ACCOUNTING REGULATIONS OF THE PEOPLE’S REPUBLIC OF CHINA FOR JOINT VENTURES USING CHINESE AND FOREIGN INVESTMENT

PROVISIONS OF THE MINISTRY OF FINANCE FOR THE COLLECTION AND REFUND OF PRODUCT TAX AND VALUE ADDED TAX ON IMPORT AND EXPORT PRODUCTS

REGULATIONS FOR THE ADMINISTRATION OF FOREIGN BANKS AND CHINESE-FOREIGN JOINT BANKS IN THE SPECIAL ECONOMIC ZONES

Category	BANKING	Organ of Promulgation	The State Council	Status of Effect	Invalidated
Date of Promulgation	1985-04-02	Effective Date	1985-04-02	Date of Invalidation	1994-04-01

Regulations of the People’s Republic of China for the Administration of Foreign Banks and Chinese-foreign Joint Banks in the Special Economic Zones

(Promulgated by the State Council on April 2, 1985 ) (Editor’s Note: The

Regulations have been annulled by the Regulations of the People’s Repubic of
China on Administraton of Foreign-Capital Financial Institutions promulgated
on February 25, 1994 and effective as of April 1, 1994)

Article 1 These Regulations are formulated with a view to expanding
international economic and financial co-operation, facilitating the inflow of
foreign capital and the introduction of technology and promoting growth of
the special economic zones.

Article 2 The term “foreign banks” referred to in these Regulations
means the branch banks established in the special economic zones by banks
with foreign capital whose head offices are based in foreign countries or in
Hong Kong and Macao regions and are registered in accordance with the laws
of these localities as well as banks with foreign capital whose head offices
are based in the special economic zones and are registered in accordance with
the laws of the People’s Republic of China.

The term “Chinese-foreign joint banks” referred to in these Regulations
means banks jointly funded and operated in the special economic zones by
banks and financial institutions with foreign capital and banks and financial
institutions with Chinese capital.

Article 3 Foreign banks and Chinese-foreign joint banks shall abide by
the laws and regulations of the People’s Republic of China and their legitimate
business activities and lawful rights and interests shall be protected by
the laws of the People’s Republic of China.

Article 4 To establish in a special economic zone a foreign bank or a
Chinese-foreign joint bank, an application shall be filed with the People’s
Bank of China, which shall examine and approve the application based on the
needs of growth of the special economic zones and on the basis of the
principle of equality and mutual benefit.

The branch banks of the People’s Bank of China in the special economic
zones shall exercise administration and supervision over the foreign banks
and Chinese-foreign joint banks.

The State Administration of Foreign Exchange Control shall be responsible
for the issuance of the licence for business operations in foreign exchange.

Article 5 Application for the establishment of a foreign bank or a
Chinese-foreign joint bank shall be handled in accordance with the following
provisions respectively:

1. If a bank with foreign capital intends to establish a branch bank in
a special economic zone, the head office of the bank shall file the
application and submit the following documents and data:

(1) a written application duty signed by the chairman of the board of
directors or the general manager with the authorization of the board of
directors and certified by a notary office, containing such information as
the name of the intended branch bank, the amount of operating funds allocated
by the head office, the curriculum vitae of the principal persons in charge
and letters of authorization, and the types of business operations applied
for;

(2) articles of association of the head office of the bank, the
composition of the board of directors, the balance sheets, statements of
profit and loss, and reports of business position for the three years prior to
the application for the establishment of the branch bank;

(3) a copy of the business licence verified and issued by the competent
authorities in the country or region where the bank is located; and

(4) letters of undertaking issued by the head office of the bank assuming
the tax and debt repayment obligations for the intended branch bank.

2. For the establishment of the head office of a foreign bank in a special
economic zone, the foreign investors concerned shall file the application and
submit the following documents and data:

(1) a written application for the establishment of the foreign bank,
containing such information as the name of the head office of the foreign
bank, the registered capital and the paid-in capital, a list of the principal
persons in charge and the types of business operations applied for;

(2) articles of association;

(3) a list of the candidates for the board of directors, including its
chairman and vice-chairmen, and the directors nominated by the investors; and

(4) data about the status of the assets and liabilities of the investors
attached with documents certified by a notary office.

3. For the establishment of a Chinese-foreign joint bank in a special
economic zone, all investing parties thereto shall jointly file the
application and submit the following documents and data:

(1) a written application for the establishment of the joint bank,
containing such information as the name of the joint bank, the name of each
of the investing parties thereto, the registered capital and the paid-in
capital, the percentage of capital contribution by each of the investing
parties, a list of the candidates for the principal persons in charge and
the types of business operations applied for;

(2) a feasibility study report jointly prepared by all the investing
parties thereto;

(3) the draft agreement, contract and articles of association of the
joint bank initialled by the authorized representatives of the respective
investing parties thereto; and

(4) a list of the candidates for the board of directors, including its
chairman and vice-chairmen, jointly nominated by all the investing parties
thereto.

4. Where foreign banks and Chinese-foreign joint banks established in the
special economic zones intend to establish separate branch offices in the
special economic zones, the application shall be filed with branch banks of
the People’s Bank of China in the special economic zones for approval.

If any of the documents and data referred to in paragraph 1 of this
Article is written in a foreign language, they shall be attached with a
Chinese version.

Article 6 The People’s Bank of China shall, based on the application of
a foreign bank or a Chinese-foreign joint bank, grant approval for the bank
concerned to engage in part or all of the following business operations:

1. loans in the domestic currency and in foreign currencies and discount
of negotiable instruments;

2. inward remittances from foreign countries or from Hong Kong and Macao
regions and collection of foreign exchange;

3. settlement for export transactions, and mortgage in foreign currency;

4. exchange of foreign currencies and of negotiable instruments in
foreign currencies;

5. investment in the domestic currency or in foreign currencies;

6. gurantees of the domestic currency and foreign currencies;

7. deals in stocks and securities;

8. trust and safe deposit box services, credit and financial standing
investigations and consultancy services;

9. outward remittances by enterprises with overseas Chinese capital,
foreign-capital enterprises, Chinese-foreign equity joint ventures and
Chinese-foreign contractual joint ventures and settlement for their import
transactions, and mortgage in foreign currency;

10. deposits in the domestic currency and in foreign currencies and
overdrafts by enterprises with overseas Chinese capital, foreign-capital
enterprises, Chinese-foreign equity joint ventures and Chinese-foreign
contractual joint ventures and by foreigners, overseas Chinese and compatriots
from Hong Kong and Macao;

11. handling deposits or loans in foreign exchange in foreign countries
or in Hong Kong and Macao regions; and

12. other business operations.

Article 7 The registered capital of the head office of a foreign bank
or a Chinese-foreign joint bank established in a special economic zone shall
be no less than Renminbi 80 million yuan in equivalent foreign exchange and
the paid-in capital thereof shall be no less than 50 percent of the registered
capital; a branch bank of a foreign bank established in a special economic
zone must possess an operating fund allocated by its head office amounting to
no less than Renminbi 40 million yuan in equivalent foreign exchange.

The paid-in capital and the operating funds of a foreign bank or a
Chinese-foreign joint bank shall be raised in full within 30 days following
the day on which its establishment is approved and shall then be audited
and verified by a registered accountant of the People’s Republic of China.

Article 8 A foreign bank or a Chinese-foreign joint bank shall, within
30 days following the day on which its establishment is approved, go through
the procedures of registration with the administrative department for industry
and commerce and obtain a business licence and shall, within 30 days following
the day of the commencement of its business operations, go through the
procedures of tax registration with the local tax authorities. Where a foreign
bank or a Chinese-foreign joint bank fails to commence its business operations
within 12 months following the day on which its establishment is approved, the
original document of approval shall automatically become null and void.

Article 9 The total amount of loans granted by the head office of a
foreign bank or by a Chinese-foreign joint bank in a special economic zone to
any enterprise in the special economic zone shall not exceed 30 percent of the
total sum of its paid-in capital plus its reserve funds and the total amount
of investment in the special economic zones shall not exceed 30 percent of the
total sum of its paid-in capital plus its reserve funds.

Article 10 The business operations in exchange and settlement between the
domestic currency and foreign currencies of a foreign bank or of a
Chinese-foreign joint bank shall be handled in accordance with the rates of
exchange quoted by the State Administration of Foreign Exchange Control and
with other relevant provisions.

