COMPUTER INFORMATION NETWORK AND INTERNET SECURITY, PROTECTION, AND MANAGEMENT REGULATIONS

ENERGY CONSERVATION LAW OF THE PEOPLE’S REPUBLIC OF CHINA

The Standing Committee of the National People’s Congress

Order of the President of the People’s Republic of China

No.90

The Energy Conservation Law of the People’s Republic of China which has been adopted at the 28th Meeting of the Standing Committee
of the Eighth National People’s Congress on November 1, 1997 is promulgated now, and shall enter into force as of November 1, 1997.

President of the People’s Republic of China: Jiang Zemin

November 1, 1997

Energy Conservation Law of the People’s Republic of China ContentsChapter I General Provisions

Chapter II Energy Conservation Administration

Chapter III Rational Energy Utilization

Chapter IV Technological Progress in Energy Conservation

Chapter V Legal Liability

Chapter VI Supplementary Provision

Chapter I General Provisions

Article 1

This Law is enacted with a view to promoting energy conservation in the whole society, improving energy utilization and economic performance,
protecting the environment, ensuring national socio-economic development and satisfying the requirements of people’s livelihood.

Article 2

The energy resources referred to in this Law mean coal, crude oil, natural gas, electricity, coke, coal gas, thermal power, finished
petroleum products, liquefied petroleum gas, biological energy and all other resources from which useful energy is obtained directly
or through processing or transformation.

Article 3

The energy conservation referred to in this Law means the strengthening of energy utilization administration, adoption of measures
which are technologically feasible, economically rational and bearable to the environment and society, reduction in losses and waste
in all links from energy production to consumption and more efficient and rational utilization of energy resources.

Article 4

Energy conservation constitutes a long-term strategic policy in the nation’s economic development.

The State Council and people’s governments of provinces, autonomous regions and municipalities directly under the Central Government
should step up the energy conservation work, rationally adjust industrial structures, enterprise structures, product structures and
energy consumption structure, promote technological progress in energy conservation, reduce energy consumption per unit of output
value and energy consumption per unit of product, improve development, processing and transformation, transportation or transmission
and supply of energy, gradually improve energy utilization and promote the energy-saving type development of the national economy.

The State encourages development and utilization of new energy resources and renewable energy resources.

Article 5

The State formulates the energy conservation policy, compiles the energy conservation plan and integrates it into the national socio-economic
development plan, ensures rational utilization of energy resources and coordinates it with economic development and environmental
protection.

Article 6

The State encourages and supports the research and dissemination of energy conservation science and technology, steps up publicity
and education in energy conservation, popularizes the scientific knowledge of energy conservation and enhances the awareness of the
whole people in energy conservation.

Article 7

All units and individuals shall fulfil the obligations of energy conservation and have the right to report the acts of wastefulness
in energy resources.

People’s governments at all levels shall reward units and individuals having scored prominent achievements in energy conservation
or research and dissemination of energy conservation science and technology.

Article 8

The department regulating energy conservation work under the State Council takes charge of the work of energy conservation supervision
and administration nationwide. The departments concerned under the State Council shall be responsible for the work of energy conservation
supervision and administration within the scope of their respective functions and responsibilities.

The departments regulating energy conservation work of local people’s governments at or above the county level shall take charge of
the work of energy conservation supervision and administration within their respective administrative areas. The departments concerned
of local people’s governments at or above the county level shall be responsible for the work of energy conservation supervision and
administration within the scope of their respective functions and responsibilities.

Chapter II Energy Conservation Administration

Article 9

The State Council and local people’s governments at all levels shall strengthen the leadership on the energy conservation work and
go in for disposition, coordination, supervision, inspection and promotion of the energy conservation work every year.

Article 10

The State Council and people’s governments of provinces, autonomous regions and municipalities directly under the Central Government
shall, pursuant to the policy of putting equal stress on economy of energy and development of energy resources and giving top priority
to energy conservation, and on the basis of comparative authentication of technology, economy and the environment of energy conservation
and development of energy resources, select investment projects in energy conservation and development of energy resources on merit
and formulate the energy investment plan.

Article 11

The State Council and people’s governments of provinces, autonomous regions and municipalities directly under the Central Government
shall arrange energy conservation funds in the funds for capital construction and technological transformation to be used in support
of rational utilization of energy and development of new energy resources and renewable energy resources.

Municipal and county people’s governments shall arrange energy conservation funds in the light of actual conditions to be used in
support of rational utilization of energy and development of new energy resources and renewable energy resources.

Article 12

The feasibility study of an investment project with fixed assets shall include a specific authentication on rational energy utilization.

The design and construction of the investment project with fixed assets shall comply with standards for rational energy utilization
and energy-saving design standards.

The examination and approval organ shall not approve the construction in accordance with law of a project which fails to meet the
standards for rational energy utilization and energy-saving design standards; no acceptance checks of the project failing to meet
the standards for rational energy utilization and energy-saving design standards shall be conducted.

Article 13

New construction of energy-guzzling industrial projects with obsolete technologies and heavy waste of energy resources shall be prohibited.
The catalogue and specific measures for the banning of new construction of energy-guzzling industrial projects shall be worked out
by the department of energy conservation administration under the State Council in conjunction with the departments concerned under
the State Council.

Article 14

The competent administrative department of standardization under the State Council shall formulate the state standards for energy
conservation.

In the case of no state standards as prescribed in the preceding paragraph, the departments concerned under the State Council may
formulate relevant trade energy-saving standards and submit them to the competent administrative department of standardization under
the State Council for the record.

The energy-saving standards to be formulated shall be technologically state-of-the-art and economically rational which shall be constantly
perfected and improved.

Article 15

The department of energy conservation administration under the State Council shall, in conjunction with the departments concerned
under the State Council, step up supervision over the trades producing wide-ranging massive energy-consuming products, urge them
to take energy-saving measures and make efforts to upgrade product design and manufacturing technology and gradually reduce the energy
consumption per unit of product of the respective trades.

Article 16

The departments of energy conservation administration of people’s governments at or above the provincial level shall, in conjunction
with the departments concerned at the corresponding level, formulate ceilings for energy consumption per unit of product for products
guzzling energy in the process of production.

Formulation of ceilings for energy consumption per unit of product should be scientific and rational.

Article 17

The State practises the elimination system of outmoded energy guzzling products and equipment.

The catalogue of energy-guzzling products and equipment to be phased out shall be determined and published by the department of energy
conservation administration under the State Council in conjunction with the departments concerned under the State Council. Specific
measures for implementation shall be formulated by the department of energy conservation administration under the State Council in
conjunction with the departments concerned under the State Council.

Article 18

Enterprises may, in accordance with the principle of voluntarism and in pursuance of the state provisions relating to product quality
authentication, apply to the authentication agencies acknowledged by the department of product quality supervision and administration
under the State Council or the departments authorized by the department of product quality supervision and administration under the
State Council for energy-consuming product energy-saving quality authentication; the enterprises which pass the authentication shall
obtain a energy-saving quality authentication certificate and use the energy-saving quality authentication mark on the energy-consuming
products or their packages.

Article 19

Statistical offices of all people’s governments at or above the county level shall, in conjunction with the departments concerned
at the corresponding level, do a good job in statistics of the state of energy consumption and utilization and publish a bulletin
at regular intervals making public the state of energy consumption per unit of product of major energy-consuming products etc.

Article 20

The State shall step up energy conservation administration over major energy-consuming units.

The following energy-consuming units shall be the major energy-consuming units:

(1)

energy-consuming units with aggregate annual energy consumption over 10,000 tons of standard coal;

(2)

energy-consuming units with aggregate annual energy consumption more than 5,000 tons and less than 10,000 tons of standard coal designated
by the departments concerned under the State Council or the departments of energy conservation administration of people’s governments
of provinces, autonomous regions and municipalities directly under the Central Government.

