REGULATIONS ON PRICE CONTROL

CHAPTER II PRICE DETERMINATION AND PRICE CONTROL

CHAPTER IV ENTERPRISE RIGHTS AND OBLIGATIONS

CHAPTER VI PENALTIES

   Article 1 These Regulations are formulated to implement State price guidelines and policies, tighten price control, maintain the basic stability
of market prices, ensure the smooth implementation of economic reform and improve the development of a socialist planned commodity
economy.

   Article 2 As long as State interests are protected, price control efforts shall safeguard the legitimate economic interests of producers, sellers
and consumers and enable the correct handling of economic interests among the central government, local governments, departments
and enterprises.

   Article 3 The State shall adopt the principle of combining direct price administration and indirect price control, whereby three types of prices,
namely a State stipulated price, a State guided price and a market adjusted price, are implemented.

   Article 4 The State shall implement a system of uniform leadership and graded control with regard to price control matters.

Commodity price control organizations, (hereinafter referred to as commodity price departments) of people’s governments at the various
levels, the competent departments of people’s governments at the various levels, as well as price control organizations and employees
of enterprises and public institutions shall strictly abide by State laws, regulations and policies on prices and shall effectively
conduct price control and supervision.

   Article 5 Prices referred to in these Regulations include:

(i) various commodity prices;

(ii) rates of fees for various service items (hereinafter referred to as service fee rates).

   Article 6 The price of a commodity shall be made up of the average production cost of the commodity, as well as tax, profits, and normal circulation
costs.

   Article 7 The determination and adjustment of the price of a commodity which is subject to State stipulated prices or State guided prices shall
be approximately the same as the value of the commodity, and shall reflect supply and demand conditions, meet State policy requirements
and comply with the following principles:

(i) maintain a reasonable relative price relationship between the various commodity prices;

(ii) provide explicit quality levels or grade criteria and implement quality pricing;

(iii) implement reasonable purchase and sale price differentials, wholesale and retail price differentials, regional price differentials
and seasonal price differentials, on the precondition of a reduction of the number of marketing stages through which goods must pass
and a reduction of costs incurred in this circulation of goods.

   Article 8 State stipulated prices refer to commodity prices and service fee rates determined by the commodity price departments and the competent
departments of the various people’s governments at county level and above in accordance with their area of jurisdiction as stipulated
by the State.

State guided prices refer to commodity prices and service fee rates determined by enterprises within the guidelines prescribed by
the commodity price departments and the competent departments of the various people’s governments at county level and above in accordance
with their area of jurisdiction as stipulated by the State, through the setting of a fundamental price fluctuation range, a rate
differential, a profit rate, a ceiling price and a minimum reserve price.

Market adjusted prices refer to commodity prices and service fee rates determined by producers and sellers.

   Article 9 A list of commodities and service fee items which are subject to division of control and under State stipulated pricing and State
guided pricing shall be formulated and adjusted by the State commodity price department and provincial, autonomous region and directly
administered municipal commodity price departments designated by the State commodity price department.

   Article 10 Assessment and adjustment of commodity prices and service fee rates shall be conducted in accordance with their area of jurisdiction
and the procedures as stipulated by the State. No regional department, unit or individual shall exceed its jurisdiction by determining
or adjusting commodity prices or service fee rates without authorization.

   Article 11 The relevant State Council departments in charge and the various local people’s governments shall keep informed on market commodity
prices and shall, through organizing supplies from State-run industrial and commercial enterprises, commodity supply enterprises
and supply and marketing co-operatives, participate in market adjustment and the control of market commodity prices. When market-adjusted
commodity prices undergo sharp rises or falls, the commodity price departments may set a maximum and minimum reserve price for fixed
commodities for a certain period of time and may implement a price rise application system.

   Article 12 The commodity price departments shall strengthen control and supervision of prices of urban and rural markets and individual household
industrial and commercial operations.