The rates of interest with respect to the various kinds of deposits,
loans, overdrafts and discount of negotiable instruments in the domestic
currency or in foreign currencies handled in the special economic zones by a
foreign bank or by a Chinese-foreign joint bank may be fixed with reference
to the rates of interest prescribed by the branch banks of the People’s Bank
of China in the special economic zones.

Article 11 A foreign bank or a Chinese-foreign joint bank that handles
various deposits in the domestic currency or in foreign currencies in the
special economic zones shall place deposit reserve funds with the branch
banks of the People’s Bank of China in the special economic zones.

Article 12 Foreign banks and Chinese-foreign joint banks shall submit to
the blanch banks of the People’s Bank of China in the special economic zones
the following reports and statements of business operations:

1. prior to the 10th of each month, the balance sheet of the previous
month shall be submitted;

2. prior to the 15th of the first month of each quarter, a breakdown of
deposits and loans, a breakdown of outward and inward remittances and
settlement for import and export transactions, and a breakdown of investment
projects of the previous quarter shall be submitted; and

3. prior to the end of March of each year, the balance sheet, the
statement of profit and loss and the statement of account balance of the
previous year shall be submitted, attached with an audit report presented
by a registered accountant of the People’s Republic of China.

Article 13 The branch banks of the People’s Bank of China in the special
economic zones shall have the right to examine the position of business
operations and financial status of the foreign banks and Chinese-foreign
joint banks, require them to submit or provide the related information and
the relevant data, and send persons to examine their account books and files.

Article 14 A foreign bank may remit abroad the profit that remains after
tax has been paid in accordance with the law.

The head office of a foreign bank or a Chinese-foreign joint bank
established in a special economic zone shall, in accordance with the relevant
provisions, draw the reserve fund, the staff bonus fund, the welfare fund and
the enterprise development fund from its after-tax profit. The portion of the
profit distributed to investors from abroad may be remitted abroad.

Foreign staff and staff from Hong Kong and Macao regions of a foreign
bank or of a Chinese-foreign joint bank may remit abroad their salaries and
other legitimate income that remain after tax has been paid in accordance
with the law.

Article 15 A foreign bank or a Chinese-foreign joint bank that is to
terminate its business operations shall, 30 days prior to the termination
thereof, submit a written report to the People’s Bank of China for approval.

A foreign bank or a Chinese-foreign joint bank that is to suspend its
business operations shall, in accordance with the provisions of the People’s
Republic of China concerning the dissolution and liquidation of
foreign-capital enterprises and Chinese-foreign equity joint ventures and
under the supervision of the branch bank of the People’s Bank of China in
the special economic zone and other relevant departments, conduct its
liquidation. After the taxes have been paid in full and liabilities have
been settled, the funds of the foreign bank or the fund owned by or
distributed to investors from abroad in a Chinese-foreign joint bank may be
remitted abroad.

Upon the completion of liquidation as referred to in the preceding
paragraph, the foreign bank or Chinese-foreign joint bank shall approach
the registration and licence-issuing authorities for the cancellation of
its registration and business licence.

Article 16 In the case where a foreign bank or a Chinese-foreign joint
bank violates these Regulations or any other financial regulations, the
branch banks of the People’s Bank of China in the special economic zones
shall have the right to issue a warning or impose a fine on it in the light
of the seriousness of the case. In case of disagreement with the penalty,
an appeal may be brought before the People’s Bank of China for its ruling.

If a foreign bank or a Chinese-foreign joint bank violates the laws and
regulations to an especially serious extent, the People’s Bank of China may
order it to suspend its business operations or shall, in an extreme case,
order it to be disbanded.

Article 17 These Regulations shall also apply to banks and financial
institutions with overseas Chinese capital or with capital from Hong Kong
and Macao regions.

Article 18 The People’s Bank of China shall be responsible for the
interpretation of these Regulations.

Article 19 These Regulations shall become effective as of the date of
promulgation.

LAW OF SUCCESSION OF THE PEOPLE’S REPUBLIC OF CHINA

ACCOUNTING REGULATIONS FOR JOINT VENTURES USING CHINESE AND FOREIGN INVESTMENT

Accounting Regulations of the PRC for Joint Ventures Using Chinese and Foreign Investment

(Promulgated on March 4,1985 by the Ministry of Finance of the People’s Republic of China)

CONTENTS

CHAPTER I GENERAL PROVISIONS

CHAPTER II ACCOUNTING OFFICE AND ACCOUNTING STAFF

CHAPTER III GENERAL PRINCIPLES FOR ACCOUNTING

CHAPTER IV ACCOUNTING FOR PAID-IN CAPITAL

CHAPTER V ACCOUNTING CASH AND CURRENT ACCOUNTS

CHAPTER VI ACCOUNTING FOR INVENTORIES

CHAPTER VII ACCOUNTING FOR LONG TERM INVESTMENT AND LONG TERM

LIABILITIES

CHAPTER VIII ACCOUNTING FOR FIXED ASSETS

CHAPTER IX ACCOUNTING FOR INTANGIBLE ASSETS AND OTHER ASSETS

CHAPTER X ACCOUNTING FOR COSTS AND EXPENSES

CHAPTER XI ACCOUNTING FOR SALES AND PROFIT

CHAPTER XII CLASSIFICATION OF ACCOUNTS AND ACCOUNTING STATEMENTS

CHAPTER XIII ACCOUNTING DOCUMENTS AND ACCOUNTING BOOKS

CHAPTER XIV AUDIT

CHAPTER XV ACCOUNTING FILES

CHAPTER XVI DISSOLUTION AND LIQUIDATION

CHAPTER XVII OTHER PROVISIONS

CHAPTER I GENERAL PROVISIONS

Article 1. The present Regulations are formulated to strengthen the accounting work of joint ventures using Chinese and foreign
investment, in accordance with the provisions laid down in the “Law of the People’s Republic of China on Joint
Ventures Using Chinese and Foreign Investment”, the “Income Tax Law of the People’s Republic of China Concerning Joint
Ventures Using Chinese and Foreign Investment” and other relevant laws and regulations.

Article 2. These Regulations are applicable to all joint ventures using Chinese and foreign investment (hereinafter referred to
as “joint ventures”) established within the territory of the People’s Republic of China.

Article 3. The public finance departments or bureaus of provinces, autonomous regions and municipalities directly under the Central
Government as well as the business regulatory departments of the State Council shall be permitted to make necessary supplements
to these regulations on the basis of complying with these regulations and in the light of specific circumstances,
and submit the supplements to the Ministry of Finance for the record.

Article 4. Joint ventures shall work out their own enterprise accounting system in accordance with these Regulations
and the supplementary provisions made by the relevant public finance department or bureau of their provinces, autonomous
regions or municipalities, or by the relevant business regulatory departments of the State Council, and in the light
of their specific circumstances and submit their own system to their enterprise regulatory departments, local
public finance department and tax authority for the record.

CHAPTER II ACCOUNTING OFFICE AND ACCOUNTING STAFF

Article 5. A joint venture shall set up a separate accounting office with necessary accounting staff to handle its financial and
accounting work.

Article 6. A joint venture of large or medium size shall have a controller to assist the president and to take the
responsibility in leading its financial and accounting work. A deputy controller may also be appointed when necessary.

A joint venture of relatively large size shall have an auditor responsible for review and examination of its financial
receipts and disbursements, accounting documents, accounting books, accounting statements and other relevant
data and those of its subordinate branches.

Article 7. The accounting office and accounting staff of a joint venture shall fulfil their duties and responsibilities with due
care, make accurate calculation, reflect faithfully the actual conditions, and supervise strictly over all economic
transactions, protect the legitimate rights and interests of all the participants of the joint venture.

Article 8. Accounting staff who are transferred or leaving their posts shall clear their responsibility transfer procedures with
those who are assuming their positions, and shall not interrupt the accounting work.

CHAPTER III GENERAL PRINCIPLES FOR ACCOUNTING

Article 9. The accounting work of joint ventures must comply with the laws and regulations of the People’s Republic of China.

Article 10. The fiscal year of a joint venture shall run from 1 January to 31 December under the Gregorian calendar.

Article 11. Joint ventures shall adopt debit and credit double entry bookkeeping.

Article 12. The accounting documents, accounting books, accounting statements and the other accounting records of a joint venture
shall be prepared accurately and promptly according to the transactions actually taken place, with all required routines
done and contents complete.

Article 13. All the accounting documents, accounting books and accounting statements prepared by a joint venture must
be written in Chinese. A foreign language mutually agreed by the participants of the joint venture may be used concurrently.