The departments of energy conservation administration of all people’s governments at or above the county level shall organize the
departments concerned in conducting supervision and inspection of the state of energy utilization of major energy-consuming units,
and may entrust units with testing and measuring technical qualifications to conduct energy conservation testing and measuring in
accordance with law.

The energy-saving requirements, energy-saving measures and control measures for major energy-consuming units shall be formulated by
the department of energy conservation administration under the State Council in conjunction with the departments concerned under
the State Council.

Chapter III Rational Energy Utilization

Article 21

An energy-consuming unit shall, in accordance with the principle of rational energy utilization, enhance energy conservation management,
formulate and organize the implementation of energy-saving technical measures of the unit to reduce energy consumption.

Energy-consuming units shall conduct energy conservation education and organize related personnel to participate in energy conservation
training.

No personnel without undergoing energy conservation education and training shall work in posts operating energy-consuming equipment.

Article 22

Energy-consuming units shall strengthen quantification management and perfect the system of energy consumption statistics and analysis
of the state of energy utilization.

Article 23

Energy-consuming units shall set up the energy conservation responsibility system and give reward to collectives and individuals having
made achievements in energy conservation.

Article 24

units making products with high energy consumption shall abide by the energy consumption ceilings per unit of product formulated in
accordance with law.

Where the circumstances are serious in energy consumption exceeding the ceilings for energy consumption per unit of product, treatment
shall be effected within a specified period. Treatment within a specified period shall be decided upon by the departments of energy
conservation administration of people’s governments at or above the county level pursuant to the terms of reference prescribed by
the State Council.

Article 25

Units and individuals making and selling energy-consuming products and using energy-consuming equipment must, within the time period
specified by the department of energy conservation administration under the State Council in conjunction with the departments concerned
under the State Council, stop the production and sale of energy-consuming products phased out by express state order, stop the use
of energy-consuming equipment phased out by express state order, and shall not transfer the phased-out equipment to others for use.

Article 26

Units and individuals making energy-consuming products shall truthfully annotate the energy consumption index on product descriptions
and product marks.

Article 27

Units and individuals making energy-consuming products shall not use forged energy-saving quality authentication marks or imitate
energy-saving quality authentication marks.

Article 28

Major energy-consuming units shall, pursuant to the relevant state provisions, submit reports on the state of energy utilization at
regular intervals. The state of energy utilization includes such contents as information on energy consumption, analyses of energy
utilization efficiency and energy conservation benefits and energy-saving measures.

Article 29

Major energy-consuming units shall set up energy management posts, employ energy management personnel from among staff members with
knowledge of the energy conservation specialty and practical experience and the technical post_title above engineer and report to the
energy conservation administrative departments of people’s governments at or above the county level and the departments concerned
for the record.

Energy management personnel shall be responsible for the supervision and inspection of the state of energy utilization of the respective
units.

Article 30

Workers and staff members of units and other urban and rural inhabitants shall, pursuant to the state provisions, take measurements
and pay fees in the use of such energy resources as electricity, coal gas, natural gas and coal produced by enterprises and shall
not use them without charge or practise the contractual lump-sum fee system.

Article 31

Energy production and management units shall, pursuant to the provisions of laws and regulations and agreement in contracts, supply
energy to the energy-consuming units.

Chapter IV Technological Progress in Energy Conservation

Article 32

The State encourages and supports the development of state-of-the-art energy-saving technologies, determines the priorities and direction
in the development of state-of-the-art energy-saving technologies, establishes and perfects the energy-saving technology service
system and fosters and standardizes the energy-saving technology market.

Article 33

The State organizes the implementation of major energy conservation scientific research projects, energy conservation demonstration
projects, comes up with energy-saving extension projects and guides enterprises, institutions and individuals in adopting state-of-the-art
energy-saving techniques, technologies, equipment and materials.

The State formulates preferential policies in support of the energy conservation demonstration projects and energy-saving extension
projects.

Article 34

The State encourages the introduction of foreign state-of-the-art energy-saving technologies and equipment and prohibits the introduction
of obsolete foreign energy-consuming technologies, equipment and materials.

Article 35

Energy conservation funds shall be arranged in the scientific research funds arranged by the State Council and people’s governments
of provinces, autonomous regions and municipalities directly under the Central Government to be used in state-of-the-art energy-saving
technology research.

Article 36

All people’s governments at or above the county level shall organize the departments concerned in the promotion of scientific and
rational specialized production in conformity with energy conservation requirements in accordance with the state industrial policies
and energy conservation technology policy.

Article 37

Design and construction of buildings shall, pursuant to the provisions of relevant laws and administrative regulations, adopt energy-saving
type building structures, materials, apparatuses and products, improve insulation characteristics and reduce energy consumption in
heating, cooling and lighting.

Article 38

People’s governments at all levels shall, pursuant to the policy of adapting to the local conditions, multi-energy complementarity,
integrated utilization and seeking benefits, strengthen energy construction in the rural areas, develop and exploit such renewable
energy and new energy resources as methane, solar energy, wind energy, hydro-energy and underground thermal power, etc.

Article 39

The State encourages the development of the following general-purpose energy-saving technologies:

(1)

extension of joint production of heat and electricity and central heating, improvement in thermal power generation unit utilization,
development of thermal power ladder-type utilization technology, joint production technology of heat, electricity and cooling and
triple supply technology of heat, electricity and coal gas and improvement in integrated utilization of thermal power;

(2)

gradual realization of economic operations of electric motors, blast motors, pumping equipment and systems, development of electric
motor speed regulation electricity-saving technology and electricity electronic electricity-saving technology, development, production
and popularization of fine-quality low-price energy-saving apparatuses and improvement of electric power utilization;

(3)

development and extension of such clean coal technologies as the flow bed burning, smokeless burning, gasification, liquefaction suitable
to the types of coal in the country and improvement of coal utilization;

(4)

development and extension of other general-purpose energy-saving technologies which have been proved in energy conservation work to
be technologically mature and with marked benefits.

Article 40

All trades shall formulate trade energy conservation technology policies, develop and extend new energy-saving technologies, new techniques,
new equipment and new materials, restrict or phase out obsolete energy-guzzling technologies, techniques, equipment and materials.

Article 41

The department of energy conservation administration under the State Council shall, in conjunction with the departments concerned
under the State Council, lay down general-purpose and trade-wise specific energy-saving technical targets, requirements and measures,
and make timely revisions in the light of the development of the economy and energy conservation technologies, improve energy utilization,
reduce energy consumption so as to enable energy utilization in China to gradually catch up with the advanced international levels.

Chapter V Legal Liability

Article 42

With respect to new construction of an energy-guzzling industrial project expressly prohibited by state order in violation of the
provisions of Article 13 of this Law, the department of energy conservation administration of the people’s government at or above
the county level shall come up with suggestions which shall be submitted to the people’s government at the corresponding level pursuant
to the terms of reference prescribed by the State Council to order the said unit to stop going into production or stop its use.

Article 43

With respect to a unit making heavy energy-consuming products exceeding ceilings for energy consumption per unit of product in violation
of the provisions of Article 24 of this law where the circumstances are serious which does not carry out treatment as directed for
treatment within the specified time period or fails to meet the requirements for treatment, the department of energy conservation
administration of the people’s government at or above the county level may come up with suggestions which shall be submitted to the
people’s government at the corresponding level pursuant to the terms of reference prescribed by the State Council to order the said
unit to suspend operations for consolidation or close down.

Article 44

With respect to any unit making and selling energy-consuming products phased out by express state order in violation of the provisions
of Article 25 of this Law, the department of product quality supervision administration of the people’s government at or above the
county level shall order the said unit to stop the production and sale of the energy-consuming products phased out by express state
order, confiscate the illegally produced and sold energy-consuming products phased out by express state order and the illegal gains,
and concurrently impose a fine more than 100% less than five times of the amount of the illegal gains; the department of industry
and commerce administration of the people’s government at or above the county level may revoke its business licence.

