MEASURES FOR PUBLIC FINANCE EXAMINATION WORK

Ministry of Finance

Order of the Ministry of Finance

No. 32

The Measures for Public Finance Examination Work, which were adopted at the executive meeting of the Ministry of Finance on January
10, 2006 upon deliberation, are hereby promulgated and shall enter into effect as of the day of March 1, 2006.

Minister of the Ministry of Finance, Jin Renqing

January 26, 2006

Measures for Public Finance Examination Work

Article 1

The present Measures are formulated in accordance with the laws of the Budget Law of the People’s Republic of China and the Regulation
on Penalties and Sanctions against Illegal Fiscal Acts and other administrative regulations for the purpose of regulating the public
finance examination work, guaranteeing and supervising the effective implementation of finance examination conducted by the department
of finance and protecting the legitimate rights and interests of citizens, legal persons and other organizations.

Article 2

The present Measures shall be applied to any finance examination implemented in accordance with the law by the departments of finance
of the people’s governments at or above the county level and the offices dispatched by the departments of finance of the people’s
governments at or above the provincial level (hereinafter uniformly referred to as the finance department).

Article 3

The term “public finance examination” as mentioned in the present Measures refers to an act that the finance department carries out
an examination on the implementation of regulations on finance and taxes and the matters of administration on fiscal, finance and
accounting etc. by entities and individuals for the purpose of executing its duties and functions of supervision over public finance,
rectifying any illegal fiscal act and maintaining the fiscal and economic order of the state.

Article 4

When implementing any public finance examination, the finance department shall follow the principles of legality, objectivity, fairness
and openness.

Article 5

The finance department shall, in accordance with the provisions of laws, regulations, rules as well as the present Measures, implement
public finance examination within the scope of its prescribed powers and functions, and draw a relevant conclusion on examination
or decision on treatment or punishment in accordance with law.

Any dispute on the jurisdiction of public finance examination shall be reported to the same superior finance department to designate
the jurisdiction.

Article 6

The finance department shall establish an annual plan of public finance examination and organize and implement relevant public finance
examination in accordance with the plan, or organize and carry out the relevant public finance examination in accordance with the
requirements of daily fiscal administration.

Article 7

Where the finance department implements any public finance examination, an examination team shall be set up and a team leader shall
be designated as well. Examination teams shall adopt a leader responsibility system.

Article 8

The examiners of an examination team shall consist of functionaries of the finance department, who shall be qualified as follows:

(1)

Being familiar with the relevant laws, regulations, rules and policies;

(2)

Mastering the relevant professional knowledge; and

(3)

Having the capability of investigation and research, comprehensive analysis and literal expression.

Article 9

In accordance with the requirements, the finance department may invite special institutions or personnel with specialized knowledge
to assist the relevant examiners to implement the finance examination.

Article 10

Any examiner who has any direct interest with any entity or individual under examination (hereinafter uniformly referred to as the
examinee) shall withdraw. Where any examinee believes that any examiner has any interest with him, he may require the withdrawal
of the examiner.

The principal of the finance department shall be responsible for making decision on the withdrawal of any examiner.

Article 11

The examiners shall comply with the relevant provisions of the state on confidentiality and shall not reveal any state secret or commercial
secret learned from the examination or use any data as learned from the examination for any matter impertinent to the examination.

Article 12

Before the implementation of any finance examination, the examination team shall be familiar with the relevant laws, regulations,
rules and policies concerning the examined items, find out the essential information of the relevant examinee and formulate a work
plan for public finance examination.

Article 13

Where the finance department implements any public finance examination, it shall send a Notice on Public Finance Examination to the
examinee 3 workdays before the relevant examination.

Where the finance department considers that the sending of a Notice on Public Finance Examination 3 workdays before the relevant examination
will cause any negative impact on the examination, it may, with the approval of the principal of the finance department, the Notice
on Public Finance Examination may be sent at a proper time before implementing the public finance examination.

The contents in a Notice on Public Finance Examination shall be as follows:

(1)

The name of the examinee;

(2)

The basis, scope, contents, means and time of the examination;

(3)

The specific requirement to the relevant examinee on cooperating with the work of examination;

(4)

A name list of the leader and examiners of the examination team and their contact ways; and

(5)

The seal of the finance department and the date of issuance.

Article 14

Where any public finance examination is implemented, there shall be not less than 2 examiners, who shall show the relevant examinee
their certificates.

The examiners may inquire of the relevant examinee about the relevant information, wherein the relevant examinee shall cooperate with
them by replying to the inquiries and reflecting the circs faithfully. A transcript shall be formulated for an inquiry, which shall
bear the signature or seal of the examinee.

Article 15

Where any public finance examination is implemented, the examiners may require the relevant examinee to provide relevant materials,
which may be photocopied thereof.

Where any material as provided is written in a foreign language or in any language of a minority ethnical group, the examinee shall
translate the said material into Chinese.

Article 16

Where any public finance examination is implemented, such methods as account check, inventory check, inquiry and letter-confirmation,
calculation and analytical check may be adopted by the examiners.

Article 17

Where any public finance examination is implemented, with the approval of the principal of the department of finance, the relevant
examiners may inquire the relevant entity that has any economic and business relation with the examinee about the relevant information
and may also inquire the relevant financial institution about the deposit of the examinee under examination according to law.

Any examiner shall, when inquiring about the relevant deposit, hold the Notice on Deposit Inquiry as issued by the finance department
and perform the obligation of confidentiality.

Article 18

Where any public finance examination is implemented, and under any circumstance that the relevant evidence may be destroyed or lost
or hard to obtain later, the said evidence may be registered for preservation in advance upon the approval of the principal of the
finance department and a decision of treatment shall be made within 7 workdays timely. During this period, the relevant examinee
or relevant personnel shall not destroy by melting or burning or transfer the evidence.

Article 19

The certification materials as obtained by any examiner in an examination shall bear the signature or seal of the relevant provider.

For any material that doesn’t bear the signature or seal of the relevant provider, the examiner shall give a note of the reasons.

Article 20

Where any public finance examination is implemented, the relevant examiner shall make records and extracts on the contents and matters
under examination, and formulate a draft on public finance examination, which shall bear the signature or seal of the examinee.

Article 21

The leader of an examination team shall conduct supervision over the work quality of other examiners in the team and shall conduct
necessary examination and review on the relevant matters.

Article 22

When meeting with any serious problem during the implementation of examination, the examination team shall report it to the finance
department for instructions in time.

Article 23

Before any examination is concluded, an examination team shall solicit the opinions of the relevant examinee on such matters as the
fundamental state of implementation on the examination as well as the subsistent problem of the examinee in written form. The relevant
examinee shall, within 5 workdays as of the day when he receives a letter of opinion solicitation in written form, bring up written
opinions or explanations. Where the relevant examinee fails to refer any written opinion or statement within the prescribed time
limit, it shall be considered to have no different objection.

Article 24

An examination team shall, within 10 workdays as of the day when the relevant examination comes to an end, submit to the finance department
a written report on public finance examination. Under any special circumstance, the time limit to submit a report on public finance
examination may be prolonged upon approval, which shall be not more than 30 days at the most.

An examination team shall, when handing in a report on public finance examination, simultaneously hand in such materials as administrative
treatment, suggestion on penalties or suggestion on transfer for treatment as well as a draft on public finance examination.

Article 25

A report on public finance examination shall include such contents as follows:

(1)

The brief introduction of the examinee;

(2)

The scope, contents, means and time of the examination;

(3)

The implementation of regulations on finance and taxes by the examinee as well as the essential information on such administrative
matters as fiscal, finance and accounting;

(4)

The basic facts of fiscal illegal act of the examinee as well as the basis and evidence for confirmation;

(5)

The opinions or statement of the examinee;

(6)

Any other matter that shall be submitted to the finance department; and

(7)

The signature of the leader of the examination team as well as the date when the report on public finance examination is filed.

Article 26

The finance department shall establish and perfect a check system of public finance examination, authorize the relevant internal functionary
department or special personnel to have a check on the report of public finance examination as well as other relevant materials as
handed in by the examination team.

Where any functionary in charge of a check has any direct interest with the relevant examinee or examiner, he shall withdraw.

Article 27

The relevant functionary department or special personnel in charge of a check shall conduct the check to the report on public finance
examination and other relevant materials from the following aspects:

(1)

Whether or not the facts as confirmed in the examination are clear;

(2)

Whether or not the evidence as obtained is true and ample;

(3)

Whether or not the procedures of examination are legal;

(4)

Whether or not the legal basis for confirming any illegal fiscal act is proper;

(5)

Whether or not the administrative treatment, suggestion on punishment or suggestion on transfer for treatment is appropriate; and

(6)

Any other matter that shall be checked.

The relevant functionary department or special personnel shall, after a check on the report of the public finance examination, put
forward relevant check opinions.