Article 14. In principle, a joint venture shall adopt Renminbi as its bookkeeping base currency. However, a foreign currency may be used
as the bookkeeping base currency upon mutual agreement of the participants of a joint venture.

If actual receipts or disbursements of cash, bank deposits, other cash holdings, claims debts, income and expenses,
etc. are made in currencies other than the bookkeeping base currency, a record shall also be made in the currencies
of actual receipts or disbursements.

Article 15. Joint ventures shall adopt the accrual basis in their accounting. All revenues realised and expenses incurred during
the current period shall be recognised in the current period, regardless of whether receipts or disbursements
are made. The revenues or expenses not attributable to the current period shall not be recognised as current
revenue or expenses, even if they are currently received or disbursed.

Article 16. The revenues and expenses of a joint venture must be matched in its accounting. All the revenues and relevant costs and
expenses of a period shall be recognised in the period and shall not be dislocated, advanced or deferred.

Article 17. All the assets of a joint venture shall be stated at their original costs and the recorded amounts are generally not
adjusted whether there is any fluctuation in their market prices.

Article 18. A joint venture shall draw clear distinction between capital expenditures and revenue expenditures. All expenditures
incurred for the increase of fixed assets and intangible assets are capital expenditures. All expenditures
incurred to obtain current revenue are revenue expenditures.

Article 19. Accounting methods adopted by a joint venture shall be consistent from one period to the other and shall not be
arbitrarily changed. Changes, if any, shall be approved by the board of directors and submitted to the local tax
authority for examination. Disclosure of the changes shall be made in the accounting report.

CHAPTER IV ACCOUNTING FOR PAID-IN CAPITAL

Article 20. The participants of a joint venture shall contribute their share capital in the amount, ratio and mode of capital
contribution within the stipulated time limit as provided in the joint venture contract. The accounting for paid-in
capital by a joint venture shall be based on the actual amount contributed by each of its participants.

(1) For investment paid in cash, the amount and date as received or as deposited into the Bank of China or other banks
where the joint venture has opened its bank account shall be the basis for recording the capital contribution.

The foreign currency contributed by a foreign participant shall be converted into Renminbi or further converted
into a predetermined foreign currency at the exchange rates quoted on the day of the cash payment by the State Administration
of Foreign Exchange Control of the People’s Republic of China (hereinafter referred to as the “State Administration
of Foreign Exchange Control”). Should the cash Renminbi contributed by a Chinese participant be converted into
foreign currency, it shall be converted at the exchange rate quoted by the State Administration of Foreign Exchange
Control on the day of the cash payment.

(2) For investment in the form of buildings, machinery, equipment, materials and supplies, the amount
shown on the examined and verified itemisation list of the assets as agreed upon by each participant and the date
of the receipt of the assets shall be the basis of accounting according to the joint venture contract.

(3) For investment in the form of intangible assets, i.e. proprietory technology, patents, trade marks, copyright
and other franchises, etc. the amount and date as provided in the agreement or contract shall be the basis of accounting.

(4) For investment in the form of the right to use sites,the amount and date as provided in the agreement or
contract shall be the basis of accounting.

The capital contributed by each participant shall be recorded into the accounts of the joint venture as soon as they are
received.

Article 21. The capital amount contributed by the participants of a joint venture shall be validated by Certified Public Accountants
registered with the government of the People’s Republic of China, who shall render a certificate on capital validation,
which shall then be taken by the joint venture as the basis to issue capital contribution certificates to the participants.

CHAPTER V ACCOUNTING CASH AND CURRENT ACCOUNTS

Article 22. A joint venture shall open its deposit accounts in the Bank of China or the other banks within the territory of the People’s
Republic of China and approved by the State Administration of Foreign Exchange Control or by one
of its branches. All foreign exchange receipts must be deposited with the bank in the foreign currency deposit account
and all foreign exchange disbursements must be made from the accounts.

Article 23. A joint venture shall set up journals to itemise cash and bank transactions in chronological order. A separate journal
shall be set up for each currency if there are several currencies.

Article 24. The accounts receivable, accounts payable and other receivables and payables of a joint venture shall be recorded in
separate accounts set up for different currencies. Receivables shall be collected and payables shall be paid in
due time and shall be confirmed with the relevant parties periodically. The causes of uncollectible items shall
be investigated and the responsibilities thereof shall be determined. Any item proved to be definitely uncollectible
through strict management review shall be written off as a bad debt after approval is obtained through reporting
procedures specified by the board of directors. No “reserve for bad debts” shall be accrued.

Article 25. For a joint venture using Renminbi as the bookkeeping base currency, its foreign currency deposits, foreign currency
loans and other accounts denominated in foreign currency shall be recorded not only in the original foreign currency
of the actual receipts and payments, but also in Renminbi converted from the foreign currency at an ascertained
exchange rate (using the exchange rate quoted by the State Administration of Foreign Exchange Control).

All additions of foreign currency deposits, foreign currency loans and other accounts denominated in foreign currencies
shall be recorded in Renminbi converted at their recording exchange rates, while deductions recorded in Renminbi
and converted at their book exchange rates shall be recognised as “foreign exchange gains or losses” (hereinafter referred
to as “exchange gains or losses”).

The recording exchange rates for the conversion of foreign currency to Renminbi may be the rate prevailing
on the day of recording the transaction or on the first day of the month, etc. The book exchange rate
may be calculated by the first-in-first-out method, or by the weighted average methods, etc. However, for the
decrease of accounts denominated in a foreign currency, the original recording rate may be used as the book rate. Whichever
rate is adopted, there shall be no arbitrary change once it is decided. If any change is necessary, it must be approved
by the board of directors and disclosed in the accounting report.

The difference in Renminbi resulting from the exchange of different currencies shall also be recognised as exchange
gains or losses.

The exchange gains or losses recognised in the account shall be the realised amount. In case of exchange rate
fluctuation, the Renminbi balances of the foreign currency accounts shall not be adjusted.

Article 26. In a joint venture using a foreign currency as its bookkeeping base currency, its Renminbi deposits, Renminbi loans
and other accounts denominated in Renminbi shall be recorded not only in Renminbi but also in the foreign currency converted
from Renminbi at the exchange rate adopted by the enterprise. Differences in the foreign currency amount
resulting from the conversion at different Exchange rates shall also be recognised as exchange gains or losses as stipulated
in Article 25.

A joint venture using a foreign currency as its bookkeeping base currency shall compile not only annual accounting statements
in the foreign currency but also separate accounting statements in Renminbi translated from the foreign currency
at the end of a year. However, the joint venture’s Renminbi bank deposits, Renminbi bank loans and the
other accounts denominated in Renminbi shall still be accounted for in their original Renminbi amounts, and shall
be combined with the other items converted into Renminbi from foreign currency. The differences between the original
Renminbi amount of the Renminbi items and their Renminbi amount from currency translation shall not be recognised
as foreign exchange gains or losses, but shall be shown on the balance sheet with an additional caption as “currency translation
differences”.

CHAPTER VI ACCOUNTING FOR INVENTORIES

Article 27. The inventories of a joint venture refer to merchandise, materials and supplies, containers, low-value and perishable
articles, work in process, semi-finished goods, finished goods, etc. in stock, in processing or in transit.

Article 28. All the inventories of a joint venture shall be recorded at the actual cost.

(1) The actual cost of materials and supplies, containers, low-value and perishable articles purchased from outside
shall include the purchase price, transportation expenses, loading and unloading charges, packaging expenses, insurance
premium, reasonable loss during transit, selecting and sorting expenses before taken into storage etc. The cost
of imported goods shall further include the custom duties and industrial and commercial consolidated tax, etc.

For merchandise purchased by a commercial or service-trade enterprise, the original purchase price shall be taken
as the actual cost for bookkeeping.

(2) The actual cost of self-manufactured materials and supplies, containers, low-value and perishable articles, semi-finished
goods and finished goods shall include the materials and supplies consumed, and wages and relevant expenses incurred during
the manufacture process.

(3) The actual cost of materials and supplies, containers, low-value and perishable articles, semi-finished
and finished goods completed through outside processing shall include the original cost of the materials and
supplies or semi-finished goods consumed, the processing expenses, inward and outward transportation expenses and sundry
charges.

The merchandise of the commercial or service-trade enterprises processed under contract with outside units shall be
recorded at the purchase price after processing, including the original purchase price of the merchandise before processing,
processing expenses and the industrial and commercial consolidated tax attributable.