Article 45

With respect to any unit using energy-consuming equipment phased out by express state order in violation of the provisions of Article
25 of this Law, the department of energy conservation administration of the people’s government at or above the county level shall
order the said unit to stop its use thereof and confiscate the energy-consuming equipment phased out by express state order; where
the circumstances are serious, the department of energy conservation administration of the people’s government at or above the county
level may come up with suggestions which shall be submitted to the people’s government at the corresponding level pursuant to the
terms of reference prescribed by the State Council to order it to suspend operations for consolidation or close down.

Article 46

With respect to anyone who transfers phased-out energy-consuming equipment to others for use in violation of the provisions of Article
25 of this Law, the department of product quality supervision administration of the people’s government at or above the county level
shall confiscate the illegal gains and concurrently impose a fine more than 100% less than five times of the amount of the illegal
gains.

Article 47

With respect to any unit that does not annotate the energy consumption index in the product descriptions and on the product mark in
violation of the provisions of Article 26 of this Law, the department of product quality supervision administration of the people’s
government at or above the county level shall order it to make a rectification within the specified time period and may impose a
fine of less than RMB 50,000 Yuan.

With respect to any unit whose annotation of the energy consumption index in the product descriptions and on the product mark is not
in conformity with the actual conditions of the product in violation of the provisions of Article 26 of this Law, the violator shall
bear civil liability pursuant to the provisions of relevant laws in addition to the penalty in accordance with the provisions of
the preceding paragraph.

Article 48

With respect to any unit using forged energy-saving quality authentication mark or imitating energy-saving quality authentication
mark in violation of the provisions of Article 27 of this Law, the department of product quality supervision administration of the
people’s government at or above the county level shall order it to make a rectification openly, confiscate the illegal gains and
may concurrently impose a fine more than 100% less than five times the amount of the illegal gains.

Article 49

State functionaries who abuse power, neglect their duties, indulge in self-seeking misconduct in energy conservation work shall, if
a crime has been constituted, be investigated for criminal liability; where a crime has not been constituted, administrative sanctions
shall be imposed.

Chapter VI Supplementary Provision

Article 50

This Law shall enter into force as of January 1,1998.

The Standing Committee of the National People’s Congress
1997-11-01

MEASURES FOR CUSTOMS SUPERVISION AND CONTROL OF THE BONDED AREAS

Category	CUSTOMS	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1997-08-01	Effective Date	1997-08-01

Measures for Customs Supervision and Control of the Bonded Areas

Chapter I  General Provisions
Chapter II  Supervision and Control of Entry and Exit Goods between the
Chapter III  Supervision and Control of Entry and Exit Goods between
Chapter IV  Supervision and Control over Goods in the Bonded Areas
Chapter V   Control of Goods of Processing Trade in the Bonded Areas
Chapter VI  Supervision and Control over Transportation Vehicles and
Chapter VII  Supplementary Provisions

(Approved by the State Council on June 10, 1997, Promulgated by General

Administration of Customs on August 1, 1997)
Chapter I  General Provisions

Article 1 These Measures are formulated in accordance with the
provisions of the Customs Law and other relevant laws with a view to
strengthening and perfecting customs supervision and control of the bonded
areas and promoting sound development of the bonded areas.

Article 2 Establishment of the bonded areas within the territory of the
People’s Republic of China must be subjected to the approval of the State
Council.

Article 3 The bonded areas are specially designated areas under customs
supervision and control. The customs exercise supervision and control over
goods, transportation vehicles and articles carried by individuals entering
or leaving the bonded areas pursuant to these Measures.

Isolation facilities meeting the requirements for customs supervision
and control should be installed between the bonded areas and other areas
within the territory of the People’s Republic of China(hereinafter referred
to as un-bonded areas).

Article 4 Only administrative organs for the bonded areas and
enterprises are established in the bonded areas. No persons other than the
security guards shall reside in the bonded areas.

Article 5 Enterprises established in the bonded areas (hereinafter
referred to as in-area enterprises) should complete the formalities of
registration at the customs.

In-area enterprises should, pursuant to the provisions of the relevant
laws and regulations of the State, keep ledgers, compile statements and
tables, do bookkeeping and carry out accounting and settlement on legal and
effective vouchers and record such information as the stocks, transfers,
transshipment, sales, processing, utilization and damages and consumption
of goods and articles entering or leaving the bonded areas.

Article 6 The bonded areas practise the customs auditing system.

In-area enterprises should hook up with the electronic computer network
of the customs and carry out electronic data exchange.

Article 7 The customs are empowered to conduct inspections and
examinations of the goods, articles, transportation vehicles and personnel
entering or leaving the bonded areas as well as related sites in the areas
pursuant to the provisions of the Customs Law.

Article 8 Goods and articles the import and export of which are
prohibited by the State must not enter or leave the bonded areas.
Chapter II Supervision and Control of Entry and Exit Goods between the
Bonded Areas and Boyond-the-boundary Areas

Article 9 The customs exercise simple, convenient and effective
supervision and control over entry and exit goods between the bonded areas
and the beyond-the-boundary areas.

Article 10 Consignees, consignors or their agents shall report to the
customs for the record on entry and exit goods between the bonded areas and
the boyond-the-boundary areas.

Article 11 No import-export quota and license control shall be exercised
other than passive export quota control in respect of entry and exit goods
between the bonded areas and the beyond-the-boundary areas.

Article 12 Import duty and import link taxes of goods entering the
bonded areas from places beyond the boundaries, unless otherwise provided for
in laws and regulations, shall be handled in accordance with the
following provisions:

(1)Machinery, equipment and other capital goods needed for in-area
construction projects of infrastructure for production shall be exempted
from taxation;

(2)Production and management equipment and rational quantity of office
items for their own use by in-area enterprises as well as their required
parts and components for maintenance, feuls for production, materials and
equipment required for the construction of workshops for production and
warehouse facilities shall be exempted from taxation;

(3)Rational quantity of management equipment and office items as well
as the required parts and components for maintenance for their own use by
the administrative organs of the bonded areas shall be exempted from
taxation; and

(4)Raw materials, parts, components and packaging materials required
for the processing of export products by in-area enterprises shall be
bonded.

Goods or articles other than those prescribed in sections (1) to (4)
in the preceding paragraph entering the bonded areas shall be taxed in
accordance with law.

Goods for transshipment and goods stored in the bonded areas shall be
put under control as bonded goods.
Chapter III Supervision and Control of Entry and Exit Goods between
the Bonded Areas and the Un-bonded Areas

Article 13 Formalities for import goods shall be completed for goods
from the bonded areas entering un-bonded areas; formalities for export goods
shall be completed for goods from un-bonded areas entering the bonded areas
and export tax refund shall be processed in accordance with the relevant
provisions of the State.

The customs exercise supervision and control over entry and exit goods
between the bonded areas and the un-bonded areas pursuant to the provisions
of the State related to import-export control.

Article 14 For machinery, equipment, capital goods and articles
entering the bonded areas from the un-bonded areas for in-area use, user
units should submit lists of the above-mentioned goods or articles which will
be cleared upon customs inspection.

Goods or articles of the preceding paragraph which have already paid
import duty and import linked tax shall not be refunded.

Article 15 For goods of the bonded areas to be imported and exported
from the ports of un-bonded areas or goods of one bonded area to be shipped
to another bonded area, written applications should be submitted to customs
in advance and these goods will be handled in accordance with customs
transfer shipment and relevant provisions upon the approval of customs.
Chapter IV Supervision and Control over Goods in the Bonded Areas

Article 16 Goods in the bonded areas can be transferred and divertied
among in-area enterprises; the interested parties should report to the
customs on matters relating to transfers and diversions for the record.

Article 17 Such simple processing as classification, sorting, painting
and pasting of marks and change in packaging forms of transit goods in the
bonded areas can be carried out in in-area warehouses or other in-area sites.

