INTERIM PROVISIONS ON FIXED ASSETS INVESTMENT DIRECTION REGULATING TAX

    Article 1  With a view to carrying out state industrial policies,
controlling investment scope, guiding investment direction, regulating
investment structure, strengthening key constructions, and promoting
sustained, stable and coordinated development of national economy, the present
Provisions are formulated.

    Article 2  All units and individuals who are engaged in investment in
fixed assets within the territory of the People’s Republic of China are
obligated taxpayers (hereinafter referred to as taxpayers) of fixed assets
investment direction regulating tax (hereinafter abbreviated to FAID
regulating tax) and shall pay FAID regulating tax in accordance with
stipulations of the present Provisions.

    Article 3  Different tax rates shall be applied to FAID regulating tax
according to state industrial policy and economic scale of project. Fixed
assets investment projects shall have applicable tax rates determined in the
light of scale of project unit. Taxable items and tax rates shall be applied
according to the FAID Regulating Tax Schedule of Taxable Items and Tax Rates
attached to the present Provisions.

    Fixed assets investment (except investment in replacements and technical
innovations) that are not listed in the Schedule of Taxable Items and Tax
Rates shall be subject to a tax rate of 15%.

    Investment in replacements and technical innovations other than those
listed within the category of 0% according to the Schedule of Taxable Items
and Tax Rates shall be subject to a tax rate of 10%.

    FAID Regulating Tax Schedule of Taxable Items and Tax Rates may be revised
by the State Council when it so decides.

    Article 4  Calculation of payable FAID regulating tax shall be based on
actually realized amount of investment in a fixed assets investment project
and in case of replacements and technical innovation projects the
calculation shall be based on actually realized amount of investment in
construction project.

    Article 5  FAID regulating tax upon a fixed assets investment project
shall be paid in a year’s advance based on annual investment budget for
each project unit. At the end of the year, tax accounts shall be squared on
the basis of actually realized investment amount with excessive payment of
tax refunded or tax due repaid. Upon completion of the whole project, the
tax accounts shall be cleared on the basis of actually realized total
investment amount with excessive payment of tax refunded or tax due repaid.

    Any taxpayer who really has difficulty in fully paying in advance tax upon
the whole year’s budgeted investment may, subject to examination and
approval of the tax authority, pay by installments the total amount by the end
of September of the very year.

    Article 6  When a taxpayer applies for approval of a fixed assets
investment project the taxpayer shall make sure that payment for FAID
regulating tax has been effectively arranged for. FAID regulating tax shall
be included in total investment budget and covered by economic and financial
assessment of the project. But tax payment may not be taken into account
when payment for design, construction or other fees are charged.

    Article 7  FAID regulating tax may not be reduced or exempted except
otherwise prescribed by the State Council.

    Article 8  FAID regulating tax shall be collected and administered by the
tax authority. Taxpayers shall go through procedures of tax
registration, tax authentication and tax declaration with the tax bureau of
the locality where the project is sited.

    Article 9  Collection of FAID regulating tax shall be brought under a
source control mechanism that combines planned unified management with
an investment license system as is detailed in the following:

    (1) Planning commissions or planning and economic commissions of
different provinces, autonomous regions, municipalities under the direct
leadership of the Central Government and of separate-planning municipalities
shall get together written project programmes on fixed assets investments
in respective locality and transmit to lower levels taxable items, tax rates
and tax amount to be applied to different fixed assets investment projects
subject to examination and decision of the tax authority at the same level.

    (2) Taxpayers shall go to the tax bureau of the locality where the
project is sited to go through procedures of tax registration and declaration
etc. before they begin injecting annual investment. Banks and other financial
institutions shall transfer the amount of tax upon presentation of the special
tax payment notice paper issued by the tax authority.

    (3) Planning commissions or planning and economic commissions shall issue
the investment permit upon presentation of the receipt of tax payment. Banks
and other financial institutions shall proceed with allotment of funds or
loans to fixed assets investment projects upon presentation of the investment
permit.

    Article 10  Payment for FAID regulating tax shall be withheld and
transferred by the Chinese People’s Construction Bank, the China Industrial
and Commercial Bank, the China Agricultural Bank, the Bank of China, the
Transportation Bank and other financial institutions or relevant units.

    Article 11  For fixed assets investment projects beyond planning, the
taxpayers may, in addition to payment of tax at applicable tax rates, be
imposed on by the tax authority a fine as much as less than five times amount
of tax that should be paid. But fixed assets investments beyond planning that
are listed within the category of 0% tax rate shall be handled by relevant
planning departments according to correspondent stipulations.

    Investments in capital construction conducted under the pretext of
replacements and renovations projects shall be imposed upon double amount of
tax payable according to taxable items and tax rates applied to capital
construction investments. But capital construction investments that are listed
within the category of 0% tax rate shall be handled by relevant planning
departments according to corresponding stipulations.

    Article 12  In case a taxpayer fails to pay tax according to the present
Provisions, planning commissions or planning and economic commissions shall
cancel establishment of the project if it is at preparatory stage, or shall
withhold arrangement for construction of the project if it has just been
ready for construction, or shall cancel the annual investment budget if it
is at the stage of continued construction and, additionally, shall revoke
the investment permit. Banks and other financial institutions shall
withhold from loaning or allotting funds to such project.

