The Ministry of Finance

Supplementary Provisions of the Ministry of Finance on Accounting for Foreign Currency Transactions by Chinese-foreign Equity Joint
Ventures

the Ministry of Finance

December 31, 1987

1.

Fixed assets, intangible assets, other assets and raw materials acquired by and the costs and expenses thereof paid for by the joint
venture with funds contributed by the parties to the joint venture as investment subscribed and denominated in a currency other than
the Renminbi (including investment subscribed and paid during the start-up period and investment subscribed and paid after operations
have been started) may be recorded in Renminbi at the book exchange rate. The same applies to fixed assets, intangible assets, other
assets and raw materials acquired by the costs and expenses thereof paid for by the joint venture with funds from foreign currency
loans.

2.

A joint venture may adjust the adjust the year-end balances of all its foreign currency savings in banks and foreign currency receivables
and payables with respect to changes of the exchange rates after agreement has been obtained from the local financial departments
and tax authorities. The exchange gains and losses balance due to differences of the book exchange rate and the prevailing exchange
rate shall be recorded in a new account called the “Exchange Gains and Losses Amortization” account. Amortization shall start from
the current year over a period to be agreed upon by the local financial departments and tax authorities, normally between one to
five years. The balance of the “Exchange Gains and Losses Amortization” account shall be presented as a separate item under the “Deferred
Charges” in the current assets side or the “Accrued Expenses” in the current liabilities side of the balance sheet.

3.

Joint ventures engaged in foreign currency credit business shall record their foreign currency receipts and payments in separate accounts
according to their currency denominations. While preparing the period-end fiscal reports (accounting statements), the joint ventures
shall record the period-end balances of all their foreign currency savings in banks and foreign currency receivable and payable accounts
in Renminbi using the prevailing exchange rates.

The exchange gains and losses balance accrued from currency exchange transactions and transfer among various foreign exchange accounts
within the current year shall be presented under the “Current Period Exchange Gains and Losses” item.

4.

A joint venture shall record the Renminbi exchange gain as result of its sale of foreign exchange at an adjustment (swap) rate which
is higher than the book exchange rate under the “Current Period Exchange Gains” item. Only the adjustment rate shall be used in recording
purchase of foreign exchange at adjustment rate and the record shall be made separately. If the purchased foreign exchange is used
to acquire fixed assets, intangible assets, other assets, and raw materials and to pay for the costs and expenses thereof, the acquisition
and payments shall be recorded in Renminbi at the book adjustment exchange rate. If the purchased foreign exchange is used to pay
for foreign currency debts and the adjustment rate is higher than the book exchange rate of the foreign currency debts, the joint
venture shall record the Renminbi exchange loss under the “Current Period Exchange Losses” item.

5.

A joint venture already in operation may present its “Exchange Gains and Losses” item separately in its income statement instead of
putting under the “General and Administrative Expenses” item. A joint venture in its start-up period may present a separate “Exchange
Gains and Losses During Start-up Period” item under the “Organising Expenses” item in its balance sheet; however, amortization shall
be made on the “Exchange Gains and Losses During Start-up Period” item over a certain period after the joint venture has started
operation and the amortization schedule shall be the same as that for the “Organising Expenses” item.

6.

A joint venture that adopts a foreign currency as its standard currency for bookkeeping may account for its transactions in Renminbi
or other currencies which are not the standard currency for bookkeeping in ways similar to those stipulated in the above provisions.