Article 18 When in-area enterprises hold exhibitions and diplays of
foreign commodities and commodities of the un-bonded areas in the bonded
areas, the displayed commodities should be subjected to customs supervision
and control.
Chapter V Control of Goods of Processing Trade in the Bonded Areas

Article 19 In-area processors should complete the formalities at the
customs for their required raw materials and components entering or leaving
the bonded areas for the record.

Article 20 Production of export products under passive quota control
by in-area processors should be subjected to the approval of the competent
department under the State Council in advance.

Article 21 Formalities should be completed at the customs in accordance
with the relevant provisions of the State for the shipment out of the country
of the finished products and the leftover bits and pieces of industrial
materials produced in the process of processing by in-area processors;
they shall be exempted from export duty unless otherwise provided for in
laws and regulations.

Shipment by in-area processors of in-area processed finished products,
substandard products or the leftover bits and pieces of industrial materials
produced in the process of processing to un-bonded areas should go through
formalities of import customs declaration at the customs in accordance with
the relevant provisions of the State and pay taxes according to law.

Article 22 For finished products processed entirely with materials and
components shipped in from abroad by in-area processors to be sold in
un-bonded areas, the customs shall levy tax as import finished products.

For processed finished products containing materials and components
shipped in from abroad to be sold in un-bonded areas, the customs shall
levy tax in accordance with their contained shipped-in materials and
components; for untruthful declarations with regard to item names, quantity
and value of the shipped-in materials and components from abroad, the
customs shall levy taxes as import finished products.

Article 23 In-area processors entrusting enterprises in un-bonded areas
or accepting the entrustment of the enterprises in un-bonded areas for
processing business should gain the approval of the customs in advance
and meet the following conditions:

(1)they have in-area production sites which have already formally
conducted processing business;

(2)main working procedure of the processing business entrusted to
enterprises in un-bonded areas should be carried out in the bonded areas;

(3)the duration of entrusting enterprises in un-bonded areas with
processing business shall be six months; when extension becomes necessary
under extraordinary circumstances, application for extension should be
submitted to the customs and the duration of extension shall be six
months. Products should be shipped back to the bonded areas upon
completion of processing in un-bonded areas; when it becomes necessary
to export the products direct from the un-bonded areas, formalities for
verification and deduction should be completed at the customs; and

(4)in-area processors taking orders of entrusted processing from
enterprises in un-bonded areas should complete the formalities for the
materials and components for entrusted processing at the customs for
the record, separate ledgers of the materials, components and products
of entrusted processing and those of the in-area enterprises should be
kept and they should be used separately. Products upon completion of
processing should be shipped back to the enterprises in the un-bonded
areas, and the in-area processors shall apply to the customs for
writing off the case.

Article 24 The customs do not practise the system of bank guarantee
machine account for processing trade for the processing businesses
with imported materials and with customers’ materials conducted by
in-area processors.

When the processing business is entrusted to enterprises in un-bonded
areas, the enterprises in the un-bonded areas shall go through the
formalities of contract registration for the record and follow the bank
guarantee machine account system.
Chapter VI Supervision and Control over Transportation Vehicles and
Articles Carried by Individuals Entering and Leaving the Bonded Areas

Article 25 Transpotation vehicles and personnel entering and leaving
the bonded areas should go through the special-purpose passages designated
by the customs and be subjected to customs inspection.

Article 26 The persons-in-charge of the transportation vehicles entering
and leaving the bonded areas should complete the formalities for registration
at the customs for the record on the presentation of the certificates of
approval by the competent departments of the bonded areas along with lists of
the names, quantity, license plate numbers and drivers’ names.

Article 27 Without the approval of the customs, transportation vehicles
and personnel from the bonded areas to the un-bonded areas must not ship or
carry duty-free goods and articles, bonded goods as well as products made
with bonded materials and components.
Chapter VII Supplementary Provisions

Article 28 Whoever in violation of the provisions of these Measures
shall be dealt with pursuant to the provisions of People’s Republic of China> and Administrative Penalty of the Customs Law of the People’s Republic of
China>; when the offence is of a serious nature, the customs can revoke
the qualification of customs registration of the in-area enterprises.

Article 29 Specific measures relating to putting on record provided
for in these Measures shall be worked out by the General Administration of
Customs.

Article 30 These Measures come into force as of the date of
promulgation. of China for Goods, Transportation Vehicles and Articles Carried by
Individuals Entering and Leaving the Shanghai Waigaoqiao Bonded Area>
is simultaneously annulled.

PROVISIONS OF THE STATE COUNCIL CONCERNING HOISTING AND USING THE NATIONAL AND REGIONAL FLAGS AT THE SAME TIME IN THE HONGKONG SPECIAL ADMINISTRATIVE REGION

Category	SPECIAL ADMINISTRATIVE REGION	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1997-06-05	Effective Date	1997-07-01

Provisions of the State Council Concerning Hoisting and Using the National and Regional Flags at the Same Time in the Hongkong Special Administrative Region

(Promulgated by Decree No. 219 of the State Council of the People’s

Republic of China on June 5, 1997, and effective as of July 1, 1997)

In accordance with the relevant provisions of the National Flag Law of the
People’s Republic of China, the following provisions shall apply as of July 1,
1997 in the case of hoisting and using the national and regional flags at the
same time in the Hongkong Special Administrative Region:

1. In the case of hoisting and using the national and regional flags at
the same time, the national flag shall be placed in the centre, or in the
higher or prominent position.

2. In the case of hoisting and using the national and regional flags at
the same time or side by side, the national flag shall have a larger size than
the regional flag, with the national flag on the right and the regional flag
on the left.

3. In the case of a procession holding the national and regional flags,
the national flag shall be ahead of the regional flag.

INTERIM PROCEDURES OF SHANGHAI MUNICIPALITY ON JOINT-STOCK COOPERATIVE ENTERPRISES

Interim Procedures of Shanghai Municipality on Joint-Stock Cooperative Enterprises

(Effective Date:1997.06.01–Ineffective Date:)

CHAPTER I GENERAL PROVISIONS CHAPTER II ESTABLISHMENT CHAPTER III SETUP AND TRANSFER OF STOCK RIGHT CHAPTER IV ORGANIZATION CHAPTER
V FINANCIAL ACCOUNTING SYSTEM AND DISTRIBUTION OF PROFITS CHAPTER VI MERGER, SPLIT-OFF, BANKRUPTCY, DISSOLUTION AND LIQUIDATION CHAPTER
VII SUPPLEMENTARY PROVISIONS

Article 1 (Purpose)

With a view to standardizing the organization and conduct of joint-stock cooperative enterprises and to promoting their development,
the present Procedures are formulated in the light of the actual situations in Shanghai.

Article 2 (Scope of Application)

The present Procedures shall apply to the joint-stock cooperative enterprises established in Shanghai.

Article 3 (Definition of Joint-stock Cooperative Enterprise)

The joint-stock cooperative enterprise specified in the present Procedures refers to the corporate entity of which the corporate property
is constituted with funding mainly or solely coming from enterprise employees, which institutes cooperative labor, democratic management,
distribution according to labor combined with dividends based on shares.

Article 4 (Rights and Obligations of Enterprise)

The joint-stock cooperative enterprise shall enjoy the entire corporate property right formed through the investment of shareholders,
and shall, according to law, enjoy civil rights and bear civil liabilities.

The joint-stock cooperative enterprise shall, according to law, practice autonomy in operation, and assume sole responsibility for
its own profits and losses on the strength of its entire corporate property.

Article 5 (Articles of Association of an Enterprise)

To establish a joint-stock cooperative enterprise, Articles of Association shall be formulated in accordance with the present Procedures.
The Articles of Association shall be binding on the enterprise and its employees on the job, who are shareholders or non-shareholders.