Article 28

The finance department shall, after conducting an examination on a report of public finance examination and relevant opinions on check,
make the following treatment in accordance with the different circumstances:

(1)

Drawing a conclusion on examination for an examinee without illegal fiscal act;

(2)

Drawing a decision on administrative treatment or punishment to any examinee with illegal fiscal act in accordance with law; or

(3)

Transferring any matter that doesn’t belong to the power limit of this department.

In the case of any great difference between the report on public finance examination and the relevant opinions on check, the finance
department shall order the examination team to make further verification as well as supplement and correct of the relevant information
or materials. Where necessary, another examination team shall be sent to implement renew a public finance examination.

Article 29

The finance department shall, when drawing any decision on administrative treatment or punishment, formulate a decision letter on
administrative treatment or punishment. A Decision Letter on Administrative Treatment or Punishment shall indicate the matters as
follows:

(1)

The name or post_title and address of the party involved;

(2)

The facts in violation of any law, regulation or rule and the relevant evidence;

(3)

The categories and basis of administrative treatment or punishment;

(4)

The means and time limit for the performance of administrative treatment or punishment;

(5)

In the case of dissatisfaction with the relevant administrative treatment or punishment, the means and time limit to apply for an
administrative reconsideration or lodge an administrative litigation; and

(6)

The name of the finance department that has made a decision on administrative treatment or punishment as well as the date when the
decision is made. The Decision Letter on Administrative Treatment or Punishment shall be affixed with the seal of the finance department
that has made the decision.

Article 30

The finance department shall, before making any decision on administrative punishment, notify the party involved of the facts, reasons
and basis for the administrative punishment, and notify the party involved of the rights that he may enjoy in accordance with law.

Any party involved has the right to make statement and defense. The finance department shall fully solicit the opinions of the party
involved and verify the facts, reasons and evidence as brought up by the party involved. Where the relevant facts, reasons and evidence
as brought up by the parties involved are reasonable, the finance department shall adopt them.

Article 31

The finance department shall, before making any decision on administrative punishment where about the right to hold a hearing shall
be notified, inform the party involved of his right to require a hearing. Where any party involved requires a hearing, the finance
department shall organize it.

When the finance department holds a hearing, it shall implement the hearing in accordance with the provisions of the Measures for
Implementing a Hearing on Administrative Punishment by Public Finance Organ (Order of the Ministry of Finance, No.23).

Article 32

The finance department shall, after making a decision on administrative treatment or punishment, send a Decision Letter on Administrative
Treatment or Punishment to the party involved.

The Decision Letter on Administrative Treatment or Punishment shall become effective as of the day of sending.

Article 33

Any party involved who is dissatisfied with any administrative treatment or punishment may apply for an administrative check or lodge
an administrative litigation in accordance with the provisions of the Administrative Review Law of the People’s Republic of China
and the Administrative Litigation Law of the People’s Republic of China.

During the period of any administrative check or administrative litigation, the implementation of the relevant administrative treatment
or punishment shall not be stopped except as otherwise herein provided by law.

Article 34

The finance department shall conduct supervision and examination over the implementation of the relevant administrative treatment
or punishment in accordance with law.

Article 35

Where any examinee has any illegal fiscal act, the finance department may proclaim the illegal fiscal act thereof as well as the relevant
decision on administrative treatment, punishment or sanction.

Article 36

Where any public finance examination is concluded, the finance department shall do a good job in filing for records of the relevant
materials pertinent to public finance examination.

Article 37

Where any functionary of the finance department abuses his power, neglects his duty or misconduct for self-seeking in any public finance
examination, an administrative sanction shall adopted to him in accordance with law. Where any crime is constituted, the offender
shall be subject to relevant criminal liabilities in accordance with law.

Article 38

The finance department shall, when finding any serious problem that may influence the implementation of policies for finance and taxes
or budget, report it to the people’s government at the same level or the finance department at a higher level in a timely manner.

Article 39

Any accounting examination as implemented by the finance department shall be applicable to the present Measures as well as the Measures
for the Implementation of Accounting Supervision by the Public Finance Department (Order of the Ministry of Finance, No.10)

Article 40

The present Measures shall go into effect as of March 1, 2006. The Rules on the Public Finance Examination (Cai Jian Zi [1998] No.223)
as promulgated by the Ministry of Finance on October 8, 1998 shall be abolished simultaneously.

Ministry of Finance
2006-01-26

NOTICE OF THE MINISTRY OF COMMERCE ON ISSUES CONCERNING ENTRUSTING STATE-LEVEL ECONOMIC AND TECHNOLOGICAL DEVELOPMENT TO EXAMINE AND APPROVE FOREIGN INVESTMENT COMMERCIAL ENTERPRISES AND AGENT ENTERPRISES OF INTERNATIONAL FREIGHT FORWARDING

The Ministry of Commerce

Notice of the Ministry of Commerce on Issues concerning Entrusting State-level Economic and Technological Development to Examine and
Approve Foreign Investment Commercial Enterprises and Agent Enterprises of International Freight Forwarding

Shang Zi Han [2005] No.102

February 9, 2006

To the departments responsible for commerce of all provinces, autonomous region, municipalities under the central government, cities
directly under State planning and Xinjiang Production and Construction Corps, all state-level economic and technological development
zones, Xiamen Haicang Taiwanese Investment. Zone, Shanghai Jinqiao Export Processing Zone, Hainan Yangpu Economic Development Zone,
Ningbo Daxie Development Zone, Suzhou Industrial Park:

In order to implement Notice of the General Office of the State Council on Forwarding the Opinions on Promoting the Further Development
of State-level Economic and Development Zones (Guo Ban Fa [2005] No.15), to further promote the effective absorption of foreign capital
by state-level economic and technological development zone, to further streamline the approval procedure and improve its efficiency
in line with the requirement of the State Council on streamlining executive approval, in accordance with the relevant spirit of Circular
of the Ministry of Commerce of the People’s Republic of China, on Issues of Relegating the Department Concerned Examining and Approving
of Foreign-funded Commercial Enterprises to Local Government(Shang Zi Han[2005]No.94) and Decree No. 19, 2005 of the Ministry of
Commerce of the People’s Republic of China, Promulgating the Revised Measures for Administration of Foreign-funded International
Forwarding Agent, the notice concerning Entrusting State-level Economic and Technological Development to Examine and Approve Foreign
Investment Commercial Enterprises and Agent Enterprises of International Freight Forwarding is, after research and decision, hereby
given as follows:

First, the management committee state-level economic and technological development zone shall, in accordance with the requirement
in Circular of the Ministry of Commerce of the People’s Republic of China, on Issues of Relegating the Department Concerned Examining
and Approving of Foreign-funded Commercial Enterprises to Local Government as well as relevant laws, regulations, and rules concerning
foreign investment, be entrusted to examine and approve the establishment and alteration of foreign enterprises, issue approval certificates
and submit them the Ministry of Commerce for record and submit the copies hereof to provincial commercial departments for record.
The management committee of state-level economic and technological development zone shall, as for the commercial enterprise website
beyond its examination and approval, solicit the relevant commercial departments where the website locates for their opinion upon
the examination and approval of the website programming.

Second, the international agent enterprises of international express delivery operated by foreign investors shall be subject to the
examination, approval and administration of the Ministry of Commerce. The establishment, alteration, issuing of approval certificate
of otherwise international freight agent enterprises operated by foreign investors shall be entrusted to the management committee
of state-level economic and technological development zone to be responsible for its examination, approval and submit to the Ministry
of Commerce for record in accordance with the relevant requirement of Decree No. 19, 2005 of the Ministry of Commerce of the People’s
Republic of China, Promulgating the Revised Measures for Administration of Foreign-funded International Forwarding Agent, as well
as laws, regulations and rules concerning foreign investment.

Third, the other businesses of aforesaid industries shall, except those subject to entrustment of the Ministry of Commerce for examination
and approval, be conducted in accordance with Measures for the Administration on Foreign Investment in Commercial Fields, and Measures
for the Administration of Foreign-funded International Freight Forwarding Enterprises.

Fourth, the management committee of state-level economic and technological development zone shall, entrusted by the Ministry of Commerce
to be engaged in foreign investment commerce, international freight forwarding agent enterprises, meet the following conditions:

(1)

It shall implement streamlined and efficient administrative system in accordance with Notice of the General Office of the State Council
on Forwarding the Opinions on Promoting the Further Development of State-level Economic and Development Zones (Guo Ban Fa [2005]
No.15).

(2)

It shall link its website with that of the Ministry of Commerce to issue approval certificate for foreign-funded enterprises via foreign
investment statistics system and inform promptly the Ministry of Commerce its implementation of examination and approval of foreign
investment commerce, international freight forwarding agent enterprise via Internet.

Fifth, after state-level economic and technological development zone has completed management system record, personnel training and
approved its qualification after acceptance via internet, the Ministry of Commerce shall separately undertake the corresponding entrustment
procedures in batches

The Ministry of Commerce
2006-02-09

ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES NO.1 – INVENTORIES

Ministry of Finance

Accounting Standards for Business Enterprises No.1 – Inventories

Cai Kuai [2006] No.3

February 15, 2006

Chapter I General Provisions

Article 1

These Standards are formulated in accordance with the Accounting Standards for Enterprises – Basic Standards for the purpose of regulating
the recognition of the inventories, measurement and disclosure of related information. .