Article 29. The receipt, issuance, requisition and return of the inventories of a joint venture shall be processed on time
through accounting procedures according to the actual quantity and shall be itemsied in the subsidiary
ledger accounts with established columns for quantities and amounts, so as to strengthen inventory control. The
merchandise, materials, etc. in transit shall be accounted for through subsidiary ledgers and their condition of arrival
shall be inspected at all times. For those goods that have not arrived in due time, the relevant department shall
be urged to take action. As to those goods that have arrived but have not yet been checked or taken into
storage, their acceptance test and warehousing procedures shall be carried out in a timely manner.

Article 30. The actual cost or original purchase price of inventories issued or requisitioned from the store of a joint venture may
be accounted for by it under one of the following methods; first-in-first-out, shifting average, weighted average,
batch actual, etc. Once the accounting method is adopted, no arbitrary change shall be allowed. In case a
change of accounting method is necessary, it shall be submitted to the local tax authority for approval and disclosed
in the accounting report.

Article 31. In the joint ventures using planned cost in daily accounting for materials and supplies, finished goods, etc. the
planned cost of those issued from stock, shall be adjusted into actual cost at the end of each month.

For commercial and service-trade enterprises using a selling price in daily accounting for merchandise, the cost of goods
sold shall be adjusted from the selling price to the original purchase price at the end of a month.

Article 32. A joint venture shall take physical inventory of its stock periodically, at least once a year. If any overage,
shortage, damage, deterioration, etc. is found, the relevant department shall investigate the cause and write
out a report. Accounting treatment shall be made as soon as the report is approved through strict management review
and the reporting procedures specified by the board of directors. The treatment shall generally be completed
before the annual closing of final accounts.

(1) The inventory shortage (minus inventory overage) and damage (minus salvage) of materials and supplies, work
in process, semi-finished goods, finished goods, and merchandise, etc. shall be charged to the current expenses,
except the amount, if any, that should be indemnified by the persons in fault.

(2) The net loss resulting from natural disasters shall be charged to non-operating expenses after deducting the
salvage value recoverable and insurance indemnity.

Article 33. If there is any inventory in a joint venture to be disposed of at a reduced price due to obsolescence, it shall be
reported for approval according to the procedures specified by the board of directors, and the net loss on disposal
shall be recognised as loss on sales. If the disposal is not yet done at the end of a year, disclosure shall be made
in the annual accounting report for the actual cost per book, the net realisable value and the probable loss thereof.

Article 34. Disclosure shall be made in the annual accounting report of a joint venture on the actual cost per book, net realisable
value and probable loss of its inventories of which the net realisable value is lower than the actual cost per book due
to the decline of the market price.

CHAPTER VII ACCOUNTING FOR LONG TERM INVESTMENT AND LONG TERM LIABILITIES

Article 35. The investment of a joint venture in other units shall be accounted for at the amount paid or agreed upon at the
time of the investment, and shall be shown in the balance sheet with a separate caption as “long term investment.”

Income and loss derived from long term investment shall be recognised as non-operating income or non-operating expense.

Article 36. The bank loans borrowed by a joint venture for capital construction during its preparation period or for increasing fixed
assets, expanding its business, or making renovation and reform of its equipment after its operation has started,
shall be accounted for at the amount and on the date of the loan and shall be presented in the balance sheet with a separate
caption as “long term bank loans”.

The interest expenses on long term bank loans incurred during the construction period shall be charged
to construction cost and capitalised as a part of the original cost of the fixed assets; but interest expense incurred
after the completion of the construction and the transfer of fixed assets for operation purposes shall be charged to current
expenses.

CHAPTER VIII ACCOUNTING FOR FIXED ASSETS

Article 37. A joint venture shall prepare a fixed assets catalogue as the basis of accounting according to the criteria of fixed
assets laid down in the “Income Tax Law of the People’s Republic of China Concerning Joint Ventures Using Chinese
and Foreign Investment” and in consideration of its specific circumstances.

Article 38. The fixed assets of a joint venture shall be grouped into five broad categories as follows: building and structures;
machinery and equipment; electronic equipment; transport facilities (trains or ships, if any, shall be grouped separately);
and other equipment. The joint venture may further group them into sub-categories according to the need of its management.

Article 39. The fixed assets of a joint venture shall be recorded at their original cost.

For fixed assets contributed as investment, the original cost shall be the price of the assets agreed upon by all
the participants of the joint venture at the time of investment.

For fixed assets purchased, the original cost shall be the total of the purchase price plus freight, loading
and unloading charges, packaging expenses and insurance premium, etc. The original cost of the fixed assets that
need installation work, shall include installation expenses. The original cost of imported equipment shall
further include the customs duties, consolidated industrial and commercial tax, etc. paid as required.

For fixed assets manufactured or constructed by the joint venture itself, the original cost shall be the actual expenditure
incurred in the course of manufacture or construction.

Expenditures of a joint venture on technical innovation and reform that result in the increase of the fixed
assets value shall be recorded as increments of the original cost of the fixed assets.

Article 40. Depreciation on the fixed assets of a joint venture shall generally be accounted for on an average basis under the
straight line method.

(1) Depreciation on fixed assets shall be accounted for on the basis of the original cost and the group depreciation rate
of the fixed assets.

The depreciation rate of fixed assets shall be calculated and determined on the basis of the original cost, estimated
residual value and useful life of the fixed assets.

A joint venture shall determine the specific useful lives and depreciation rates for different groups of
fixed assets according to the minimum depreciation period and the estimated residual value of the fixed assets
as provided in the “Income Tax Law Concerning Joint Ventures Using Chinese and Foreign Investment”.

(2) In a case where a joint venture needs accelerated depreciation or a change of depreciation method
for special reasons, application shall be submitted by the joint venture to the tax authority for examination and
approval.

(3) Generally, depreciation of the fixed assets of a joint venture shall be accounted for monthly according to the monthly
depreciation rates and the monthly beginning balances of the original cost per book of the fixed assets in use.
For fixed assets put in use during a month, depreciation shall not be calculated for the month but shall be started
from the next month. For fixed assets to be used during the month which are reduced or stopped depreciation shall still
be calculated for the month and be stopped from the next month.

(4) For fixed assets fully depreciated but still useful, depreciation shall no longer be calculated. For fixed assets
discarded in advance,no retroactive depreciation shall be made either.

For fixed assets declared scrap in advance or transferred out, the difference between the net proceeds
obtained from disposal (less liquidation expenses) and the net value of the fixed assets (original cost less accumulated
depreciation) shall be recognised as non-operating income or non-operating expenses of a joint venture.

Article 41. For the purchase, sales, disposal, discarding and internal transfer, etc. of the fixed assets, a joint venture must execute
accounting routines and set up a fixed assets subsidiary ledger for the relevant accounting so as to strengthen the control
of fixed assets.

Article 42. A physical inventory must be taken on the fixed assets of a joint venture at least once a year. If any average, shortage
or damage of the fixed assets is found, the cause shall be investigated and a report written out by the relevant department.
Accounting treatment shall be made as soon as the report is approved through strict management review and the reporting
procedures specified by the board of directors. Generally, this work shall be finished before the annual closing of final
accounts.

(1) For fixed assets average,the replacement cost shall be taken as the original cost, the accumulated depreciation shall
be estimated and recorded according to the existing usability and wear and tear of the assets, and the difference between
the original cost and the accumulated depreciation shall be credited to non-operating income.

(2) For fixed assets shortage,the original cost and accumulated depreciation shall be written off and
the excess of original cost over accumulated depreciation shall be charged as non-operating expenses.

(3) For damaged fixed assets, the net loss after the original cost deducted by the accumulated depreciation, recoverable
salvage value and the indemnity receivable from the person in fault or from the insurance company, shall be charged as non-operating
expenses.

CHAPTER IX ACCOUNTING FOR INTANGIBLE ASSETS AND OTHER ASSETS

Article 43. The intangible assets and other assets of a joint venture include proprietary technology, patents, trade marks, copyrights,
right to use sites, other franchises and organisation expenses, etc.

For intangible assets contributed as investment by the participants of a joint venture, the original cost
shall be the value provided in the agreement or contract. The original cost of purchased intangible assets shall
be the amount actually paid. Monthly amortisation of the intangible assets shall be made over their useful life
from the year when they come into use. Those without specified useful life may be amortised over a period of ten
years. The amortisation period shall not be longer than the duration of a joint venture.