The scope of operation of the joint-stock cooperative enterprise shall be defined by the Articles of Association, and shall be registered
according to law. Those items in the enterprise’s scope of operation which are restricted by laws and regulations shall be subject
to approval according to law.

Article 6 (Use of Enterprise Name)

If a joint-stock cooperative enterprise names itself a company, the words “cooperative company” shall be included in its name.

Article 7 (Principles of Operational Management and Administrative Management)

The joint-stock cooperative enterprise shall implement the principle of separating enterprise operational management and social administrative
management.

The right of operational management of the joint-stock cooperative enterprise shall be exercised, pursuant to the present Procedures
and the Articles of Association, by the capital contributors according to the proportion of their shares.

The economic, social and other governmental administration for the joint-stock cooperative enterprise shall be under the charge of
the people’s government and its subordinate departments concerned in the district or county where the enterprise is registered, except
where such governmental administration is to be exercised by the relevant municipal departments according to law.

The tax payable by the joint-stock cooperative enterprise shall be levied and administered by the department in the district or county
where the enterprise is registered.

Article 8 (Conditions for Establishment)

The establishment of a joint-stock cooperative enterprise shall meet the following conditions:

1. Having a certain number of shareholders;

2. Having the minimum amount of registered capital;

3. Having the Articles of Association jointly formulated by the shareholders;

4. Having a name for the enterprise and a standard organizational structure;

5. Having the fixed premise for production and operation and the necessary conditions for production or operation.

Article 9 (Number of Shareholders)

The number of employee shareholders in a joint-stock cooperative enterprise shall not less than eight.

The number of non-shareholding employees on the job shall not exceed 10% of the total number of employees on the job in enterprise.

Article 10 (Modes of Establishment)

The establishment of the joint-stock cooperative enterprise shall be of two types, namely promotional type and economic restructuring
type.

The establishment under promotion refers to the establishment of joint- stock cooperative enterprise by more than two promoters in
accordance with the present Procedures.

The establishment through economic restructuring refers to the transformation of an existing enterprise into a joint-stock cooperative
enterprise in accordance with the present Procedures after inventory of the assets and the verification of capital, identification
of the property right and appraisal of assets in the light of the relevant provisions of the state law and municipal regulations.

Article 11 (Contents of the Articles of Association)

The Article of Association of the joint-stock cooperative enterprise shall clearly state the following items:

1. Name and address of the enterprise;

2. Type of the enterprise;

3. Scope of operations;

4. Registered capital;

5. Mode and limit of the capital contributed by shareholders;

6. Names of the shareholders;

7. Rights and obligations of the shareholders and non-shareholder employees on the job;

8. Conditions and procedures for acquisition and transfer of shares;

9. Organizational structure of the enterprise and its process of formation, functions and powers, and rules of procedure;

10. Production procedures of the enterprise’s legal representative, his/her term and authority of office;

11. Financial management system and way of distributing profits;

12. Matters concerning dissolution of the enterprise and way of liquidation;

13. Procedure on amending the Articles of Association;

14. Other matters the shareholders consider necessary to stipulate.

Article 12 (Registered Capital)

The amount of the registered capital of a joint-stock cooperative enterprise shall be commensurate with its scope of operations, and
the minimum registered capital shall be defined according to relevant provisions governing the registration of corporate entity.

Article 13 (Modes of Capital Contribution)

The shareholders may contribute capital in cash, in kind and also in industrial property right, non-patented technology, or land-use
right at appraised value. The physical goods, industrial property right, non- patented technology or land-use right contributed as
capital must be appraised and evaluated; over-evaluation or under-evaluation shall not be allowed in the verification of property.
Appraisal and evaluation of the land-use right shall be conducted according to the provisions of the relevant laws and regulations.

The amount of capital contributed in the form of industrial property right and non-patented technology at appraised value shall not
exceed 20% of the registered capital of the enterprise except where special provisions on the adoption of new high-tech achievements
have been made by the State.

Article 14 (Special provisions on Establishment of Joint-stock Cooperative Enterprise Through Economic Restructuring)

If a state-owned enterprise is transformed into a joint-stock cooperative enterprise, the state-owned assets or the collective assets
may serve as borrowed assets or may also be purchased by the employees of this enterprise. If the state-owned assets or the collective
assets are used as borrowed assets, the joint-stock cooperative enterprise established through Economic Restructuring shall pay to
the department in charge of the assets or subject of investment the fee for holding the assets in possession.

The rate of the fee for holding the assets in possession shall be set by the state-owned assets administration department or the collective
assets administration department jointly with the economic restructuring department, finance department and tax department.

Article 15 (Procedure for Establishment Through Economic Restructuring)

The establishment of a joint-stock cooperative enterprise established through economic restructuring shall be subject to the consent
of the owner or the representative of the owner of the assets and to the approval of the employees’ (deputies) general meeting. The
enterprise shall file an application with the relevant department and go through the procedures for the registration of establishment
at the enterprise registration department after the application has been examined and approved.

Article 16 (Examination and Approval of Establishment Through Economic Restructuring)

The commission, office, or bureau concerned at the municipal level or its authorized holding (group) company or group company shall
be responsible for the examination and approval of the establishment through Economic Restructuring of the enterprises under the
jurisdiction of the Municipality.

The department designated by the district (county) people’s government shall be responsible for the examination and approval of the
establishment through Economic Restructuring of the enterprises under the jurisdiction of district (county).

Article 17 (Documents to Be Submitted for Establishment Registration)

When going through the procedures for establishment registration, the joint-stock cooperative enterprise shall submit to the enterprise
registration organ the following documents:

1. Application;

2. Documents of examination and approval for establishment through economic restructuring;

3. Articles of Association;

4. Report on assets verification;

5. Names and addresses of shareholders;

6. Certificate of appointment and ID of legal representative;

7. Other documents provided by laws, regulations and rules.

Article 18 (Registration of Enterprise)

The enterprise registration organ shall, within 30 days after receipt of the application for establishment registration of the joint-stock
cooperative enterprise, decide on whether to approve or disapprove the registration according to the conditions stipulated in the
present Procedures.

If the registration is approved, the enterprise registration organ shall issue a business license to the enterprise.

CHAPTER III SETUP AND TRANSFER OF STOCK RIGHT

Article 19 (Setup of Stock right)

The shares of a joint-stock cooperative enterprise shall be classified into individual shares and corporate shares.

The individual shares refer to the shares formed by investment of the enterprise’ employees and individual persons from outside the
enterprise. The stock right shall be enjoyed by these employees and individual persons.

The corporate shares refer to the shares formed by investment from other enterprises, institutions or economic organizations with
status of legal person The stock right shall be enjoyed by those legal person.

Article 20 (Exceptional Circumstances of Setup of Stock Right)

When a collective enterprise is restructured into a joint-stock cooperative enterprise, the assets that are identified as collectively
owned by all the employees of the original enterprise who have retired or left their post, can be converted into shares, and set
up as collectively-owned shares. The stock right shall be exercised by the relevant department designated by the Municipal People’s
Government.

The procedures for the exercise of stock right of the collectively-owned shares and the distribution of profits will be stipulated
separately by Shanghai Municiapl Economic Restructuring Commission jointly with other relevant departments.

Article 21 (Proportion and Limit of Shares Bought by Employee Shareholders)

The total amount of shares held by the whole staff of a joint-stock cooperative enterprise shall not be less than 51% of the total
amount of capital stock. If, because of the transfer of stock right, the total amount of the shares held by the whole staff of a
joint-stock cooperative enterprise happens to be below 51% of the total amount of capital stock, the case shall be examined and approved
by the district (county) people’s government according to provisions which shall be worked out by the Shanghai Municipal Economic
Restructuring Commission jointly with other relevant departments.

In respect of the joint-stock cooperative enterprise promotional type, the limit on the shares bought by an individual employee shall
be set in the Articles of Association.