Article 2

Other relevant accounting standards shall apply to such items as follows:

(1)

The Accounting Standard for Business Enterprises No. 5 – Biological Assets shall apply to the consumptive biological assets.

(2)

The Accounting Standard for Business Enterprises No. 15 – Construction Contracts shall apply to the costs of the inventories together
through construction contracts.

Chapter II Recognition

Article 3

The term “inventories” refers to finished products or merchandise possessed by an enterprise for sale in the daily of business, or
work in progress in the process of production, or materials and supplies to be consumed in the process of production or offering
labor service.

Article 4

The inventories shall not be recognized unless they satisfy such conditions simultaneously as follows:

(1)

The economic benefits pertinent to the inventories are likely to flow into the enterprise; and

(2)

The cost of the inventories can be measured reliably.

Chapter III Measurement

Article 5

The inventories shall be initially measured in light of their cost. The cost of inventory consists of purchase costs, processing costs
and other costs.

Article 6

The purchase costs of inventories consists of the purchase price, relevant taxes, transport fees, loading and unloading fees, insurance
premiums and other expenses that may be relegated to the purchase costs of inventories.

Article 7

The processing costs of inventories consist of the direct labor and production overheads allocated according to a particular method.

The “production overheads” refers to all indirect expenses happened in the process of manufacturing products and providing labor services
by an enterprise. An enterprise shall, according to the nature of the production overheads, choose the reasonable method for the
allocation of production overheads.

If two or more kinds of products are manufactured in the same production process, and the processing cost for each product is unable
to be separated from that of others directly, the processing costs shall be allocated among the products in a reasonable way.

Article 8

“Other costs of inventories” refers to those costs, other than purchase costs and processing costs, happened in bringing the inventories
to their present location and condition.

Article 9

The following expenses shall be recognized as current profits and losses as they are happened, which shall not be included in the
cost of inventories:

(1)

The direct materials, direct labor and production overheads that are abnormally consumed;

(2)

The storage expenses (excluding the expenses which are necessary in the production process for reach the next production stage); and

(3)

Other expenses that cannot be included in the costs happened in bringing the inventories to their present location and condition.

Article 10

The borrowing costs, which shall be included in the cost of inventories, shall be disposed in accordance with the Accounting Standard
for Enterprises No. 17 – Borrowing costs.

Article 11

The cost of inventories invested by an investor shall be ascertained in accordance with the value as stipulated in the investment
contract or agreement, unless it is not stipulated fair in the contract or agreement.

Article 12

The cost of agricultural products in the harvest, and the cost of inventories obtained by the exchange of non-monetary assets, recombination
of liabilities and merger of enterprises shall be ascertained in accordance with the Accounting Standard for Business Enterprises
No. 5 – Biological Assets, Accounting Standard for Business Enterprises No. 7 – Exchange of Non-monetary Assets, Accounting Standard
for Business Enterprises No. 12 – Debt Restructurings and Accounting Standard for Business Enterprises No. 20 -Business Combinations,
respectively.

Article 13

Where an enterprise provides labor service, the direct labor expenses, other direct expenses as well as the indirect expenses included
thereto shall be included in the cost of inventories.

Article 14

An enterprise shall confirm the actual cost of sending out inventories by employing the first-in-first-out method, the weighted average
method or the specific identification method.

The cost of sending out inventories of items with similar nature and purpose shall be confirmed by employing the same cost calculation
method.

Generally, the cost of non-substitutable inventories, and goods purchased and produced as well as the labor services offered for specific
projects, the cost of sending out shall be confirmed by employing the specific identification method.

As to the inventories, which have been already sold, their costs shall be carried forward as the current profits and losses and the
relevant provision for the loss on decline in value of inventories shall also be carried forward.

Article 15

On the date of balance sheet, the inventories shall be measured whichever is lower in accordance with the cost and the net realizable
value.

If the cost of inventories is higher than the net realizable value, the provision for the loss on decline in value of inventories
shall be made and be included in the current profits and losses.

The net realizable value refers to in the daily business activity the amount after deducting the estimated cost of completion, estimated
sale expense and relevant taxes from the estimated sale price of inventories.

Article 16

An enterprise shall confirm the net realizable value of inventories on the ground of reliable evidence obtained, taking into consideration
of the purpose for holding inventories and the effects of events occurring after the date of the balance sheet.

The materials held for production shall be measured at cost if the net realizable value of the finished products is higher than the
cost. If a decline of the value of materials shows that the net realizable value of the finished products is lower than the cost,
the materials shall be measured at the net realizable value.

Article 17

The net realizable value of inventories held for the execution of sales contracts or labor contracts shall be calculated on the ground
of the contract price.

If an enterprise holds more inventories than the quantities subscribed in the sales contract, the net realizable value of the excessive
part of the inventories shall be calculated on the ground of the general sales price.

Article 18

Ordinarily an enterprise shall make provision for loss on decline in value of inventories on the ground of each item of inventories.

For inventories with large quantity and relatively low unit prices, the provision for loss on decline in value of inventories shall
be made on the ground of the categories of inventories.

For the inventories related to the series of products manufactured and sold in the same area, and of which the final use or purpose
is identical or similar thereto, and if it is difficult to measure them by separating them from other items, the provision for loss
on decline in value of inventories shall be made on a combination basis.

Article 19

An enterprise shall confirm the net realizable value of inventories on the balance sheet date. If the factors causing any write-down
of the inventories have disappeared, the amount of write-down shall be resumed and be reversed from the provision for the loss on
decline in value of inventories that has been made. The reversed amount shall be included in the current profits and losses.

Article 20

An enterprise shall amortize the easily consumed products of low value and packing articles and supplies by employing the one-off
write-off method or equal-split amortization method and bring it in the cost of the relevant assets or in the current profits and
losses.

Article 21

For any damage to the inventories of an enterprise, the enterprise shall include the amount after deducting the book value and relevant
taxes from the disposal income in the current profits and losses. The book value of inventories shall refer to the amount after deducting
the accumulative provision for loss on decline in value of inventories from the cost of inventories.

The loss of inventories shall be included in the current profits and losses.

Chapter IV Disclosure

Article 22

An enterprise shall, in the notes, disclose the information concerning to inventories as follows:

(1)

The book value of all inventories at the beginning and end of the period;

(2)

The methods to confirm the cost of sending out inventories;

(3)

The basis for confirming the net realizable value of inventories, the methods to make provision for the loss on decline in value of
inventories, the amount of the provision for loss on decline in value of inventories to be reversed in the current period, as well
as the relevant information about the making and reversion of the provision for loss on decline in value of inventories.

(4)

The book value of inventories used for a guaranty.

Ministry of Finance
2006-02-15

ACCOUNTING STANDARDS FOR ENTERPRISES NO. 25 – ORIGINAL INSURANCE CONTRACTS

the Ministry of Finance

Accounting Standards for Enterprises No. 25 – Original Insurance Contracts

No. [2006] of the Ministry of Finance

February 15, 2006

Chapter I General Provisions

Article 1

With a view to regulating the recognition, measurement of the original insurance contracts concluded by insurants and the presentation
of relevant information, the present Standards are formulated according to the Accounting Standards for Enterprises – Basic Standards.

Article 2

The term “insurance contract” refers to an agreement under which the insurer and the insured stipulate the insurance rights and obligations
and the insurer undertakes the insurance risks sourced from the insured. Insurance contracts are classified into original insurance
contracts and re-insurance contracts.

The term “original insurance contract” refers to an insurance contract under which the insurer charges the insurance premium and undertakes
the liability to pay the insurance money for the property losses resulted from the prescribed possible accident(s), or undertakes
the liability to pay the insurance money when the insured dies, or is injured, disabled or sick, or attains to the stipulated age
or time period.

Article 3

The following items shall be subject to other relevant accounting standards:

(1)

The impairment of assets such as the post-loss goods produced by an original insurance contract issued by an insurer shall be subject
to the Accounting Standards for Enterprises No. 1- Inventories.

(2)

A contract issued by an insurer to the insured on a risk other than the insurance risks shall be subject to the Accounting Standards
for Enterprises No. 22 – Recognition and Measurement of Financial Instruments and the Accounting Standards for Enterprises No. 37
– Presentation of Financial Instruments.

(3)

A reinsurance contract issued or held by an insurer shall be subject to the Accounting Standard for Enterprises – Reinsurance Contracts.

Chapter II Determination of Original Insurance Contracts

Article 4

No matter whether a contract concluded by an insurer and an insured is an original insurance contract or not, that whether or not
the insurer has undertaken the insurance risks shall, on the basis of a single-item contract, be judged according to the contract
terms.

Where the occurrence of an insurance accident is likely to cause the insurer to undertake the liability to pay the insurance money,
it shall be determined that the insurer has undertaken the insurance risks.