Article 44. The expenses incurred by a joint venture during its preparation period (not including expenditure for acquiring
fixed assets and intangible assets and the interest incurred during the construction period to be included
in the construction cost may be accounted for as organisation expenses according to the provisions of the agreement
and with the consent of all participants, and shall be amortised after the production or operation starts. The
annual amortisation shall not exceed 20 per cent of the expenses.

Article 45. The expenditure incurred by a joint venture on major repair and improvement of the leased-in fixed assets shall

PATENT LAW OF THE PEOPLE’S REPUBLIC OF CHINA

REGULATIONS FOR LAND MANAGEMENT OF THE TIANJIN ECONOMIC AND TECHNOLOGICAL DEVELOPMENT ZONE

Regulations for Land Management of the Tianjin Economic and Technological Development Zone

(Effective Date 1985.07.20)

Article 1. These Regulations are formulated in accordance with the relevant laws and regulations of the People’s Republic of China
and the Regulations for the Administration of the Tianjin Economic and Technological Development Zone.

Article 2. All the land and resources within the boundaries of the Tianjin Economic and Technological Development Zone
(hereinafter referred to as the Development Zone) are owned by the State. The land shall be put under the centralised
administration of the Administrative Commission of the Tianjin Economic and Technological Development Zone (hereinafter
referred to as the Development Zone Administrative Commission).

Article 3. All units and individuals must comply with and implement the overall development plan of the Development Zone. Without
approval, it shall not be permitted to arbitrarily alter the topography of or landforms on the land within the boundaries
of the Development Zone, or to occupy land without permission, or construct or demolish any building or structure.

Article 4. Where any unit or individual requires the use of land, they must submit an application to the Development Zone
Administrative Commission. The land may only be used after completion of the formalities for the use of the land
by presentation to the departments responsible for administration of planning in the Development Zone the agreements,
contracts or documents approved by the Development Zone Administrative Commission and receipt of a certificate of
land use.

Article 5. Units and individuals which have received approval to use land shall only have the right to its use; they shall not be
permitted to exploit, put to use or destroy underground or other resources.

Article 6. Units or individuals using land should, within six months from the date of issue of the certificate of land use,
submit to the Development Zone planning departments a construction plan and plan for production commencement and construction
work should start within nine months. Should this not be done, the certificate of land use may be revoked.

With valid reasons and documentary evidence, the land-using units or individuals may, with the approval of the
Development Zone Administrative Commission, appropriately postpone the submission of construction and production
commencement plans and the date of commencement of construction.

Article 7. After the land-using unit or individual has fulfilled the construction requirements as stipulated in the contract
or agreement, the project shall be subject to final inspection and approval by the Development Zone department
in charge of planning and administration. It may only be put officially into operation when it is shown
to conform to the construction standards and safety regulations of the People’s Republic of China. If it is discovered
that production has commenced without authorisation, the unit or individual shall immediately be ordered to cease
use and go through the required inspection procedures once more; in the case of any accident arising directly therefrom,
the unit or individual shall pay compensation and accept full legal liability.

Article 8. If a land-using unit or individual wishes to expand the boundaries of the land being used, they shall complete the
procedures of application and approval for expansion of the land in use.

Article 9. The term of land use by a unit or individual shall be determined by the Development Zone Administrative Commission
on the basis of the actual requirements of the project. Where an extension of that period is required, the necessary
procedures must be completed.

Article 10. Any unit or individual using land in the Development Zone shall pay a fee for land use. The standard of fees
for land use and the method of collection of such fees shall be stipulated elsewhere by the Development Zone Administrative
Commission.

Article 11. Those who establish educational, cultural, scientific and technological, health and other non-profit public welfare
institutions in the Development Zone, and projects involving exceptionally advanced technology shall be granted
a reduction of or exemption from land use fees.

Those who invest in projects involving water supply, gas supply, electricity supply, heating systems, drainage
and sewage, roads and other infrastructural projects in the Development Zone shall be granted a reduction of or
exemption from land use fees for a period of five to ten years.

Article 12. Land-using units or individuals that undertake construction or building of an infrastructural nature on their land, in
accordance with their contract or agreement, shall ensure that such construction conforms with municipal plans.

Article 13. Land-using units or individuals shall themselves undertake to build and install, within the boundaries of the land in use,
facilities for the supply of water, electricity, heating, gas as well as sewerage, roads and telecommunications facilities.

Article 14. These Regulations shall come into force from the date of promulgation.

GRASSLAND LAW OF THE PEOPLE’S REPUBLIC OF CHINA

REGULATIONS FOR LABOUR MANAGEMENT OF THE TIANJIN ECONOMIC AND TECHNOLOGICAL DEVELOPMENT ZONE

Regulations for Labour Management of the Tianjin Economic and Technological Development Zone

(Effective Date 1985.07.25)

Article 1. These Regulations are formulated in accordance with the relevant laws and regulations of the People’s Republic of China
and the Tianjin Economic and Technological Development Zone.

Article 2. These Regulations apply to Sino-foreign joint ventures, co-operative enterprises and wholly foreign owned enterprises
in the Tianjin Economic and Technological Development Zone (hereinafter referred to as enterprises).

Article 3. The labour plan of the enterprises shall be filed with the labour management department of the Tianjin Economic and Technological
Development Zone (hereinafter referred to as the Development Zone) and brought into line with the labour plan of
the Municipality of Tianjin.

Article 4. In employing staff and workers, the enterprises shall implement the labour contract system.

Article 5. The Development Zone Labour Service Company shall aid the enterprises in recruiting and training staff and workers, guide
staff and workers in signing labour contracts with the enterprises, direct them in seeking employment, and collect,
pay, and control social labour insurance funds.

Article 6. The staff and workers of the enterprises have the right to establish trade unions in accordance with the law and to organise
trade union activities. The enterprise shall support the work of the trade union and the trade union shall support
the proper business activities of the enterprise.

Article 7. The staff and workers to be employed by an enterprise may be recommended by the Labour Service Company, recruited by the
Labour Service Company at the request of the enterprise or, after approval by the Administrative Commission
of the Tianjin Economic and Technological Development Zone (hereinafter referred to as the Development
Zone Administrative Commission), recruited by the enterprise itself.

Article 8. The staff and workers to be employed by the enterprise shall be 16 years of age or older with a minimum educational level
equivalent to that of junior middle school.

Article 9. The staff and workers to be employed by the enterprise shall be assessed, medically examined and accepted for employment in
accordance with the principle of selecting the best qualified. They shall then sign labour contracts with the enterprise.

A labour contract may be signed collectively by the staff and workers with the enterprise or on an individual basis.

The labour contract shall include the following items: the employment, dismissal and resignation of the staff
and workers; the term of contract and probation period; their production and work tasks; wages or salaries and awards
and penalties; work schedules and holidays;labour protection, labour insurance and welfare benefits; and labour
discipline and contract modifications. The contract shall not contain any provisions of a discriminatory nature
concerning the staff and workers. The probation period shall not exceed six months.

The labour contract shall be examined and approved by the labour management department of the Development Zone.

Article 10. With examination and approval by the Development Zone Administrative Commission, the enterprise may employ staff
and workers from Hong Kong, Macao and abroad.

Article 11. For hiring seasonal employees and those who are employed for less than one year, enterprises in the Development Zone
shall go through procedures in accordance with Article 7 and 8, and shall refer to Article 9 of these Regulations.

Article 12. Enterprises shall pay individual wages for each of the staff and workers they employ. The minimum level of wages or salary
shall be stipulated by the Development Zone Administrative Commission. Wage levels shall be determined by the enterprise
in accordance with work posts, skills and labour intensity. The wages shall be increased every year, according to levels
of skills of the workers and the enterprise’s profits. The percentage of increase per year shall be negotiated and decided
by the enterprise and the trade union.

Article 13. The enterprise shall pay the Development Zone Labour Service Company a social labour insurance fund every month. This
fund, 25 per cent of the labour service fees paid by the enterprise in relation to its Chinese employees, shall
be paid for each month before the fifth day of the following month. In case of failure to do so, a surcharge for overdue
payment equal to 1 per cent of the payable amount shall be imposed for every day in arrears.

Article 14. The procedures for the use and the scope of the social labour insurance fund shall be separately formulated by the Development
Zone Administrative Commission.

Article 15. The standards and types of wages, systems of bonuses and subsidies for staff and workers of the enterprise shall be
decided upon by the enterprise itself, and filed with the labour management department of the Development Zone.