   Article 13 The State commodity price department shall perform the following duties in areas of price control:

(i) research and draft State price guidelines, policies, plans and reform programmes and organize the implementation of such items
following their approval by the State Council;

(ii) research and draft laws and regulations on prices;

(iii) take responsibility for the control and overall balancing of prices throughout the country;

(iv) outline guidelines and methods for commodity and service fee pricing, determine and adjust commodity prices and service fee rates
which are subject to a division of control and, in the case of determining or adjusting key commodity prices or service fee rates,
discuss details with relevant State Council departments in charge and subsequently submit the proposal to the State Council for approval;

(v) guide and supervise the relevant State Council departments and provincial, autonomous region and directly administered municipal
people’s governments in respect of price matters and investigate and deal with acts violating price laws, regulations and policies
(hereinafter referred to as illegal pricing acts);

(vi) mediate and settle price disputes between the relevant State Council departments, between provincial, autonomous region or directly
administered municipal people’s governments and between the relevant State Council departments and provincial, autonomous region
or directly administered municipal people’s governments;

(vii) establish a national price information network and develop price information services;

(viii) perform other duties designated by the State Council.

   Article 14 The relevant State Council departments shall perform the following duties in areas of price control:

(i) organize and supervise the implementation of State price guidelines, policies, laws and regulations within the system and industries
concerned;

(ii) outline the guidelines and methods of commodity and service fee pricing in accordance with their jurisdiction on price control,
and determine and adjust commodity prices and service fee rates which are subject to division of control;

(iii) organize and supervise the implementation of stipulated commodity prices and service fee rates within the system and industries
concerned;

(iv) guide its respective system and industries in price matters, mediate and settle price disputes which occur therein, and assist
the commodity price surveillance organs to investigate and deal with illegal pricing acts;

(v) provide information and price adjustment proposals relevant to commodity prices and service fee rates for items which are subject
to control by the State commodity price department;

(vi) establish a price information network within its respective system and industries and develop price information services.

   Article 15 The commodity price department of a provincial, autonomous region or directly administered municipal people’s government shall perform
the following duties in areas of price control:

(i) implement State price guidelines policies, laws and regulations;

(ii) organize and supervise the units concerned to implement commodity prices and service fee rates as stipulated by the State commodity
price department and the relevant State Council departments;

(iii) be responsible for the control and overall balancing of prices for the local region and consult with the relevant departments
concerning the drafting of a price plan for the local region and organize its implementation, subject to its approval;

(iv) outline the guidelines and methods of commodity and service fee pricing in accordance with its area of jurisdiction on price
control, determine and adjust commodity prices and service fee rates which are subject to division of control and, in the case of
key commodity prices or service fee rates, submit details to a provincial, autonomous region or directly administered municipal people’s
government for approval and filing with the State commodity price department and the relevant State Council departments;

(v) guide and supervise the relevant departments at the same level, the lower level people’s governments and local enterprises and
public institutions and investigate and deal with illegal pricing acts;

(vi) mediate and settle price disputes within the local region;

(vii) establish a local price information network and develop price information services;

(viii) perform other duties designated by provincial, autonomous region or directly administered municipal people’s governments.

   Article 16 Regulations on price control duties for the relevant departments of provincial, autonomous region and directly administered municipal
people’s governments, commodity price departments and the relevant departments of county people’s governments shall be formulated
by provincial, autonomous region and directly administered municipal people’s governments with reference to the relevant provisions
of this Chapter.

   Article 17 An enterprise shall have the right to:

(i) set commodity prices and service fee rates for commodities and service items which are subject to State guided prices, in accordance
with the relevant regulations;

(ii) set and implement market adjusted commodity prices and service fee rates;

(iii) following confirmation by the relevant department and approval by the commodity price department, set commodity prices in accordance
with the stipulated range of price increases and determine within its jurisdiction, discount prices for damaged and substandard products;

(iv) determine the price of products on trial sale within its area of jurisdiction as stipulated by the State;

(v) provide advice on determining and adjusting commodity prices and service fee rates for items which are subject to State stipulated
pricing or State guided pricing.