The term “insurance accident” refers to accidents which are prescribed in an insurance contract and fall within the scope of insurance
liabilities.

Article 5

Where a contract concluded by an insurer and an insured puts the insurer in a position of not only undertaking the insurance risks
but also other risks, it shall be respectively treated according to the following circumstances:

(1)

Where the insurance risks can be distinguished from other risks and can be measured separately, the insurance risks may be separated
from other risks. The part of insurance risks shall be determined as an original insurance contract. And the part of other risks
may not be determined as an original insurance contract.

(2)

Where the insurance risks cannot be distinguished from other risks, or where the insurance risks can be distinguished from other risks
but can not be measured separately, the entire contract shall be determined as an original insurance contract.

Article 6

The insurer shall, in light of whether or not it undertakes the liability to pay the insurance money during the extension period of
the original insurance contracts, classify the original insurance contracts into original life insurance contracts and original non-life
insurance contracts.

Where the insurer undertakes the liability to pay the insurance money during the extension period of an original insurance contract,
it shall determine it as an original life insurance contract. Where it does not undertake the liability to pay insurance money during
the extension period of an original insurance contract, it shall determine it as an original non-life insurance contract.

The “extension period of an original insurance contract” refers to the period during which the insured does not pay premium from the
maturity date of the previous period, but the insurer still undertake the liability to pay the insurance money.

Chapter III The Income from Original Insurance Contracts

Article 7

The premium income, which can meet the following requirements simultaneously, may be recognized:

(1)

An original insurance contract has been established and corresponding insurance liabilities have been undertaken;

(2)

The economic benefits related to the original insurance contract are highly probable to flow in;

(3)

The income related to the original insurance contract can be measured reliably.

Article 8

An insurer shall, according to the following provisions, calculate and determine the amount of insurance income:

(1)

As for an original non-life insurance contract, the amount of insurance income shall be determined according to the total premium
as stipulated in the original insurance contract.

(2)

As for an original life insurance contract, if the insurance premium as charged by installments, the amount of insurance income shall
be the premium charged in the current period. If the premium is charged in a lump sum, the insurance income shall be determined according
to the premium which shall be charged in a lump sum.

Article 9

Where an original insurance is cancelled prior to the expiration date, the insurer shall, according to the stipulations of the original
insurance contract, calculate and determine the refund to the insured as the refund premium, and record it in the profits and losses
of the current period.

Chapter IV Reserves for Original Insurance Contracts

Article 10

The reserves for original insurance contracts shall include unearned premium reserves, reserves for outstanding claims, reserves for
life insurance liabilities and reserves for long-term health insurance liabilities.

The term “unearned premium reserves” refers to the reserves drawn by an insurer for unexpired non-life insurance liabilities.

The term “reserve for outstanding claims” refers the reserves drawn by an insurer for the non-life insurance accidents which have
already occurred but have not been settled.

The term “reserves for life insurance liabilities” refers to the reserves drawn by an insurer for unexpired life insurance liabilities.

The term “reserves for long-term health insurance liabilities” refers to the reserves calculated and drawn by an insurer for unexpired
long-term health insurance liabilities.

Article 11

An insurer shall, in the current period of recognition of the income from non-life insurances, calculate and draw unearned premium
reserve as an adjustment to the premium income of the current period in light of the actuarial amount, and recognize the unearned
premium reserves as a liability.

An insurer shall, on the balance sheet date, recalculate the balance between the recognized amount of the unearned premium reserves
and the drawn amount of the unearned premium reserves in light of the actuarial amount, and shall make an adjustment to the unearned
premium reserves.

Article 12

An insurer shall, in the current period when the non-life insurance accident happens, draw the reserve for outstanding claims in light
of the actuarial amount, and shall recognize the reserve for outstanding claims as a liability.

The reserve for outstanding claims includes the reserve for outstanding claims that are incurred and reported, the reserve for outstanding
claims that are incurred but not reported as well as the reserve for the expenses of settlement of claims.

The “reserve for outstanding claims that are incurred and reported” refers to the reserve made by an insurer for the compensation
cases, in which non-life insurance accidents have occurred and claims are made to the insurer, but are not settled yet.

The “reserve for outstanding claims that are incurred but not reported” refers to the reserve made by an insurer for the compensation
cases, in which non-life insurance accidents have occurred but no claim is made to the insurer yet.

The “reserve for the expenses of settlement of claims” refers to the reserve made by an insurer for the attorney fees, litigation
fees, loss inspection fees, wages and salaries of the personnel for the settlement of claims and other expenses which are likely
to incur in compensation cases, in which non-life insurance accidents have occurred but which have not been settled yet.

Article 13

An insurer shall, in the current period of recognition of life insurance premiums, draw reserves for life insurance liabilities and
long-term health insurance liabilities in light of the actuarial amounts, and shall recognize the reserves for life insurance liabilities
and those for long-term health insurance liabilities as liabilities.

Article 14

An insurer shall, at least by the end of each year, test the abundance of the reserves for outstanding claims, life insurance liabilities,
and long-term health insurance liabilities.

Where the amount of relevant reserves which are recalculated and determined by the insurer in light of the actuarial amount exceeds
the drawn amount of the relevant reserves on the abundance test date, the relevant reserves shall be replenished on the basis of
the difference. If the amount of relevant reserves which are recalculated and determined by the insurer in light of the actuarial
amount is less than the residual amount of the relevant reserves on the abundance test date, no adjustment shall be made to the relevant
reserves.

Article 15

Where an original insurance contract is cancelled prior to its expiration date, the insurer shall write off the residue amounts of
the relevant reserves for unearned premiums, life insurance liabilities and long-term health insurance liabilities, and recorded
them into the profits and losses of the current period.

Chapter V Cost of Original Insurance Contracts

Article 16

The cost of an original insurance contract refers to the total outflow of economic benefits, which is incurred by the original insurance
contract, will result in the decrease of the owners equities and is irrelevant to the distribution of profits to the owners.

The cost of an original insurance contract mainly includes the handling charges or commission, compensation cost, as well as the reserves
for outstanding claims, life insurance liabilities and long-term health insurance liabilities.

The compensation cost includes the indemnity or payment made by the insurer, and the expenses for the attorney fees, litigation fees,
loss inspection fees, wages and salaries of the personnel for the settlement of claims which are incurred during the settlement of
the claims.

Article 17

The handling fees and commissions, which are incurred to the insurer during the course of obtaining the original insurance contracts,
shall be recorded into the profits and losses of the current period.

Article 18

The reserves for outstanding claims, life insurance liabilities, and long-term health insurance liabilities, which are drawn by an
insurer in light of the actuarial amounts shall be recorded into the profits and losses of the current period.

An insurer shall, in the current period of determination of the amount of compensation, record into the profits and losses of the
current period the amount of compensation determined to make. Meanwhile, it shall offset the residual amount of the corresponding
reserves for outstanding claims, reserves for life insurance liabilities or for long-term health insurance liabilities.

Article 19

The reserves for outstanding claims, life insurance liabilities or long-term health insurance liabilities, which are replenished by
an insurer according to the abundance test, shall be recorded into the profits and losses of the current period.

Article 20

Any post-loss goods obtained by an insurer due to undertaking the liability to pay the insurance money shall be recognized as an asset
calculated at the market price of the same class of or similar asset, and shall be used to offset the compensation cost of the current
period.

When disposing of any post-loss goods, the insurer shall adjust the compensation cost of the current period according to the balance
between the amount received and the carrying amount of the post-loss goods.

Article 21

Where the subrogation recourse fee to be charged by an insurer for undertaking the liability to pay the insurance money meets the
following requirements simultaneously, it shall be recognized as the receivable subrogation recourse fee and shall be used to offset
the compensation cost of the current period:

(1)

The economic benefits related to this subrogation recourse fee is likely to flow in; and

(2)

The amount of the subrogation recourse fee can be measured reliably.

When an insurer receives the receivable subrogation recourse fee, it shall, pursuant to the balance between the received amount and
the carrying amount of the relevant receivable subrogation recourse fee, adjust the compensation cot of the current period.

Chapter VI Presentation

Article 22

An insurer shall, in the balance sheet, separately present the following items related to the original insurance contract:

(1)

the unearned premium reserve;

(2)

the reserve for outstanding claims;

(3)

the reserve for life insurance liabilities; and

(4)

the reserve for long-term health insurance liabilities.

Article 23

An insurer shall, in the profit statement, present separately the following items related to the original insurance contract:

(1)

the income from premiums;

(2)

the refunded premiums;

(3)

the drawing of unearned premium reserve;

(4)

the premiums earned;

(5)

the disbursement of handling fee;

(6)

the compensation cost;

(7)

the reserve for outstanding claims;

(8)

the reserve for life insurance liabilities; and

(9)

the reserve for long-term health insurance liabilities.