In respect of the joint-stock cooperative enterprise economic restructuring type, the lowest limit on the shares bought by an individual
employee shall not be less than the total amount of average wage of an individual employee of this enterprise in the year previous
to the economic restructure, and the highest limit shall not exceed ten fold the total amount of average wage of an individual employee
of this enterprise in the year previous to the economic restructure or shall be set in the Articles of Association.

Article 22 (Proportions of Total Amount of Shares Bought by Individual Persons and Legal Persons Outside This Enterprise)

The total amount of shares held by individual persons outside the joint- stock cooperative enterprise shall not exceed 10% of the
total amount of after stock of the enterprise, and that held by legal persons outside the joint cooperate enterprise shall not exceed
39% of the total amount of the stock.

Article 23 (Limit on Shares Bought by Operator)

The limit on the amount of shares held by the legal representative of a joint-stock cooperative enterprise shall be decided by the
shareholders’ general meeting, but the minimum limit shall not be below the average amount of shares held by individual employee
shareholders.

Article 24 (Certificate of Stock Rights)

The joint-stock cooperative enterprise shall not issue shares, but shall issue to the shareholders the certificates of stock right,
which shall serve as evidence of contribution to investment by the shareholders and as the basis for dividends.

The certificate of stock rights shall clearly state the following items:

1. Enterprise name;

2. Registration date of the enterprise;

3. Registered capital of the enterprise;

4. Name of the shareholder, and the amount of capital paid-in and the date of payment;

5. Serial number and issuing date of the certificate of capital contribution.

The certificate of capital contribution shall bear the seal of the joint-stock cooperative enterprise.

Article 25 (Restriction on Redemption of Shares)

After the establishment of a joint-stock cooperative enterprise the shareholders shall not redeem their shares, but in case the employee
shareholder is transferred, discharged, or has resigned, retired or died, etc., the matter shall be handled by the enterprise according
to the provisions of the Articles of Association, or the resolution of the shareholders’ general meeting.

Article 26 (Restriction on Transfer of Shares)

The shareholders of a joint-stock cooperative enterprise may transfer their shares, and the shareholders of the enterprise (including
non-employee shareholders) shall have preemptive right under the same conditions. However, the proportion and number of shares transferred
shall be subject to restriction under the provisions of Article 9, 21, 22 and 23 of the present Procedures.

The legal representative of a joint-stock cooperative enterprise shall not transfer his/her shares during his/her term of office and
the fiscal year after he/she quits the enterprise.

Article 27 (Shareholders’ Roll)

The joint-stock cooperative enterprise shall set up a shareholders’ roll and record there in the following items:

1. Names and addresses of shareholders;

2. Amounts of capital paid-in by shareholders;

3. Serial numbers of the certificates for capital contribution.

Article 28 (Shareholders’ General Meeting and Its Functions and Powers)

The shareholders’ general meeting shall be the organ of authority of a joint-stock cooperative enterprise and shall exercise the following
functions and powers:

1. To decide on the operation plan and the investment plan of the enterprise;

2. To elect or to change the legal representative or directors of the enterprise;

3. To elect or to change the supervisors who are representatives of the shareholders, and to decide on the matter concerning their
remuneration;

4. To discuss and approve the report of the board of directors or of the enterprise’s legal representative;

5. To discuss and approve the report of the board of supervisors;

6. To discuss and approve the annual financial budget programmer and the final accounts programmer of the enterprise;

7. To discuss and approve the profit distribution plan and the loss making-up plan of the enterprise;

8. To make resolutions on the increase or decrease in the registered capital and on the merger, split-off, bankruptcy, or dissolution
of the enterprise;

9. To revise the Articles of Association;

10. To deal with other important issues stipulated by the Articles of Association.

Article 29 (Convening of Shareholders’ General Meeting)

The shareholders’ general meeting shall be convened by the legal representative of a joint-stock cooperative enterprise. The enterprise’s
legal representative shall notify, 15 days before the convening of the shareholders’ general meeting or within the period stipulated
by the Articles of Association, all the shareholders of the matters relating to the convening of the shareholders’ general meeting.

The shareholders’ general meetings are of two kinds: regular and provisional. Both the regular and provisional shareholders’ general
meetings shall be convened on schedule as stipulated by the Articles of Association.

The provisional shareholders’ general meetings shall be convened when one of the following circumstances occurs:

1. Being requested by the shareholders holding more than 10% of the stock;

2. Being requested by more than 10% of the employee shareholders;

3. Being deemed necessary by the enterprise’s legal representative;

4. Being proposed by the board of suppressers.

The shareholders shall have the right to inspect the minutes of shareholders’ general meeting.

Article 30 (Voting Mode of the Shareholders’ General Meeting)

Voting at the shareholders’ general meeting shall adopt the mode of combining one vote per person and one vote per share.

When taking a vote on the matters covered by Article 28 (1), (2), with exception of the election and change of directors, and those
covered by Article 28 (3-7) in the present Procedures, the shareholders’ general meeting shall adopt the mode of one vote per person
with its resolutions subject to the approval of the majority of the shareholders attending the general meeting.

When taking a vote on the matters covered by Article 28 (9), the shareholders’ general meeting shall adopt the mode of one vote per
person with its resolutions subject to the approval of more than 2/3 of the shareholders.

When taking a vote on the election and change of directors under Article 28 (2) and on the matters covered by Article 28 (8) in the
present Procedures, the shareholders’ general meeting shall adopt the mode of one vote per share with its resolutions subject to
the approval of the shareholders with more than 2/3 of the stock.

Article 31 (Establishment of Organization)

The joint-stock cooperative enterprise of comparatively large scale may set up the board of directors and the board of supervisors.
The board of directors shall have 3-19 members with its chairperson acting as the enterprise’s legal representative. The number of
members of the board of supervisors shall be set by the Articles of Association, among whom the representatives of the employee shareholders
shall not be less than 1/2 of the total number of members.

The joint-stock cooperative enterprise of comparatively small scale shall, instead of setting up the board of directors, only install
an executive director, who shall be the enterprise’s legal representative.

Article 32 (Producing the Legal Representative)

The legal representative of a joint-stock cooperative enterprise established through economic restructuring must be approved by the
majority of the shareholders attending the general meeting. The candidates for the legal representative may be recommended by the
employees of the enterprise, or, when necessary, be nominated by the superior department in charge of the original enterprise or
be invited through public notice.

The mode of prodding the legal representative and treasurer of the joint-stock cooperative enterprise established under sponsorship
shall be stipulated by the Articles of Association.

Article 33 (Organization and Operator’s Functions and Powers)

The functions and powers of the board of directors, manager and board of supervisors of a joint-stock cooperative enterprise shall
be stipulated by the Articles of Association with reference to the “Company Law of the People’s Republic of China.” The functions
and powers of the executive director of a joint-stock cooperative enterprise shall be stipulated by the Articles of Association.

The functions and powers of the board of directors, manager (factory director), board of supervisors, and executive director of a
joint-stock cooperative enterprise shall not conflict with the functions and powers of the shareholders’ general meeting.

Article 34 (Duties of Directors)

The directors of a joint-stock cooperative enterprise shall assume responsibility for implementing the resolutions of the board of
directors. If the resolutions run counter to laws, regulations, rules or the Articles of Association, resulting in a heavy loss to
the enterprise, the directors participating in the making of the resolution shall be responsible for compensating the enterprise.
However, the director(s) who can be proved to have expressed objection at the time of voting as recorded in the minutes, shall be
relieved from the responsibility.