Article 16. The work schedule of the staff and workers of the enterprise shall not exceed six days a week and eight hours a day.
For work that has to be carried out continuously, the work time shall not exceed 48 hours per week for each employee.
When employees are required to work overtime, the trade union of the enterprise shall be consulted for approval.
For overtime work on the weekly day off or time in excess of eight hours, the overtime pay per day shall not
be lower than that of the employee’s standard daily wages. Overtime on official festivals or public holidays shall not
be less than double the standard daily wage.

Article 17. Staff and workers of the enterprise shall enjoy rest days, official holidays, and vacation periods in accordance with
government regulations.

Article 18. The enterprises must implement the rules and regulations of the People’s Republic of China and the Tianjin Municipality
concerning labour protection and ensure safe and civilized production. The Development Zone Administrative
Commission and the relevant departments of the Municipality shall have the right to carry out inspection and supervision.

Article 19. The enterprises shall implement special health protection for women workers in accordance with the regulations of
the People’s Republic of China on the protection of women workers.

Article 20. In the event of staff and workers of the enterprise suffering from occupational diseases and work-related injuries,
including those causing disability or death, the standards and procedures for their pensions shall be separately
stipulated by the Development Zone Administrative Commission in accordance with the relevant regulations of the People’s
Republic of China.

Article 21. The enterprises shall exercise management of staff and workers in accordance with the regulations stipulated in the
contract and the business requirements of the enterprise.

In accordance with the seriousness of the case, penalties and even discharge may be imposed by the enterprise on staff
and workers who violate the rules and regulations of the enterprise and thereby cause harmful consequences. Before
discharging staff and workers the enterprise shall consult the trade union of the enterprise for its opinion
and decisions shall be recorded with the Development Zone labour management department.

If the trade union regards the sanctions or discharges imposed on staff and workers as inappropriate, it has the right
to raise an objection and send representatives to negotiate solutions with the enterprise. In the event that the problem
cannot be solved through negotiation, it shall be handled in accordance with the stipulations of Article 24 of these Regulations.

Article 22. An enterprise may dismiss staff and workers who become superfluous as a result of changes in production and technical
conditions if, after training, they cannot meet its requirements and are not suitable for transfer to other
work. Decisions regarding the dismissal of staff and workers shall be reported to the labour management department
of the Development Zone for recording.

Staff and workers who are injured at work or undergo treatment for occupational diseases, and women
workers over six months’ pregnant or on maternity leave shall not be discharged.

The enterprise shall pay compensation to dismissed staff and workers according to the period of time for which
they have worked in the enterprise. Specific stipulations shall be formulated separately by the Development Zone
Administrative Commission.

Article 23. Staff and workers may submit their resignations to the enterprise in accordance with the regulations stipulated in the
contract. The resignations shall be submitted to the enterprise one month in advance and the enterprise should permit such
resignations.

Those staff and workers who have received more than three months’ training provided by the enterprise shall compensate
the enterprise for the expenses incurred for their training should they wish to resign within one year of completing
such training or resign without permission. The compensation amount shall be calculated according to the expenses
spent on them during training. Specific stipulations shall be formulated separately by the Development Zone Administrative
Commission.

Article 24. Should labour disputes arise within the Development Zone, the labour management department of the Development Zone may
be asked to mediate or a suit may be filed in the People’s Court.

Article 25. Matters such as wages, awards and penalties, welfare and social labour insurance, and dismissal and resignation of staff
and workers from Hong Kong, Macao and abroad employed by the enterprise shall be specified in the employment contracts
and filed with the Development Zone Administrative Commission.

Article 26. In the event of staff and workers being employed by the enterprise from domestic enterprises outside the Development Zone,
their wage standards, types of wages, measures for awards and penalties, welfare and matters concerning social labour
insurance and dismissal shall be discussed jointly by the employing enterprise, the enterprises where they
originally worked and the Labour Service Company. Such matters shall be stipulated in the labour contract and
filed with the labour management department of the Development Zone.

Article 27. These Regulations shall come into force on the day of promulgation.

PATENT LAW

Patent Law of the People’s Republic of China

CHAPTER I GENERAL PROVISIONS

CHAPTER II REQUIREMENTS FOR GRANT OF PATENT RIGHT

CHAPTER III APPLICATION FOR PATENT

CHAPTER IV EXAMINATION AND APPROVAL OF APPLICATION FOR PATENT

CHAPTER V DURATION, CESSATION AND INVALIDATION OF PATENT RIGHT

CHAPTER VI COMPULSORY LICENSE FOR EXPLOITATION OF THE PATENT

CHAPTER VII PROTECTION OF PATENT RIGHT

CHAPTER VIII SUPPLEMENTARY PROVISIONS

CHAPTER I GENERAL PROVISIONS

Article 1. This law is enacted to protect patent rights for inventions-creations, to encourage inventions-creations, to
foster the spreading and application of inventions-creations, and to promote the development of science and technology,
for meeting the needs of the construction of socialist modernization.

Article 2. In this Law, “inventions-creations” mean inventions, utility models and designs.

Article 3. The Patent Office of the People’s Republic of China receives and examines patent applications and grants patent
rights for inventions-creations that conform with the provisions of this Law.

Article 4. Where the invention-creation for which a patent is applied for relates to the security or other vital interests of the State
and is required to be kept secret, the application shall be treated in accordance with the relevant prescriptions of the
State.

Article 5. No patent right shall be granted for any invention-creation that is contrary to the laws of the State or
social morality or that is detrimental to public interest.

Article 6. For a service invention-creation, made by a person in execution of the tasks of the entity to which he belongs or
made by him mainly by using the material means of the entity, the right to apply for a patent belongs to the entity.
For any non-service invention-creation, the right to apply for a patent belongs to the inventor or creator. After the
application is approved, if it was filed by an entity under ownership by the whole people, the patent right shall be
held by the entity; if it was filed by an entity under collective ownership or by an individual, the patent right shall
be owned by the entity or individual.

For a service invention-creation made by any staff member or worker of a foreign enterprise, or of a Chinese-foreign
joint venture enterprise, located in China, the right to apply for a patent belongs to the enterprise.
For any non-service invention-creation, the right to apply for a patent belongs to the inventor or creator. After
the application is approved, the patent right shall be owned by the enterprise or the individual that applied for
it.

The owner of the patent right and the holder of the patent right are referred to as “patentee”.

Article 7. No entity or individual shall prevent the inventor or creator from filing an application for a patent for
a non-service invention-creation.

Article 8. For an invention-creation made in cooperation by two or more entities, or made by an entity in execution of a commission
for research or designing given to it by another entity, the right to apply for a patent belongs, unless otherwise
agreed upon, to the entity which made, or to the entities which jointly made, the invention-creation. After the application
is approved, the patent right shall be owned or held by the entity or entities that applied for it.

Article 9. Where two or more applicants file applications for patent for the identical invention-creation, the patent right shall be
granted to the applicant whose application was filed first.

Article 10. The right to apply for a patent and the patent right may be assigned.

Any assignment, by an entity under ownership by the whole people, of the right to apply for a patent, or of the patent
right, must be approved by the competent authority at the higher level.

Any assignment, by a Chinese entity or individual, of the right to apply for a patent, or of the patent right, to a foreigner
must be approved by the competent department concerned of the State Council.

Where the right to apply for a patent or the patent right is assigned, the parties must conclude a written contract,
which will come into force after it is registered with and announced by the Patent Office.

Article 11. After the grant of the patent right for an invention or utility model, except as otherwise provided for in the law,
no entity or individual may, without the authorization of the patentee, make, use or sell the patented product, or use
the patented process and use or sell the product directly obtained by the patented process, for production or business
purposes.

After the grant of the patent right for a design, no entity or individual may, without the authorization of the patentee,
make or sell the product, incorporating its or his patented design, for production or business purposes.

After the grant of the patent right, except as otherwise provided for in the law, the patentee has the right to prevent
any other person from importing, without its or his authorization, the patented product, or the product directly
obtained by its or his patented process, for the uses mentioned in the preceding two paragraphs.

Article 12. Any entity or individual exploiting the patent of another must, except as provided for in Article 14 of this Law, conclude
with the patentee a written license contract for exploitation and pay the patentee a fee for the exploitation of the
patent. The licensee has no right to authorize any entity or individual, other than that referred to in the contract
for exploitation, to exploit the patent.