    In case planning departments or banks violate the present Provisions to
the consequence of tax evasion, relevant authorities at higher level shall
investigate into responsibilities of concerned offenders.

    Article 13  Other matters over management of collection of FAID
regulating tax shall be handled according to stipulations of the Interim
Provisions of the People’s Republic of China on Management of Tax Collection.

    Article 14  The present Provisions are not applicable to investments in
fixed assets by Sino-foreign equity joint ventures, Sino-foreign
cooperative enterprises or solely foreign funded enterprises.

    The present Provisions are not applicable to investments in development
items banned by the state. Such investments cases shall be separately
handled by planning departments according to corresponding state laws,
regulations, guidelines and policies. Schedule of State Banned Development
Items may be revised by the State Council when it so decides.

    Article 15  Preferential treatment with FAID regulating tax to be applied
to regions of minor nationalities shall be provided for separately.

    Procedures on collection, reduction and exemption of FAID regulating tax
upon fixed assets investments with less than 50,000 yuan that, according to
state regulations, fall beyond planned management, shall be decided by
people’s governments of provinces, autonomous regions and municipalities
under the direct leadership of the Central Government.

    Article 16  Fixed assets investment permits shall be issued and managed
in a unified manner by planning departments. Rules on permit management
shall be formulated by the State Planning Commission.

    Article 17  Interpretation of the present Provision shall be in the
responsibility of the State Tax Bureau. Detailed rules for implementation
may be formulated by the State Tax Bureau.

                            
(Investment projects)

1. Agriculture,      Projects for control of big and small rivers     0%
Forestry and           including flood prevention project, dam,
Water Conservancy      floodgate, flood storage and control

                      
reservoir, flood-control dam,

                      
flood-diversion project, river realignment,

                      
danger reservoir reinforcement,

                      
flood-control communication equipment;

                     Projects
for irrigation and drainage including   0%

                      
water storage, water diversion, water

                      
up-pumping, water discharge, water allotment,

                      
water saving, water drainage and

                      
flood-discharge;

                     Farmland
and water conservancy, water and soil   0%

                      
conservancy;

                     Improvement
of medium- and high-yield            0%

                      
cultivated land;

                     Development
of beaches and wasteland;            0%

                     Breeding
of fine seeds and varieties;            0%

                     Stations
of technical services in animal         0%

                      
husbandry, livestock medical science,

                      
acquatic products, agricultural machines and

                      
water conservancy;

                     Poultry and
livestock farm;                      0%

                     Construction
of fishing port and fishery base    0%

                      
(except for those that occupy arable land);

                     Deep-sea
fishery and purchase of fishing boat;   0%

                     Acquaculture
(except for where arable land is    0%

                      
occupied);

                     Spreading
of agricultural, forestry and water    0%

                      
conservancy technologies;

                     Commodity
base of grain, cotton and edible oil;  0%

                     Monitor,
authentication and technical            0%

                      
supervision of agricultural machinery;

                     Supplementary
and compound forages;              0%

                     Base of fine
agricultural and side-line          0%

                      
products;

                     Forage monitoring
and testing station;           0%

                     Fertilizer,
chemicals and animal medicines       0%

                      
monitoring and testing station;

                     Shelter-forest
project;                          0%

                     Construction
of nature preserves;                0%

                     Forestry
protection;                            
0%

                     Construction
of quick-grown high-yield forest;   0%

                     Construction
of bases for protection and         0%

                      
raising of wild animals;

                     Well-known,
excellent and special economic       0%

                      
forests;

                     Plantation
of Chinese medical herbs;             0%

                     Cultivation
of forests of middle age and         0%

                      
young growth;

                     Cultivation
of forestry seedlings;               0%

                     Afforestation
and forestry resource reclamation  0%

                      
projects;

                     Animal and
plant quarantine;                    
0%

                     Construction
of grazing land;                    0%

                     Construction
of meteorological and hydrological  0%

                      
installments;

                     Water diversion
and water supply projects;       0%

                     Protection
of water resources and resettlements  0%

                      
of residents in the zone of reservoir.

                    
2. Energy Industry

   Coal              Coal mining (except for small
coalpits without   0%

                      
construction license);

                     Exploitation
of coal gas;                        0%

                     Exploitation
and utilization of low calorie      0%

                      
fuels;

                     Mechanized
exploitation and dressing of coking   0%

                      
coal with a capacity of 200,000 tons and

                      
above;

                     Mechanized
exploitation of coking coal with      30%

                      
a capacity of lower than 200,000 tons.

   Electricity       Thermal power generating unit, nuclear power,    0%

                      
projects of big, medium and small hydropower

                      
station, thermoelectric joint-generating and

                      
energy-saving set, power transmission and

                      
transformation projects with a capacity of

                      
100,000 kilowatts and above;

                     Thermal power
or steam-condensing generating     5%

                      
set with a capacity ranging from 25,000

                      
kilowatts to 100,000 kilowatts within a

       &