Article 35 (Circumstances Prohibiting the Assumption of the Office of Director, Executive Director, Manager (Factory Director) and Supervisor)

Any person found to be in one of the following circumstances shall not be allowed to assume the office of director, executive director,
manager (factory director), or supervisor of a joint-stock cooperative enterprise:

1. With no capacity of civil act or with restricted capacity of civil act;

2. Having been convicted of the crime of graft, bribery, conversion of property, misappropriation or disrupting social economic order,
and sentenced to imprisonment, and less than five years having elapsed after the term of enforcement of the sentence, or after his/her
being deprived of political rights for criminal offenses;

3. Having assumed the office of director, executive director, or manager (factory director) of an enterprise and having been personally
responsible for the losses incurred in the enterprise due to his/her mismanagement, and less than three years have elapsed after
he/she quitted the enterprise;

4. Having assumed the office of legal representative of an enterprise whose business license was revoked for acts in violation of
law for which he/she being responsible, and it was less than three have years after the business license was revoked.

5. Failing to clear on the date due his/her personal debt which amounted to (over) three times the amount of average annual wage of
the employees in Shanghai;

The appointment of directors, executive director, manager (factory director) or supervisors produced by the joint-stock cooperative
enterprise in violation of the stipulation of the preceding paragraph shall be null and void.

Article 36 (Prohibited Acts of Directors, Executive Director, Manager (Factory Director) and Supervisors)

The directors, executive director, manager (factory director) and supervisors shall not be allowed to be engaged in operating in their
own behalf or in the behalf of any other person any competing business against this enterprise, or in carrying out activities detrimental
to the interests of this enterprise.

Article 37 (Liability for Damages)

If the directors, executive directive director, manager (factory director) or supervisors cause damage to their enterprise or its
shareholders by violating laws, regulations, rules, or the Articles of Association, they shall be liable for the damages so caused.

CHAPTER V FINANCIAL ACCOUNTING SYSTEM AND DISTRIBUTION OF PROFITS

Article 38 (Financial Accounting System)

The joint-stock cooperative enterprise shall set up the financial accounting system in accordance with the provision of the law and
regulations, and stipulation of the finance department in charge under the State Council.

Article 39 (Financial Accounting Report)

The joint-stock cooperative enterprise shall prepare a financial accounting report at the end of every fiscal year and make it available
for the shareholders’ inspection twenty days before the convening of the shareholders’ general meeting.

Article 40 (Distribution of After-tax Profits)

The after-tax profits of the joint-stock cooperative enterprise shall be distributed in the following order:

1. To Cover the loss on confiscated properties, and to pay the fines and overdue fines payable for violation of the provision of tax
law;

2. To Make up for the loss incurred in the previous year;

3. To draw 10% of the profits for the statutory accumulation fund, but the drawing may not be made when the statutory accumulation
fund has reached 50% of the registered capital;

4. To draw 5-10% of the profits for the statutory public welfare fund;

5. To draw optional accumulation fund based on the resolution of the shareholders’ general meeting;

6. To draw bonus distribution fund.

Article 41 (Use of Accumulation fund)

The accumulation fund of a joint-stock cooperative enterprise shall be used for making up losses, expanding production/operation or
increasing the enterprise’s capital;

When the statutory accumulation fund is converted into the enterprise’s capital, the remainder of the accumulation fund shall not
be less than 28% of the registered capital.

Article 42 (Use of Public Welfare Fund)

The public welfare fund of a joint-stock cooperative enterprise shall be used for the collective welfare of the employees of this
enterprise.

Article 43 (Distribution of Bonus According to Shares)

The bonus distribution fund of a joint-stock cooperative enterprise shall be distributed according to the number of shares.

CHAPTER VI MERGER, SPLIT-OFF, BANKRUPTCY, DISSOLUTION AND LIQUIDATION

Article 44 (Merger or Split-off)

The merger or split-off of a joint-stock cooperative enterprise shall be effected by a resolution passed by the shareholders’ general
meeting and be notified to the creditors. The claims and debts of the original enterprise shall be taken over by the enterprise existing
after the merger or split-off.

Article 45 (Bankruptcy)

If a joint-stock cooperative enterprise is declared bankrupt according to law for its insolvency the people’s court shall, according
to the provision of the relevant law, organize the shareholders, relevant organs and related professionals to set up a liquidation
group to carry out the bankruptcy liquidation of the enterprise.

Article 46 (Dissolution)

A joint-stock cooperative enterprise shall be dissolved in one of the following circumstances:

1. The term of operation stipulated in its Articles of Association has expired, or other events necessitating the dissolution as stipulated
in its Articles of Association has occurred;

2. The shareholders general meeting has made a resolution on the dissolution of the enterprise; or

3. It has been shut down for its violation of law.

Article 47 (Liquidation)

If a joint-stock cooperative enterprise is dissolved according to the provisions of Article 46 in the present Procedures, it shall,
according to the relevant provisions of the State, set up a liquidation group to check up the property and clear up various kinds
of debts.

Article 48 (Termination of Liquidation)

On completion of the liquidation of a joint-stock cooperative enterprise, the liquidation group shall put forward a liquidation report,
and apply to the original enterprise registration department for cancellation of its enterprise registration, and make a public announcement
after the report has been verified and attested by a registered accountant office, an auditing office, or an assets appraisal organization.

CHAPTER VII SUPPLEMENTARY PROVISIONS

Article 49 (Joint-stock Cooperative Enterprise to Be Treated as Collective Enterprise)

The joint-stock cooperative enterprises established in accordance with the present Procedures and those established before the implementation
of the present Procedures and standardized according to the present Procedures shall be treated as collective enterprises.

Article 50 (Department Responsible for Interpretation in Application)

Shanghai Municipal Economic Restructuring Commission shall be responsible for the interpretation of the present Procedures in their
specific application.

Article 51 (Date of Implementation)

These present Procedures shall become effective on June 1,1997.

CIRCULAR OF THE CENTRAL COMMITTEE OF THE COMMUNIST PARTY OF CHINA AND THE STATE COUNCIL CONCERNING THE TRANSMISSION OF THE REPORT ON THE SUGGESTIONS WITH REGARD TO THE CONDITIONS OF TOWNSHIP AND VILLAGE ENTERPRISES IN CHINA AND THEIR FUTURE REFORM AND DEVELOPMENT BY THE MINISTRY OF AGRICULTURE

Category	AGRICULTURE, FORESTRY AND METEOROLOGY	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1997-03-11	Effective Date	1997-03-11

Circular of the Central Committee of the Communist Party of China and the State Council Concerning the Transmission of the by the Ministry of Agriculture

Appendix:REPORT ON THE SUGGESTIONS WITH REGARD TO THE CONDITIONS OF
I.BASIC SITUATION CONCERNING THE DEVELOPMENT OF TOWNSHIP AND VILLAGE
II.GOALS,TASKS AND MAJOR MEASURES FOR THE DEVELOPMENT OF TOWNSHIP AND
III.CONTINUE TO CREATE A FAVORABLE POLICY ENVIRONMENT FOR THE DEVELOPMENT
IV.EARNESTLY STRENGTHEN LEADERSHIP OF TOWNSHIP AND VILLAGE ENTERPRISES

(March 11, 1997)

The Central Committee of the Communist Party of China and the State
Council approve the of Township and Village Enterprises in China and Their Future Reform and
Development> by the Ministry of Agriculture, which is hereby transmitted
to you for earnest implementation in the light of actual conditions.

Township and village enterprises are a great creation of the Chinese
peasants. Township and village enterprises have witnessed rapid growth
and scored tremendous achievements since the Third Plenary Session of the
Eleventh Central Committee of the Communist Party of China. Township and
village enterprises have become the backbone force of rural economy and
a strong pillar of the national economy having made great contributions to
diversion of surplus labor power in the rural areas, increase in peasants’
income and input in agriculture, consolidation and strengthening of the
collective economy and the building of affluent, civilized and prosperous
new socialist rural areas; having played an important role in increasing
effective supply of society, promoting the country’s industrialization,
enhancing the nation’s comprehensive power, consolidating the worker-
peasant alliance and ensuring social stability; and having explored a
successful path for the satisfactory resolution of the problem of
agriculture, the rural areas and peasants and promoting economic
restructuring,and national socio-economic development in a big agricultural
country like China where peasants constitute the vast majority. Development
of township and village enterprises are a major strategic option for the
promotion of China’s socialist modernization and making the country strong
and the people rich.