Article 13. After the publication of the application for a patent for invention, the applicant may require the entity or individual
exploiting the invention to pay an appropriate fee.

Article 14. The competent departments concerned of the State Council and the people’s governments of provinces, autonomous regions
or municipalities directly under the Central Government have the power to decide, in accordance with the State plan,
that any entity under ownership by the whole people that is within their system or directly under their administration
and that holds the patent right to an important invention-creation is to allow designated entities to
exploit that invention-creation; and the exploiting entity shall, according to the prescriptions of the State,
pay a fee for exploitation to the entity holding the patent right.

Any patent of a Chinese individual or entity under collective ownership, which is of great significance to the
interests of the State or to the public interest and is in need of spreading and application, may, after approval
by the State Council at the solicitation of its competent department concerned, be treated alike by making
reference to the provisions of the preceding paragraph.

Article 15. The patentee has the right to affix a patent marking and to indicate the number of the patent on the patented product
or on the packing of that product.

Article 16. The entity owning or holding the patent right shall award to the inventor or creator of a service invention-creation a reward
and, upon exploitation of the patented invention-creation, shall award to the inventor or creator a reward based
on the extent of spreading and application and the economic benefits yielded.

Article 17. The inventor or creator has the right to be named as such in the patent document.

Article 18. Where any foreigner, foreign enterprise or other foreign organization having no habitual residence or business office in
China files an application for patent in China, the application shall be treated under this Law in accordance with
any agreement concluded between the country to which the applicant belongs and China, or in accordance with any
international treaty to which both countries are party, or on the basis of the principle of reciprocity.

Article 19. Where any foreigner, foreign enterprise or other foreign organization having no habitual residence or business office
in China applies for a patent, or has other patent matters to attend to, in China, he or it shall appoint a patent
agency designated by the State Council of the People’s Republic of China to act as his or its agent.

Where any Chinese entity or individual applies for a patent or has other patent matters to attend to in the country,
it or he may appoint a patent agency to act as its or his agent.

Article 20. Where any Chinese entity or individual intends to file an application in a foreign country for a patent for invention-creation
made in the country, it or he shall file first an application for patent with the Patent Office and, with the
sanction of the competent department concerned of the State Council, shall appoint a patent agency designated by the State
Council to act as its or his agent.

Article 21. Until the publication or announcement of the application for a patent, staff members of the Patent Office and persons
involved have the duty to keep its content secret.

CHAPTER II REQUIREMENTS FOR GRANT OF PATENT RIGHT

Article 22. Any invention or utility model for which patent right may be granted must possess novelty, inventiveness and practical applicability.

Novelty means that, before the date of filing, no identical invention or utility model has been publicly disclosed
in publications in the country or abroad or has been publicly used or made known to the public by any other means in
the country, nor has any other person filed previously with the Patent Office an application which described the identical
invention or utility model and was published after the said date of filing.

Inventiveness means that, as compared with the technology existing before the date of filing, the invention has prominent
substantive features and represents a notable progress and that the utility model has substantive features and represents
progress.

Practical applicability means that the invention or utility model can be made or used and can produce effective results.

Article 23. Any design for which patent right may be granted must not be identical with or similar to any design which, before the date
of filing, has been publicly disclosed in publications in the country or abroad or has been publicly used in the country.

Article 24. An invention-creation for which a patent is applied for does not lose its novelty where, within six months before
the date of filing, one of the following events occurred:

(1) Where it was first exhibited at an international exhibition sponsored or recognized by the Chinese Government;

(2) where it was first made public at a prescribed academic or technological meeting;

(3) where it was disclosed by any person without the consent of the applicant.

Article 25. For any of the following, no patent right shall be granted:

(1) scientific discoveries;

(2) rules and methods for mental activities;

(3) methods for the diagnosis or for the treatment of diseases;

(4) animal and plant varieties;

(5) substances obtained by means of nuclear transformation.

For processes used in producing products referred to in item (4) of the preceding paragraph, patent right may
be granted in accordance with the provisions of this Law.

CHAPTER III APPLICATION FOR PATENT

Article 26. Where an application for a patent for invention or utility model is filed, a request, a description and its
abstract, and claims shall be submitted.

The request shall state the post_title of the invention or utility model, the name of the inventor or creator, the name
and the address of the applicant and other related matters.

The description shall set forth the invention or utility model in a manner sufficiently clear and complete so as to
enable a person skilled in the relevant field of technology to carry it out; where necessary, drawings are required. The
abstract shall state briefly the main technical points of the invention or utility model.

The claims shall be supported by the description and shall state the extent of the patent protection asked for.

Article 27. Where an application for a patent for design is filed, a request, drawings or photographs of the design shall be submitted,
and the product incorporating the design and the class to which that product belongs shall be indicated.

Article 28. The date on which the Patent Office receives the application shall be the date of filing. If the application
is sent by mail, the date of mailing indicated by the postmark shall be the date of filing.

Article 29. Where, within twelve months from the date on which any applicant first filed in a foreign country an application for
a patent for invention or utility model, or within six months from the date on which any applicant first filed in a foreign
country an application for a patent for design, he or it files in China an application for a patent for the same subject
matter, he or it may, in accordance with any agreement concluded between the said foreign country and China, or
in accordance with any international treaty to which both countries are party, or on the basis of the principle of mutual recognition
of the right of priority, enjoy a right of priority.

Where, within twelve months from the date on which any applicant first filed in China an application for a patent
for invention or utility model, he or it files with the Patent Office an application for a patent for the same subject matter,
he or it may enjoy a right of priority.

Article 30. Any applicant who claims the right of priority shall make a written declaration when the application is filed, and
submit, within three months, a copy of the patent application document which was first filed; if the applicant fails
to make the written declaration or to meet the time limit for submitting the patent application document, the claim
to the right of priority shall be deemed not to have been made.

Article 31. An application for a patent for invention or utility model shall be limited to one invention or utility model.
Two or more inventions or utility models belonging to a single general inventive concept may be filed as one application.

An application for a patent for design shall be limited to one design incorporated in one product. Two or more designs
which are incorporated in products belonging to the same class and are sold or used in sets may be filed as one application.

Article 32. An applicant may withdraw his or its application for a patent at any time before the patent right is granted.

Article 33. An applicant may amend his or its application for a patent, but the amendment to the application for a patent for invention
or utility model may not go beyond the scope of the disclosure contained in the initial description and claims,
and the amendment to the application for a patent for design may not go beyond the scope of the disclosure as shown
in the initial drawings or photographs.

CHAPTER IV EXAMINATION AND APPROVAL OF APPLICATION FOR PATENT

Article 34. Where, after receiving an application for a patent for invention, the Patent Office, upon preliminary examination,
finds the application to be in conformity with the requirements of this Law, it shall publish the application promptly
after the expiration of eighteen months from the date of filing. Upon the request of the applicant, the Patent Office
publishes the application earlier.

Article 35. Upon the request of the applicant for a patent for invention, made at any time within three years from the date
of filing, the Patent Office will proceed to examine the application as to its substance. If, without any justified
reason, the applicant fails to meet the time limit for requesting examination as to substance, the application
shall be deemed to have been withdrawn.

The Patent Office may, on its own initiative, proceed to examine any application for a patent for invention as
to its substance when it deems it necessary.

Article 36. When the applicant for a patent for invention requests examination as to substance, he or it shall furnish pre-filing
date reference materials concerning the invention.

The applicant for a patent for invention who has filed in a foreign country an application for a patent for the same
invention shall, at the time of requesting examination as to substance, furnish documents concerning any search made
for the purpose of examining that application, or concerning the results of any examination made, in that country.
If, without any justified reason, the said documents are not furnished, the application shall be deemed to have been withdrawn.

Article 37. Where the Patent Office, after it has made the examination as to substance of the application for a patent for
invention, finds that the application is not in conformity with the provisions of this Law, it shall notify the applicant
and request him or it to submit, within a specified time limit, his or its observations or to amend the application.
If, without any justified reason, the time limit for making response is not met, the application shall be deemed to have
been withdrawn.

Article 38. Where, after the applicant has made the observations or amendments, the Patent Office finds that the application
for a patent for invention is still not in conformity with the provisions of this Law, the application shall be rejected.

Article 39. Where it is found after examination as to substance that there is no cause for rejection of the application
for a patent for invention, the Patent Office shall make a decision to grant the patent right for invention, issue
the certificate of patent for invention, and register and announce it.