Article 24

An insurer shall, in its annotations, disclose the following information related to the original insurance contract:

(1)

the relevant information on the subrogation recourse fee;

(2)

the relevant information on the post-loss goods;

(3)

the increase and decrease of each reserve; and

(4)

the main actuarial assumptions and methods for drawing these reserves and testing the abundance of the reserves.

the Ministry of Finance
2006-02-15

NOTICE OF THE STATE ADMINISTRATION OF TAXATION ON REBATE OF NEWLY-BUILT ENTERPRISE BUSINESS INCOME TAX IN CARGO TRANSPORT INDUSTRY

The State Administration of Taxation

Notice of the State Administration of Taxation on Rebate of Newly-built Enterprise Business Income Tax in Cargo Transport Industry

Guo Shui Han [2006] No. 249

To states tax bureaus, local tax bureaus of all provinces, autonomous region, municipalities directly under the Central Government,
cities specifically designated in the state plan:

After the distribution of Notice of the State Administration of Taxation on Strengthening Tax Imposition in Cargo Transport Industry
(Guo Shui Fa [2003] No.121) and Notice of the State Administration of Taxation about Several Tax Issues Concerning Cargo Transport
Industry (Guo Shui Fa [2004] No. 88) , all levels of local tax authorities reflected that the state tax bureau shall be responsible
for the administration of imposition of newly-built enterprise business corporate tax in cargo transport industry whereas local tax
bureaus be responsible for issuing cargo transport invoice and that the provisions on rebate of business income tax in accordance
with laws, regulation and rules were not clear whether the state tax bureau or local tax bureau should be responsible for its handling.
After research, the notice is hereby given as follows:

where the due rebate of business income tax of the taxpayer in carrying industry, which is charged by state tax bureaus for its imposition
and administration and charged by local tax bureaus for issuing cargo transport invoice and universal invoice tax imposition, needs
to be handled by the state tax bureaus in responsible in accordance with related laws, regulations and rules, the due rebate hereof
may either setoff the next-year business income tax payable of the taxpayer or be handled after clearing settlement, provided that
the rebate amount shall be not more than the amount of business income tax imposed by the state tax bureau in responsible of the
tax year, or the exceeded part shall be rebated by the local tax bureau responsible for issuing cargo transport invoice.

II.

the rebate particulars of the aforesaid taxpayer shall be settled promptly on occasion of settlement clearance.

III.

in accordance with the relevant provisions in Notice of the State Administration of Taxation on Printing and Distributing Interim
Measures on Checking and Verifying the Imposition of Business Income Tax (Guo Shui Fa [2000] No. 38), the tax authorities in responsible
shall not reimburse the tax paid by the taxpayer who is subject to the imposition of business income tax and subsequently pays the
tax for the issued cargo transport invoice.

IV.

the local tax authority in responsible shall, when turning over the imposed tax to the state taxes, shall apply the uniformed invoice
of local tax system with the local tax bureau responsible for the checking, verifying and summarizing submitting to the upper tax
authority of the account.

all levels of state tax authorities and local tax authorities shall implement and strengthen the information switching system. The
local tax authority in responsible shall convey to the state tax bureau the statistics about the business income tax turned over
to state treasury; on occasion that the due business income tax exceeds the imposed part by the state tax bureau in responsible shall
be handled by local tax bureau for its rebate particulars, the state tax bureau in responsible shall fill Confirmation Letter of
Rebate (Tax-deductible) and delivers the statistics hereof to local tax bureau in responsible.

VI.

the detailed measures shall be made by all provincial state tax bureaus and local tax bureaus.

VII.

for the unsettled rebate of the previous years, provisions in the present Notice shall prevail.

The State Administration of Taxation

March 8, 2006

The State Administration of Taxation
2006-03-08

CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON THE ISSUE CONCERNING THE PAYMENT OF ENTERPRISE INCOME TAXES BY LOGISTIC ENTERPRISES

State Administration of Taxation

Circular of the State Administration of Taxation on the Issue concerning the Payment of Enterprise Income Taxes by Logistic Enterprises

Guo Shui Han [2006] No.270

To the state taxation bureaus and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central
Government, and cities under separate state planning,

In light of the relevant spirit of the Notice on Printing and Distributing the Opinions on Promoting the Development of Modern Logistic
Industry of China (Fa Gai Yun Xing[2004] No.1617) by the National Development and Reform Commission jointly with other eight departments,
and in pursuant to the relevant provisions of the Interim Regulation on Enterprise Income Tax of the People’s Republic of China and
its detailed implementation rules, we hereby issue the following notice on relevant issues concerning the payment of enterprise income
taxes by logistic enterprises in order to promote the development of the modern logistic industry, and enhance the competitiveness
of the logistic enterprises,:

With respect to the trans-regional institutions (including sites and networks) established by a logistic enterprise within the same
province, autonomous region, or municipality directly under the Central Government, if they are enterprises under uniform operation
and accounting system under the leadership of their headquarters without establishing bank settlement accounts or compiling financial
statements and account book, and are interlinked with the headquarters and implement standardized management, their enterprise income
taxes shall be paid uniformly by their headquarters, and the trans-regional institutions shall not pay enterprise income taxes at
their own localities. Those trans-regional institutions that do not comply with any one of the aforesaid conditions shall not be
included into the scope of unified tax payment, and shall pay their enterprise income taxes at their own localities.

II.

The aforesaid logistic enterprises shall refer to the economic organizations that meet the following requirements: registered at the
administrative departments of industry and commerce; have or rent the necessary means of transport and storage facilities; have
at least two or more scopes of business of undertaking transportation (or freight forwarding) and storage, and etc.; are able to
provide such all-in-one services as transportation, agency, storage, loading and unloading, processing, cleanup, distribution, and
etc.; have the information management system applicable to their own businesses, implement independent business accounting; are liable
for their own profit and losses; and undertake civil liabilities independently.

III.

When the logistic enterprises pay their enterprise income taxes uniformly, their headquarters (head office) shall file an application
to the competent taxation authority at the provincial level where it is located, and the competent provincial taxation authority
shall notify the relevant competent tax authorities to implement it accordingly after making examination and confirmation.

IV.

When the logistic enterprises apply for paying enterprise income taxes uniformly, they shall file an application for unified tax payment
to the competent taxation authority at the provincial level where it is located before March 31 of the year, and attach the business
licenses and taxation registration certificates (in photocopy) of the headquarters and the trans-regional institutions, Articles
of Association of the enterprises, the financial business accounting system of the enterprises, certificate of assets relationship
between the headquarters and the trans-regional institutions, financial statements and tax returns of the headquarters in the previous
year, name list of the trans-regional institutions and their localities, and other materials if necessary.

The competent tax authorities at the localities of the logistic enterprises (including headquarters and trans-regional institutions)
which pay enterprise income taxes uniformly shall strengthen the administration of tax collection on the headquarters and the trans-regional
institutions and the supervisions thereof in light of the spirits of the documents and regulations of the State Administration of
Taxation on the management of the enterprises that collective or unified pay taxes.

State Administration of Taxation

March 18, 2006

State Administration of Taxation
2006-03-18

NOTIFICATION NO.5, 2006 OF FOREIGN ASSISTANCE PROJECT BID BOARD OF THE MINISTRY OF COMMERCE

Notification No.5, 2006 of Foreign Assistance Project Bid Board of the Ministry of Commerce

Tong Gao [2006] No.5

Foreign Assistance Project Bid Board of the Ministry of Commerce held the 5th regular meeting on March 24, 2006. Matters of concern
and resolution are notified as follows:

The internal total contract price for Container Inspection Equipment of Ecuador assistance project was examined and approved.

The bid-winning enterprise of Burma Agricultural Machinery Factory Extension assistance project was examined and approved. The Bid
Board opened sealed tenders on March 13, 2006. In all, 5 tender enterprises including Suzhou Hengrun Import & Export Corp., Ltd.,
China National Pharmaceutical Foreign Trade Corporation, China National Instrument Import & Export (Group) Corporation, China
National Automotive Industry Imp. & Exp. Corporation and Tianjin Machinery Import & Export Corporation submitted the tender
documents on time. The Bid Board, according to the reviewing results with best price versus performance ratio measures after quantifying
the tender price, the quantity of the goods, supply and quality assurance, packing, transport and the quantity of tender documents,
determined to confer bid to Suzhou Hengrun Import & Export Corp. Ltd.

The internal total contract price for Indonesia Earthquake Observation and Measurement and Seismic Sea Wave Early-warning System
assistance project was examined and approved.

The tender mode of Providing 10, 000 tons of Diesel Oil to the Democratic People’s Republic of Korea assistance project was re-discussed.
Because of the urgency of the project and since only Sinochem Corporation has submitted bidding documents, the Bid Board decided
to have tender discussion with Sinochem Corporation. Besides, the internal total contract price for this project was examined and
approved.