   Article 18 An enterprise shall be obliged to:

(i) observe State price guidelines, policies, laws and regulations when implementing State stipulated prices and State guided prices;

(ii) provide factual information on the pricing of commodities and service fee items which are subject to the implementation of State
stipulated prices or State guided prices;

(iii) comply with price control measures implemented by the commodity price departments, accept price surveillance and make available
relevant factual information, such as costs and account books, if required for price surveillance investigations;

(iv) implement an application and record filing system for commodity prices and service fee rates, as stipulated by the commodity
price departments;

(v) use price labels in accordance with regulations in areas such as commercial retail sectors, catering industries and service industries.

   Article 19 The rights and obligations of a public institution or an individual industrial or commercial household operation in the area of prices
shall be implemented with reference to the provisions of Articles 17 and 18 of these Regulations.

   Article 20 Price surveillance organs of the commodity price department at the various levels shall have the authority to perform, in accordance
with the law, price supervision and investigation and to handle illegal pricing acts, and shall supervise and examine the relevant
departments of the people’s governments at an equivalent level, lower level people’s governments and enterprises, public institutions
and individual industrial and commercial household operations within the local region with regard to the implementation of price
laws, regulations and policies.

   Article 21 A commodity price surveillance organ shall be guided in its operations by a higher level commodity price surveillance organ. The
appointment or replacement of key officials of local commodity price surveillance organs at the various levels shall be subject to
the consent of the higher level commodity price department.

   Article 22 Commodity price surveillance organs shall rely on and mobilize the public into carrying out price surveillance and examinations,
organize trade unions and neighbourhood organizations to establish employee price surveillance offices and consumer price surveillance
offices, and organize public participation in price surveillance activities.

Commodity price departments shall encourage consumer associations to play an active role in price surveillance and shall investigate
and deal with illegal pricing acts reported by consumer associations, in accordance with the law.

   Article 23 Public price surveillance shall focus on the prices of consumer goods and service fee rates which are closely linked with the everyday
life of the people.

A public price surveillance officer shall wear a badge and show a price surveillance certificate when carrying out price surveillance
activities.

   Article 24 Local governments at the various levels shall strengthen control of price surveillance and organize the relevant departments and
relevant parties from the public to carry out both regular and irregular supervision and examination of the implementation of price
laws, regulations and policies.

   Article 25 The departments of industrial and commercial administration, auditing, finance, taxation, public security, standardization and weights
and measures, as well as banks and other departments shall actively co-operate with the commodity price surveillance organs in order
to carry out price surveillance and deal with illegal pricing acts effectively.

   Article 26 Any unit or individual shall be enpost_titled to reveal illegal pricing acts. Commodity price surveillance organs shall maintain the
confidentiality of a party which reveals an illegal pricing act and shall, in accordance with regulations, issue an award to this
party or to a party which contributes to the investigation of an illegal pricing act.

An award shall also be issued, in accordance with regulations, to any party which makes an outstanding contribution in the area of
organizing public participation in price surveillance work.

   Article 27 A party which attacks or carries out revenge on a party which has revealed an illegal pricing act shall be pursued for any legal
liability in accordance with the law.

   Article 28 A commodity price surveillance officer shall perform his duties in accordance with the law. Disciplinary action shall be taken, in
accordance with relevant State regulations, against an officer who abuses office powers, commits bribery and corruption, gives special
favours to relatives and friends or neglects his duty and, in a serious case which constitutes a crime, criminal liability shall
be pursued by the judicial organs in accordance with the law.