Article 40. Where it is found after preliminary examination that there is no cause for rejection of the application for a
patent for utility model or design, the Patent Office shall make a decision to grant the patent right for utility model
or the patent right for design, issue the relevant patent certificate, and register and announce it.

Article 41. Where, within six months from the date of the announcement of the grant of the parent right by the Patent
Office, any entity or individual considers that the grant of the said patent right is not in conformity with the
relevant provisions of this Law, it or he may request the Patent Office to revoke the patent right.

Article 42. The Patent Office shall examine the request for revocation of the patent right, make a decision revoking
or upholding the patent right, and notify the person who made the request and the patentee. The decision revoking the
patent right shall be registered and announced by the Patent Office.

Article 43. The Patent Office shall set up a Patent Reexamination Board. Where any party is not satisfied with the decision
of the Patent Office rejecting the application, or the decision of the Patent Office revoking or upholding the patent
right, such party may, within three months from the date of receipt of the notification, request the Patent Reexamination
Board to make a reexamination. The Patent Reexamination Board shall, after reexamination, make a decision and
notify the applicant, the patentee or the person who made the request for revocation of the patent right.

Where the applicant for a patent for invention, the patentee of an invention or the person who made the request for
revocation of the patent right for invention is not satisfied with the decision of the Patent Reexamination
Board, he or it may, within three months from the date of receipt of the notification, institute legal proceedings
in the people’s court.

The decision of the Patent Reexamination Board in respect of any request, made by the applicant, the patentee or the
person who made the request for revocation of the patent right, for reexamination concerning a utility model or design is
final.

Article 44. Any patent right which has been revoked shall be deemed to be non-existent from the beginning.

CHAPTER V DURATION, CESSATION AND INVALIDATION OF PATENT RIGHT

Article 45. The duration of patent right for inventions shall be twenty years and the duration of patent right for utility models
and patent right for designs shall be ten year, counted from the date of filing.

Article 46. The patentee shall pay an annual fee beginning with the year in which the patent right was granted.

Article 47. In any of the following cases, the patent right shall cease before the expiration of its duration:

(1) Where an annual fee is not paid as prescribed;

(2) Where the patentee abandons his or its patent right by a written declaration.

Any cessation of the patent right shall be registered and announced by the Patent Office.

Article 48. Where, after the expiration of six months from the date of the announcement of the grant of the patent right by the Patent
Office, any entity or individual considers that the grant of the said patent right is not in conformity with the
relevant provisions of this Law, it or he may request the Patent Reexamination Board to declare the patent right invalid.

Article 49. The Patent Reexamination Board shall examine the request for invalidation of the patent right, make a decision and notify
the person who made the request and the patentee. The decision declaring the patent right invalid shall be registered
and announced by the Patent Office.

Where any party is not satisfied with the decision of the Patent Reexamination Board declaring the patent
right for invention invalid or upholding the patent right for invention, such party may, within three months
from receipt of the notification of the decision, institute legal proceedings in the people’s court.

The decision of the Patent Reexamination Board in respect of a request to declare invalid the patent right for utility
model or design is final.

Article 50. Any patent right which has been declared invalid shall be deemed to be non-existent from the beginning.

The decision of invalidation shall have no retroactive effect on any judgment or order on patent infringement
which has been pronounced and enforced by the people’s court, on any decision concerning the handling of patent
infringement which has been made and enforced by the administrative authority for patent affairs, and on any contract
of patent license and of assignment of patent right which have been performed, prior to the decision of invalidation;
however, the damages caused to other persons in bad faith on the part of the patentee shall be compensated.

If, pursuant to the provisions of the preceding paragraph, no repayment, by the patentee or the assignor of the
patent right to the licensee or the assignee of the patent right, of the fee for the exploitation of the patent or the
price for the assignment of the patent right is obviously contrary to the principle of equity, the patentee or the assignor
of the patent right shall repay the whole or part of the fee for the exploitation of the patent or the price for the assignment
of the patent right to the licensee or the assignee of the patent right.

The provisions of the second and third paragraph of this Article shall apply to the patent right which has been revoked.

CHAPTER VI COMPULSORY LICENSE FOR EXPLOITATION OF THE PATENT

Article 51. Where any entity which is qualified to exploit the invention or utility model has made requests for authorization
from the patentee of an invention or utility model to exploit its or his patent on reasonable terms and such efforts
have not been successful within a reasonable period of time, the Patent Office may, upon the application of that
entity, grant a compulsory licence to exploit the patent for invention or utility model.

Article 52. Where a national emergency or any extraordinary state of affairs occurs, or where the public interest so requires, the Patent
Office may grant a compulsory licence to exploit the patent for invention or utility model.

Article 53. Where the invention or utility model for which the patent right was granted is technically more advanced than another invention
or utility model for which a patent right has been granted earlier and the exploitation of the later invention
or utility model depends on the exploitation of the earlier invention or utility model, the Patent Office may,
upon the request of the later patentee, grant a compulsory licence to exploit the earlier invention or utility model.

Where, according to the preceding paragraph, a compulsory licence is granted, the Patent Office may, upon the
request of the earlier patentee, also grant a compulsory licence to exploit the later invention or utility model.

Article 54. The entity or individual requesting, in accordance with the provisions of this Law, a compulsory licence for
exploitation shall furnish proof that it or he has not been able to conclude with the patentee a licence contract for exploitation
on reasonable terms.

Article 55. The decision made by the Patent Office granting a compulsory licence for exploitation shall be registered and announced.

Article 56. Any entity or individual that is granted a compulsory licence for exploitation shall not have an exclusive right
to exploit and shall not have the right to authorize exploitation by any others.

Article 57. The entity or individual that is granted a compulsory licence for exploitation shall pay to the patentee
a reasonable exploitation fee, the amount of which shall be fixed by both parties in consultations. Where the
parties fail to reach an agreement, the Patent Office shall adjudicate.

Article 58. Where the patentee is not satisfied with the decision of the Patent Office granting a compulsory licence for exploitation
or with the adjudication regarding the exploitation fee payable for exploitation, he or it may, within three months
from the receipt of the notification, institute legal proceedings in the people’s court.

CHAPTER VII PROTECTION OF PATENT RIGHT

Article 59. The extent of protection of the patent right for invention or utility model shall be determined by the terms
of the claims. The description and the appended drawings may be used to interpret the claims.

The extent of protection of the patent right for design shall be determined by the product incorporating the patented
design as shown in the drawings or photographs.

Article 60. For any exploitation of the patent, without the authorization of the patentee, constituting an infringing act,
the patentee or any interested party may request the administrative authority for patent affairs to handle the
matter or may directly institute legal proceedings in the people’s court. The administrative authority for patent
affairs handling the matter shall have the power to order the infringer to stop the infringing act and to compensate for
the damage. Any party dissatisfied may, within three months

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CIRCULAR OF THE GENERAL OFFICE OF THE STATE COUNCIL FOR TRANSMITTING THE REPORT SUBMITTED BY THE PEOPLE’S INSURANCE COMPANY...

REGULATIONS OF CUSTOMS ON IMPLEMENTING THE REGISTRATION SYSTEM OF DECLARANT UNITS

ACCOUNTING REGULATIONS OF THE PEOPLE’S REPUBLIC OF CHINA FOR JOINT VENTURES USING CHINESE AND FOREIGN INVESTMENT

PROVISIONS OF THE MINISTRY OF FINANCE FOR THE COLLECTION AND REFUND OF PRODUCT TAX AND VALUE ADDED TAX ON IMPORT AND EXPORT PRODUCTS

REGULATIONS FOR THE ADMINISTRATION OF FOREIGN BANKS AND CHINESE-FOREIGN JOINT BANKS IN THE SPECIAL ECONOMIC ZONES

LAW OF SUCCESSION OF THE PEOPLE’S REPUBLIC OF CHINA

ACCOUNTING REGULATIONS FOR JOINT VENTURES USING CHINESE AND FOREIGN INVESTMENT

PATENT LAW OF THE PEOPLE’S REPUBLIC OF CHINA

REGULATIONS FOR LAND MANAGEMENT OF THE TIANJIN ECONOMIC AND TECHNOLOGICAL DEVELOPMENT ZONE

GRASSLAND LAW OF THE PEOPLE’S REPUBLIC OF CHINA

REGULATIONS FOR LABOUR MANAGEMENT OF THE TIANJIN ECONOMIC AND TECHNOLOGICAL DEVELOPMENT ZONE

PATENT LAW

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