Foreign Assistance Project Bid Board of the Ministry of Commerce

March 29, 2006

Foreign Assistance Project Bid Board of the Ministry of Commerce
2006-03-29

CIRCULAR OF SAIC, MOFCOM, GAC AND SAFE ON PRINTING AND ISSUING SUGGESTIONS ON IMPLEMENTATION OF SEVERAL ISSUES APPLICABLE FOR LAW OF EXAMINATION, APPROVAL, REGISTRATION AND ADMINISTRATION OF FOREIGN-FUNDED ENTERPRISES

State Administration for Industry and Commerce, Ministry of Commerce, General Administration on Customs and State Administration of
Foreign Exchanges

Circular of SAIC, MOFCOM, GAC and SAFE on Printing and Issuing Suggestions on Implementation of Several Issues Applicable for Law
of Examination, Approval, Registration and Administration of Foreign-funded Enterprises

Gong Shang Wai Qi [2006] No. 81

Industry and commerce administrative bureaus, departments of commercial administration, and foreign exchanges administrative bureaus
in all provinces, autonomous regions, municipalities and separately listed cities in plan, all customs and state economic and technical
development zones:

The 18th session of the standing committee of the 10th National People’s Congress has approved Decision on Amendment of Corporation
Law of the People’s Republic of China and State Council Decision on Amendment of Administrative Regulations on Registration of Corporations
of the People’s Republic of China on Oct 27, 2005, which has gone into effect as from Jan 1, 2006. For purposes of better adoption
of the law, regulating and facilitating the work of examination and approval of foreign funds as well as registration administration,
promoting the healthy development of foreign-funded enterprises and stepping up quality and level of utilization of foreign funds,
Suggestions on Implementation of Several Issues Applicable for Law of Examination, Approval, Registration and Administration of Foreign-funded
Enterprises is now printed and issued to you to implement. If encounter any problem, please report as soon as possible.

Appendix: Suggestions on Implementation of Several Issues Applicable for Law of Examination, Approval, Registration and Administration
of Foreign-funded Enterprises

State Administration for Industry and Commerce

Ministry of Commerce

General Administration on Customs

State Administration of Foreign Exchanges

Apr 24, 2006

State Administration for Industry and Commerce, Ministry of Commerce, General Administration on Customs and State Administration
of Foreign Exchanges
2006-04-24

MEASURES FOR THE ADMINISTRATION OF THE ISSUANCE OF SECURITIES BY LISTED COMPANIES

Order of the China Securities Regulatory Commission

No. 30

The Measures for the Administration of the Issuance of Securities by Listed Companies, which were deliberated and adopted at the 178th
executive meeting of the chairmen of China Securities Regulatory Commission on April 26, 2006, are hereby promulgated and shall come
into force as of May 8, 2006.

Chairman of China Securities Regulatory Commission, Shang Fulin

May 6, 2006

Measures for the Administration of the Issuance of Securities by Listed Companies
Chapter I General Provisions

ArticleArticle 1

These Measures are formulated pursuant to the Securities Law and Company Law with a view to regulating the issuance of securities
by listed companies and protecting the lawful rights and interests of investors and the social and public interests.

Article 2

The listed companies which apply for issuing securities within the territory of China shall be governed by these Measures.

The securities as mentioned in these Measures shall refer to the following types of securities:

(1)

Stocks;

(2)

Convertible corporate bonds; and

(3)

Other types as recognized by the China Securities Regulatory Commission (hereinafter referred to as the CSRC).

Article 3

A listed company may make a public issuance of securities towards unspecified objects or may make a private issuance of securities
towards specified objects.

Article 4

When issuing securities, a listed company shall disclose or provide the genuine, accurate and complete information timely and fairly,
which shall not contain any false record or misleading statement or has any serious omission.

Article 5

The fact that the CSRC approves the issuance of securities of a listed company does not mean that the CSRC makes any substantial
judgment or guarantee about the investment value of the securities or about the proceeds of the investors. The investors who subscribe
to the securities shall bear the investment risks themselves due to any changes in the business operations and proceeds of the listed
company.

Chapter II Conditions for the Public Issuance of Securities

Section 1 General Provisions

Article 6

A listed company which satisfies the following provisions shall be deemed that it has a sound and well-operated organizational structure:

(1)

The Articles of association are lawful and effective, and there are sound bylaws for the shareholders assembly, the board of directors,
the board of supervisors, and independent directors, who are able to perform their respective functions according to law;

(2)

The company has sound internal control system, which can ensure the operating efficiency, lawfulness and regulation compliance of
the company, and the reliability of its financial reports. There is no serious defect with regard to the completeness, reasonableness
and validity of the internal control system;

(3)

The incumbent directors, supervisors and senior management members are qualified for their posts and can faithfully and diligently
perform their duties. None of them has committed any act in violation of Article 148 or Article 149 of the Company Law, and has
been given any administrative punishment by the CSRC within the latest 36 months, and condemned publicly by the stock exchange within
the latest 12 months;

(4)

The listed company separates its personnel, assets and financial affairs from those of the controlling shareholder or the actual
controller, has independent institutions and business operations and can carry out business operations and management independently;

(5)

The listed company has not provided any guaranty to any outsider illegally within the latest 12 months.

Article 7

A listed company which meets the following provisions shall be deemed that it has a sustainable profit-making ability:

(1)

It has favorable earnings for the latest 3 consecutive fiscal years. Comparing the net profits after deducting the non-regular profits
and losses with the pre-deduction net profits, of which the lower shall be the calculation basis.;

(2)

It has relatively stable sources of business and profits and it does not excessively rely on its controlling shareholder or actual
controller;

(3)

Its present primary business or investment direction can develop in a sustainable manner. It has a sound business operation mode
and investment plan, and has a good market prospect for its main product or service. There is no major imminent or foreseeable unfavorable
change in the business operation environment and market demands;

(4)

The senior management members and the core technicians are stable and there is no seriously unfavorable change in the latest 12 months;

(5)

The important assets, core technologies or other important rights and interests are lawfully obtained and can be continuously utilized,
and there is no major imminent or foreseeable unfavorable change therein;

(6)

There is no guaranty, lawsuit, arbitration or any other important matter that is likely to seriously affect the sustainable business
operations of the company; and

(7)

Where it has ever issued any securities publicly within the latest 24 months, and no such circumstance ever occurs in which the business
profits of the current year of the issuance decrease by 50% or more as compared to that of the previous year.

Article 8

A listed company which satisfies the following provisions shall be deemed that it has a good financial status:

(1)

Its basic accounting work is standardized and it strictly complies with the uniform accounting system of the state;

(2)

With regard to the financial statements of the latest three years and the recent 1 period, there is no audit report with reserved
opinions, or negative opinions or opinions that cannot be expressed as issued by certified accountants. For an audit report with
no reserved opinions but with emphasized paragraph of matters issued by a certified public accountant, the matters involved have
no major unfavorable effect on the issuer of securities or the major unfavorable effect has been eliminated prior to the issuance
of securities;

(3)

The quality of its assets is good. The non-performing assets cannot result in any major unfavorable effect on the financial status
of the company;

(4)

Its business outcomes are real and the cash flows are normal. The recognition of its business incomes, costs and expenses strictly
complies with the relevant accounting standards of the state. It has made sufficient and reasonable provisions for asset impairment
in latest three years and it has never manipulated its business performances; and

(5)

The profits that it has distributed accumulatively in cash or in stocks in the latest 3 years are not less than 20% of the average
annual distributable profits realized in the latest 3 years.

Article 9

A listed company has no false record in its financial and accounting documents within the latest 36 months and has not committed
any of the following major illegal acts:

(1)

Being subject to any administrative punishment of the CSRC or given any criminal punishment due to the violation of any securities
law, administrative regulation or rules;

(2)

Being subject to any administrative punishment with serious consequences, or any criminal punishment due to violating any law, administrative
regulation or rules on the industry and commerce, tax, land, environmental protection or customs; or

(3)

Other acts in violation of other laws or administrative regulations of the state with serious consequences.

Article 10

The amount and utilization of the funds raised by a listed company shall satisfy the following provisions:

(1)

The amount of funds raised shall not exceed the amount required by the project;

(2)

The utilization of the fund raised complies with the industrial policies of the state as well as the laws and administrative regulations
on the environmental protection and land management;

(3)

Except for a financial enterprise, the fund raised at the time shall not be used on such projects as financial investments such as
holding transactional financial assets or financial assets available for sale and financial investments by lending it to others or
use it by entrusted financing, nor shall it be used to invest directly or indirectly in any company that mainly engages in buying
and selling securities;

(4)

The implementation of the investment project will not result in inter-industry competition between the listed company and the controlling
shareholder or the actual controller, nor will it affect the companys independence in production and business operations; and

(5)

It shall formulate rules on the special deposit of the funds raised and shall deposit the funds raised in the special account as
designated by its board of directors.

Article 11

Where a listed company is under any of the following circumstances, it shall not issue any securities publicly:

(1)

The application documents for the issuance at the time have any false record, misleading statement or major omission;

(2)

It illegally changes the usage of the funds raised in the previous public issuance of securities and fails to make a correction;

(3)

It has ever been publicly condemned by the stock exchange within the latest 12 months;

(4)

It and its controlling shareholder or actual controller fail to perform their public commitments to the investors within the latest
12 months;

(5)

It or any of its incumbent directors, senior management members is investigated by the judicial organ due to any suspected crime
or is investigated by the CSRC due to any suspected violation of laws or regulations; or

(6)

Other circumstances under which it severely impaired the legitimate rights and interests of the investors, and the social and public
interests.

