the investment subsidy or fails to implement the project as prescribed, the finance authorities at all levels shall, besides recalling
the appropriated funds to the national treasury in full amount, immediately cease the allocation of investment subsidy to the authorities
in charge in where the project unit is located or to the province, autonomous region, municipality directly under the Central Government
and city specially designated in the state plan, and conduct an overall inspection till these violations are redressed. And the related
persons shall be investigated for liabilities in accordance with the Rules of Penalties and Sanctions against Financial Illegalities
(Decree of the State Council No.427) and with other relevant State provisions, and, if laws are violated, shall be investigated and
prosecuted for the corresponding legal liabilities.

Chapter VI Supplementary Provisions

Article 19

These Measures shall enter into force 30 days after the date of promulgation.

Article 20

The Ministry of Finance shall be responsible for the interpretation of these Measures.