   Article 29 The following acts shall be considered to be acts of illegal pricing:

(i) failing to implement State stipulated prices when purchasing or selling commodities or charging a service fee;

(ii) violating price guidelines for State guided prices when determining or adjusting commodity prices or service fee rates;

(iii) forcing grades or prices up or down;

(iv) violating regulations by selling production materials which are within the plan at a higher price which applies only to items
outside the plan;

(v) selling at a negotiable price rationed commodities which are supplied to urban and township residents;

(vi) violating regulations by selling commodities at an excessive price made up through various distributors;

(vii) imposing indiscriminate charges for unauthorized items;

(viii) increasing commodity prices and service fee rates indirectly by means of substituting quality commodities with substandard
commodities, giving short measures, lowering quality standards and other unacceptable means;

(ix) creating monopoly pricing by reaching an agreement between enterprises or industries;

(x) failing to abide by the application system which governs price increases;

(xi) failing to use price labels in accordance with the regulations;

(xii) disclosing State price secrets;

(xiii) performing any other act which violates price laws, regulations or policies.

   Article 30 Where any of the acts stated in the previous Article occur, the price surveillance organ shall, depending on the circumstances, impose
the following penalties:

(i) issue a notice of criticism;

(ii) order the violator to return the illicit gains to the buyer or user;

(iii) confiscate any illicit gains that cannot be returned;

(iv) issue a fine;

(v) request the administration of industry and commerce to suspend the business license of the offender;

(vi) issue a fine to the person held directly responsible and the person in charge if the offender is an enterprise or a public institution,
and recommend to the relevant department that certain administrative action is taken.

These penalties may be imposed simultaneously.

   Article 31 If an offender refuses to return the illicit gains or pay the fine, a commodity price surveillance organ may, in accordance with
the relevant regulations, notify the bank of the offending party to transfer the amount due from the account. If the offender does
not have a bank account or does not have the funds, the commodity price surveillance organ shall be enpost_titled to sell commodities
of the offender to pay the amount due.

The illicit gains of a penalized unit or individual which are returned or confiscated shall be deducted from the annual sales income
or operating revenue for the year in which the case is settled. An enterprise or public institution shall pay its fines from its
own funds, all-in budget expenses or funds that are not included in the budget.

   Article 32 A penalized unit or individual which does not agree with the penalty decision may, within 15 days of receiving notice of the penalty,
apply to a higher level commodity price surveillance organ for reconsideration. The higher level commodity price surveillance organ
shall issue a decision on the review within 30 days of receiving the review application. The original penalty decision shall be implemented
as usual during the period of reconsideration. If the penalized party disagrees with the review decision, it may lodge an appeal
with the People’s Court within 15 days of receiving notice of the decision.

   Article 33 If a mistake is found to have occurred, the State commodity price department shall have the power over the various level commodity
price surveillance organs to reverse a decision already in force, or to issue an order for a review and a higher level commodity
price surveillance organ shall have the same right over a lower level commodity price surveillance organ.

   Article 34 In case of refusal to comply with or the hindering of a commodity price surveillance officer performing his lawful duty, a penalty
shall be imposed by the public security organ, in accordance with the provisions of the Regulations of the People’s Republic of China
on Public Security Control and, in serious cases which constitute a crime, criminal liability shall be pursued by the judicial organs
in accordance with the law.

   Article 35 If the commodity price departments, the relevant departments of people’s governments at the various levels or their employees exceed
the extent of their authority and the procedures on price control when determining or adjusting commodity prices or service fee rates,
the matter shall be corrected by a higher level commodity price department or a commodity price department at an equivalent level
and the liability of the party concerned shall be pursued in accordance with the administrative jurisdiction governing cadres.

If State price secrets are disclosed, liability shall be pursued in accordance with the law.

   Article 36 The commodity price departments shall, in accordance with State price guidelines and policies, implement control and supervision
of administrative and public service charges and shall consult with the relevant departments to determine the standards for charges.

   Article 37 Price control for foreign investment enterprises established within Chinese territory shall be carried out in accordance with the
relevant State regulations.

   Article 38 The State Administration of Commodity Prices shall be responsible for the interpretation of these Regulations and shall formulate
detailed implementing rules.

   Article 39 These Regulations shall take effect from the date of promulgation and the Provisional Regulations on Commodity Price Control, issued
7 July 1982 by the State Council, shall be nullified simultaneously.