Section 2 Issuance of Securities

Article 12

The allotment and sale of shares to the original shareholders (hereinafter referred to as allotment of shares) shall satisfy the
following provisions in addition to meeting the provisions of Section 1 of this Chapter:

(1)

The amount of the shares to be allotted shall not exceed 30% of the total amount of capital stock prior to allotment of shares at
the time;

(2)

The controlling shareholder shall make a public commitment on the amount of shares it subscribes before the shareholders assembly;
and

(3)

The stocks shall be issued by way of proxy sale prescribed by the Securities Law.

Where the controlling shareholder fails to perform its commitment to subscribe to the shares allotted to it, or the number of shares
subscribed to by the original shareholders does not reach 70% of the number of shares to be allotted at the expiration of the term
of proxy sale, the issuer shall refund to the shareholders who have subscribed to the shares allotted to them on the issuing price
plus interests as calculated at the bank deposit rate for the same period.

Article 13

To publicly raise shares towards against unspecified objects (i.e. to make additional issuance), a listed company shall meet the
following provision in addition to satisfying the provisions of Section 1 of this Chapter: followings:

(1)

The weighted average yield rates of net asset for the latest 3 years shall not be lower than 6%. Comparing the net profit deducting
non-regularity profit and loss with the pre-deduction net profit the lower one shall be the calculation basis of weighted average
yield rates of net asset.;

(2)

Except for a financial enterprise, it does not hold any relatively large amount of transaction financial assets or financial asset
available for sale, nor does it make any financial investment by lending money to others or by making any entrusted financing by
the end of the latest period;

(3)

The issuance price shall not be lower than the average price of the companys stock prices during the 20 transaction days prior
to the announcement of the letter of intent or the average price of the transaction day prior to the issuance.

Section 3 Issuance of Convertible Corporate Bonds

Article 14

To publicly issue convertible corporate bonds, a company shall meet the following provisions in addition to satisfying the provisions
of Section 1 of this Chapter :

(1)

The weighted average yield rates of net asset for the latest 3 years shall be not lower than 6%. Comparing the net profits after
deducting the non-regular profits and losses with the pre-deduction net profits the lower one shall be the calculation basis of weighted
average yield rates of net asset ;

(2)

After the present issuance, the balance of the accumulative corporate bonds shall not exceed 40% of the amount of net assets at the
end of the latest period; and

(3)

The annual average amount of distributable profits realized in latest 3 years is not less than the annual amount of interests of
the corporate bonds.

The term “convertible corporate bonds” as mentioned in the preceding paragraph shall refer to the corporate bonds which are issued
by an issuing company pursuant to law and which may be converted to shares in a certain period under stipulated conditions.

Article 15

The term of convertible corporate bonds shall be 1 year at least, and 6 years at most.

Article 16

The par value of each convertible corporate bond shall be 100 Yuan.

The interest rate of a convertible corporate bond shall be determined by the issuing company consulting with the opinion of the major
underwriter, but it shall conform to the relevant provisions of the state.

Article 17

For issuing convertible corporate bonds publicly, a company shall entrust a qualified credit rating institution to make credit ratings
and follow-up ratings.

A credit rating institution shall announce at least one follow-up rating report every year.

Article 18

A listed company shall finish the matters on paying off the balance of principal and interest of the bonds within 5 working days
after the expiration of the term of convertible corporate bonds.

Article 19

For issuing convertible corporate bonds publicly, a company shall stipulate measures on the protection of the rights of bond holders,
the rights and procedures of bondholders meetings, as well as the conditions for the effectiveness of the resolutions made at bondholders
meetings.

A bondholders meeting shall be held in case any of the following events occurs:

(1)

The stipulations in the prospectus shall be changed;

(2)

The issuer is unable to pay the principals and the interests on schedule;

(3)

The issuer reduces its registered capital, or is merged, split up, dissolved or applies for bankruptcy;

(4)

There is any major change in the guarantor or guaranty; or

(5)

Any other event that may affect the major interests of the bondholders.

Article 20

For issuing convertible corporate bonds publicly, the company shall provide a guaranty unless its unaudited net assets at the end
of the latest period amounts to RMB 1.5 billion Yuan.

Where a guaranty is required, a full amount guaranty shall be provided. The scope of guaranty shall include the principal and interest,
penalty for breach of contract, damages compensation, and expenses for the realization of creditors rights.

Where a guaranty is provided by way of promise, it shall be a guaranty of joint and several liabilities and the amount of the unaudited
net assets of the guarantor at the end of the latest period shall not be less than the accumulative amount of the guaranties of the
guarantor. A securities company or a listed company shall not act as a guarantor for the issuance of convertible bonds, with exception
for listed commercial banks.

When setting a mortgage or pledge, the estimated value of the mortgaged or pledged property shall not be lower than the guaranty amount.
The estimated value shall be assessed by a qualified asset assessment institution.

Article 21

The convertible corporate bonds shall not be converted into corporate stocks unless 6 months have lapsed as of the end date of the
issuance thereof. The time limit for the conversion shall be determined by company in light of the existence period of the corporate
bonds as well as the financial status of the company.

A bondholder shall have the options whether to convert the corporate bonds into stocks or not. It will become a shareholder of the
issuing company the day next to the conversion.

Article 22

The conversion price shall not be lower than the average price of the transaction of companys stock in 20 transaction days prior
to the announcement of the prospectus or the average price of prior one transaction day.

The term “conversion price” as mentioned in the preceding paragraph shall refer to the price paid by per share converted from convertible
corporate bond that is stipulated in the prospectus in advance.

Article 23

A prospectus may stipulate redemption clauses, which shall state that the listed company may redeem the convertible corporate bonds
that have not been converted into stocks in light of the conditions and price stipulated in advance.

Article 24

A prospectus may stipulate the sell-back clauses, which shall state that the bondholders may sell the bonds back to the listed company
in light of the conditions and price stipulated in advance.

The prospectus shall stipulate that the bondholders shall have the sell-back right for once in case that the listed company changes
any of the announced purposes of use of the funds raised.

Article 25

A prospectus shall stipulate the principle and method for adjusting the conversion price. After the issuance of convertible corporate
bonds, the conversion price shall be adjusted at the time when any change in the shares of the listed company is resulted from the
allotment of shares, the issuance of additional shares, gift shares, dividends distribution, split-up or any other event.

Article 26

Where a prospectus contains any clause on downward revision of the conversion price, it shall simultaneously stipulate:

(1)

The conversion price revision plan shall be submitted to the general assembly of shareholders of the company for voting and shall
be subject to approval of 2/3 or more of the voting rights held by the shareholders attending the meeting of the general assembly.
When the assembly of shareholders takes a vote, the shareholders holding convertible corporate bonds shall disqualify themselves;
and

(2)

The price after the revision shall not be lower than the average price of transaction of the companys stock prices 20 transaction
days prior to the announcement of the prospectus and the average price of prior one transaction day.

Article 27

A listed company may publicly issue convertible corporate bonds for which the transaction of warrants is separated from the transaction
of bonds. (Hereinafter referred to as “convertible corporate bonds with separate transactions”)

To issue convertible corporate bonds with separate transactions, the listed company shall satisfy the following provisions in addition
to meeting the provisions of Section 1 of this Chapter :

(1)

The companys unaudited net assets at the end of the latest period amounts to 1.5 billion Yuan or more;

(2)

The average annual distributable profits realized in the latest 3 years is not less than the annual amount of interest of the corporate
bonds;

(3)

The average annual net amount of the cash flows brought about by its business operations within the latest 3 accounting years is
not less than the annual amount of the interest of corporate bonds, with exception for those companies which meets the provisions
in Article 14 (1) of these Measures; and

(4)

After the present issuance, the balance of the accumulative corporate bonds shall not exceed 40% of the amount of the net assets
at the end of the latest period and the expected total amount of fund raised by the exercise of all related warrants shall not exceed
the amount of the convertible corporate bonds to be issued.

Article 28

An application shall be filed with the stock exchange where the the listed company is listed, for listing and trading the convertible
corporate bonds with separate transactions.

The corporate bonds and warrants in the convertible corporate bonds with separate transactions shall get listed for trading respectively
in case that they satisfy the conditions for getting listed listing in the stock exchange.

Article 29

The term of convertible corporate bonds with separate transactions shall be one year at least.

The provisions of Articles 16 through 19 of these Measures shall apply to the par value, interest rate, credit rating and repayment
of the principal and interest of the bonds, as well as the protection of the creditors rights.

Article 30

Where the issuer provides a guaranty for the issuance of convertible corporate bonds with separate transactions, the provision of
Paragraphs 2 through 4 of Article 20 of these Measures shall apply.

Article 31

Where any warrant is listed for trading, the elements it stipulates shall include the exercise price, existence period, exercise
period or exercise date, and exercise ratio.

Article 32

The exercise price of the warrants shall not be lower than the average price of the companys stock prices in 20 transaction days
prior to the announcement of the prospectus or the average price prior one transaction day.

Article 33

The existence period of warrants shall not exceed the term of corporate bonds. It shall not be less than 6 months as of the date
of end of issuance.

No adjustment may be made to the existence period of warrants as announced in the prospectus.

Article 34

No warrants may be exercised until at least 6 months after the end of its issuance. The exercise period shall be a period prior to
the expiration of the existence period or shall be a special transaction date within the existence period.

Article 35

The prospectus of convertible corporate bonds with separate transactions shall stipulate that the bondholders shall have the sell-back
right for once in case that the listed company changes the announced purposes of use of the fund to be raised.

Chapter III Conditions for Private Offering of Stocks

Article 36

The term “private offering of stocks” as mentioned in these Measures shall refer to the offering of stocks to specified objects by
a listed company in a private manner.

Article 37

The specified objects of private offering of stocks shall meet the following provisions:

(1)

The specified objects meet the conditions as stipulated in the resolution of the shareholders assembly;

(2)

The offering number of specified objects shall not exceed 10.

Where a specified object is an overseas strategic investor, it shall be subject to the approval of the relevant department of the
State Council prior to the offering.

Article 38

To make a private offering of stocks, a listed company shall meet the following provisions:

(1)

The offering price shall not be lower than 90% of the average price of the companys stocks in 20 transaction days prior to the
benchmark date of pricing;

(2)

The shares presently offered shall not be transferred to others within 12 months as of the end of offering. The shares subscribed
by the controlling shareholder or actual controller and enterprises it controlled shall not be transferred to others within 36 months;

(3)

The utilization of the fund raised funds shall conform to the provisions of Article 10 of these Measures; and

(4)

Where the present offering shall result in any change in the controlling power of the listed company, it shall conform to other provisions
of China Securities Regulatory Commission.

Article 39

Where any listed company is under any of the following circumstances, it shall not make any private offering of stocks:

(1)

The application documents for the present offering have any false record, misleading statement or major omission;

(2)

The rights and interests of the listed company are severely impaired by its controlling shareholder or actual controller and the
impairment has not been eliminated;

(3)

The listed company or its subsidiary company illegally provides any guaranty to others and the guaranty has not been cancelled;

(4)

Any of the incumbent directors or senior management members of the listed company has ever been given any administrative punishment
by the CSRC within the latest 36 months or has been condemned publicly by the stock exchange within the latest 12 months;

(5)

The listed company or any of its incumbent directors, senior management members is under investigation conducted by the judicial
organ due to any suspected crime or is under investigation conducted by the CSRC due to any suspected violation of laws or regulations;

(6)

The listed company has ever been issued audit report with reserved opinions, negative opinions or opinions that can not be expressed
by a certified public accountant for its financial statements in the latest 3 years and in the latest one period, unless the consequences
of the events involved therein have been eliminated or the present offering involves significant restructuring; or

(7)

Other circumstances under which the lawful rights and interests of the investors, and social and public interests are severely impaired.

Chapter IV Issuance Procedures

Article 40

Where a listed company applies for issuing securities, its board of directors shall make a resolution on the following matters and
shall submit it to the shareholders assembly for approval:

(1)

A plan for the present issuance of securities;

(2)

A feasibility report on the purposes of uses of the funds to be raised by the present issuance;

(3)

A report on the purposes of uses of the funds raised by in the previous issuance; and

(4)

Other matters that must be specified.

Article 41

The shareholders assembly shall make a resolution on the issuance of stocks, which shall include the following matters at least:

(1)

Type and amount of securities of the present issuance;

(2)

Issuance method, objects of the issuance and the arrangement about the allotment to the original shareholders;

(3)

Pricing method or the price range;

(4)

Purposes of use of the funds to be raised;

(5)

Valid period of the resolution;

(6)

Authorization to the board of directors to deal with specific issues relating to the present issuance; and

(7)

Other matters that must be specified.

Article 42

The shareholders assembly shall make a resolution on the issuance of convertible corporate bonds, which shall include the following
matters at least:

(1)

Matters as prescribed in Article 41 of these Measures;

(2)

Interest rate of the bonds;

(3)

Term of the bonds;

(4)

Guaranty related matters;

(5)

Sell-back clauses;

(6)

Time limit and method for the repayment of principal and interest;

(7)

Conversion period; and

(8)

Determination and revision of the conversion price.

Article 43

The shareholders assembly shall make a resolution on the issuance of convertible corporate bonds with separate transactions, which
shall include the following matters at least:

(1)

Matters as prescribed in Articles 41 and items (2) through (6) of Article 42 of these Measures;

(2)

Exercise price of the warrants;

(3)

Existence period of the warrants; and

(4)

Exercise period or exercise date of the warrants.

Article 44

A resolution made by the shareholders assembly regarding the issuance of securities shall be subject to the agreement by the 2/3
of the voting rights of the shareholders attending the meeting. Where the listed company issues securities to its specific shareholders
and their connected parties, the connected shareholders shall disqualify themselves when the shareholders assembly takes a vote
on the issuance plan.

Where a listed company convenes a shareholders assembly with respect to the matters of issuance of securities, it shall make it
convenient for the shareholders to attend the shareholders assembly by providing them with network service or other facilities.

Article 45

Where a listed company applies for the public issuance of securities or private offering of new shares, it shall be recommended by
a recommender, which shall file an application with China Securities Regulatory Commission.

The recommender shall make and submit the application documents on issuance according to the relevant provisions of the CSRC.

Article 46

The CSRC shall examine a securities issuance application in light of the following procedures:

(1)

It shall decide whether to accept the application documents or not within 5 working days after it receives them;

(2)

It shall conduct a preliminary examination over the application documents after it accepts them;

(3)

Its Issuanc

ANNOUNCEMENT NO.38, 2006 OF THE MINISTRY OF COMMERCE OF THE PEOPLE’S REPUBLIC OF CHINA

the Ministry of Commerce

Announcement No.38, 2006 of the Ministry of Commerce of the People’s Republic of China

[2006] No.38

Ministry of Commerce issued Announcement No. 34 on June 13, 2005, on starting the anti-dumping investigation on imported Wear Resistant
Overlay originating from the U.S and EU. The investigated product is listed under No. 48064000 of Customs Tariff of Import and Export
of the People’s Republic of China.

Since this case is rather complicated, Ministry of Commerce decided to postpone the investigation period for another 6 month, namely
ending on December 13, 2006, in accordance with Article 26 of Anti-dumping Regulations of People’s Republic of China.

Ministry of Commerce

May 22, 2006

the Ministry of Commerce
2006-05-22

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Probate

INTERIM PROVISIONS ON ADMINISTRATION OF THE EXPORT OF PRECURSOR CHEMICALS TO PARTICULAR COUNTRIES (REGIONS)

DETAILED RULES FOR THE IMPLEMENTATION OF THE REGULATION ON THE ADMINISTRATION OF COMMERCIAL PERFORMANCE

MEASURES FOR PUBLIC FINANCE EXAMINATION WORK

NOTICE OF THE MINISTRY OF COMMERCE ON ISSUES CONCERNING ENTRUSTING STATE-LEVEL ECONOMIC AND TECHNOLOGICAL DEVELOPMENT TO EXAMINE AND APPROVE FOREIGN INVESTMENT COMMERCIAL ENTERPRISES AND AGENT ENTERPRISES OF INTERNATIONAL FREIGHT FORWARDING

ACCOUNTING STANDARDS FOR BUSINESS ENTERPRISES NO.1 – INVENTORIES

ACCOUNTING STANDARDS FOR ENTERPRISES NO. 25 – ORIGINAL INSURANCE CONTRACTS

NOTICE OF THE STATE ADMINISTRATION OF TAXATION ON REBATE OF NEWLY-BUILT ENTERPRISE BUSINESS INCOME TAX IN CARGO TRANSPORT INDUSTRY

CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON THE ISSUE CONCERNING THE PAYMENT OF ENTERPRISE INCOME TAXES BY LOGISTIC ENTERPRISES

NOTIFICATION NO.5, 2006 OF FOREIGN ASSISTANCE PROJECT BID BOARD OF THE MINISTRY OF COMMERCE

CIRCULAR OF SAIC, MOFCOM, GAC AND SAFE ON PRINTING AND ISSUING SUGGESTIONS ON IMPLEMENTATION OF SEVERAL ISSUES APPLICABLE FOR LAW OF EXAMINATION, APPROVAL, REGISTRATION AND ADMINISTRATION OF FOREIGN-FUNDED ENTERPRISES

MEASURES FOR THE ADMINISTRATION OF THE ISSUANCE OF SECURITIES BY LISTED COMPANIES

ANNOUNCEMENT NO.38, 2006 OF THE MINISTRY OF COMMERCE OF THE PEOPLE’S REPUBLIC OF CHINA

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