The coming fifteen years are a crucial period in China’s socialist
modernization during which township and village enterprises shoulder new
historical responsibilities. for Perspective Goals in 2010 of the National Socio-Economic Development
of the People’s Republic of China> and of China on Township and Village Enterprises> should be implemented in
line with the spirit of the Fifth and Sixth Plenary Sessions of the
Fourteenth Central Committee of the Communist Party of China, persevering
in the simultaneous building of material and spiritual civilizations,
implementing the strategy of reinvigorating the country by way of science
and education and the strategy of sustainable development, pressing ahead
the transformation of economic system and the mode of economic growth and
striving for improvement in quality and efficiency in economic operations.
Efforts should be made to adapt to the objective requirements of the
socialist market economy and socialized mass production with whether it is in
the interest of development of the national economy, the enhancement of
China’s comprehensive national power and improvement in the living standards
of the people as standards, respect the practice, creation and options of the
peasants, sum up experiences, step by step realize standardization, adopt
various forms, actively support and correctly guide township and village
enterprises in deepening reform, clearly define relations of property rights,
ensure the value and appreciation of assets of township and village
enterprises especially those of collective assets, perfect operational
mechanisms, mobilize the enthusiasm and creativeness of owners, operators and
producers, enhance the vigor and vitality of enterprises and improve the
economic performance and competitiveness of enterprises. Efforts should be
made to correctly handle the relations between development and improvement to
maintain sustained rapid growth and lay stress on improvement in overall
quality. Guidance should be provided according to different categories in the
light of local conditions. In the eastern regions emphasis should be on
improvement and development should be achieved in the process of development;
in the central and western regions stress should be on sustained rapid growth
and improvement made in the process of development. In the eastern regions
efforts should be made to actively develop technology-intensive and
capital-intensive industries and outward-oriented economy, push enterprises
in the expansion of scales, upgrading technical levels and grades of
products, transter step by step labor-intensive and resource-processing
industries to the central and western regions so as to accelerate the pace of
development there. Actively implement the east-west cooperation strategy. The
eastern regions and the central and western regions should strengthen
association and cooperation, embark on the road of development with the east
leading the west, the west pushing the east and mutual advancement hand in
hand on the basis of the principle of complementing one another with one’s
own advantages, reciprocity and mutual benefit and sincere cooperation so as
to narrow step by step the gap in economic development among regions. The
policy of encouraging the subsidization, development and stimulation of
agriculture by industry should be continuously perfected. Actively set up
enterprises with agricultural produce and sideline products processing and
distribution as the driving force, realize integration of cultivation,
breeding and processing and integration of trade, industry of agriculture,
promote industrialized and intensive management and operations of
agriculture, to encourage the peasants and enterprises to form community of
interests, to realize increment in value and benefit of farm produce and
increase in peasants income. Resources should be developed and exploited
rationally, pollution actively prevented and treated, and resources,
environment and cultivated lands protected in real earnest. Industries
structures should be adjusted rationally, distribution of enterprises
optimized by relying on scientific and technological advancement, strengthen
enterprise management and resolve in good earnest a number of questions such
as low-level repetition in construction, dispersion in distribution,
extensive operation, unsatisfactory management and low efficiency in certain
localities and enterprises.

The Party and the State carry out the policy of “giving active support,
making rational planning, providing guidance according to the conditions of
different categories and effect administration in accordance with law” with
regard to township and village enterprises. Party and government leaders at
all levels should, standing at the strategic height of reform and opening up
and building socialism with Chinese characteristics, fully realize the great
and profound significance of developing township and village enterprises and
unswervingly promote the reform, development and upgrading of township and
village enterprises. Township and village enterprises should be integrated
into the overall plan for national socio-economic development, and practical
and feasible policy measures worked out, and efforts intensified to render
support to them and good external environment created for them. Party
Committees and governments at all levels should strengthen leadership in
real earnest, take the development of township and village enterprises as
a strategic focus in bringing prosperity to the rural economy and the
national economy as a whole, place it high on the agenda, study regularly
the emerging situation, new conditions and fresh experiences in the
development of township and village enterprises and make timely decisions
in respect of a number of major issues and resolve the difficulties and
problems in the process of reform and development. Laws, regulations and
policy measures related to township and village enterprises should be
implemented in all seriousness. The burden of township and village enterprises
should be lightened in real earnest and the legitimate rights and interests
of township and village enterprises protected. Administrative agencies for
township and village enterprises should be further perfected to give full
play to their functional roles in planning, guidance, administration,
supervision, coordination and services. All departments concerned should
go all out, cooperate and coordinate with one another in providing stronger
support for the development of township and village enterprises, promote,
guide, protect and standardize the development of township and village
enterprises in the realization of the Nineth Five-Year Plan and the 2010
Perspective Goals of the country’s national socio-economic development and
making new greater contributions to China’s socialist modernization.

Appendix:REPORT ON THE SUGGESTIONS WITH REGARD TO THE CONDITIONS OF
TOWNSHIP AND VILLAGE ENTERPRISES IN CHINA AND THEIR FUTURE REFORM AND
DEVELOPMENT (Ministry of Agriculture, January 31, 1997)

Since the implementation of the policy of reform and opening up and
under the guidance of Deng Xiaoping’s theory of building socialism with
Chinese characteristics and the Party’s basic line, township and village
enterprises have witnessed vigorous development in China and scored
achievements which have become the focus of people’s attention. In the
coming fifteen years, township and village enterprises are faced with new
situation and shouldering heavy historical responsibilities in the process
of the implementation of Perspective Goals for National Socio-Economic Development>. Recently, we
have, in line with the spirit of Fifth and Sixth Plneary Sessions of the
Fourteeth Central Committee of the Communist Party of China, and in the light
of the implementation of Township and Village Enterprises>, studied the question of reform,
development and upgrading of township and village enterprises. The report on
the relevant information and our suggestions is hereby submitted as follows:
I.BASIC SITUATION CONCERNING THE DEVELOPMENT OF TOWNSHIP AND VILLAGE
ENTERPRISES SINCE THE IMPLEMENTATION OF THE POLICY OF REFORM AND OPENING UP

Township and village enterprises have developed and grown since the
Third Plenary Session of the Eleventh Central Committee of the Communist
Party of China. In particular, in the decade or more since the Central
Committee of the Communist Party of China and the State Council transmitted
in 1984 Enterprises> by the Ministry of Agriculture, Animal Husbandry and Fisheries,
there have been rapid growth in economic aggregate of township and village
enterprises and continuous improvement in overall quality which have not
only played a tremendous role in bringing prosperity to the rural economy,
increasing the peasants’ income, supporting agricultural production,
diverting surplus labor, raising peasants’ quality and strengthening
socialist spiritual civilization, but have also made great contributions
to the economic development, political stability and social progress in
China. They mainly manifest themselves in the following aspects:

They Are a Staunch Pillar Strengthening Rural Collective Economy. In
1995, the increment value of township and village enterprises accounted for
56% of the entire rural social increment value and in the coastal regions
and the suburbs of big cities it accounted for over two third. Collective
assets of township and village enterprises account for 77% of the total
rural collective assets which have strongly consolidated and strengthened
the socialist collective economy.

They Are a Strong Guarantee for the Realization of Peasants’ Well-to-do
Life. In 1995, the wage paid by township and village enterprises to workers
and staff members amounted to RMB 438 billion Yuan with 50% of the net
increase of the peasants’ per capita net income from township and village
enterprises. Development of township and village enterprises constitutes
an important force and a measure treating the root-cause in reducing peasants’
burden and development for poverty eradication. Peasants’ income increases
faster, their burden relatively lighter and there are less poverty-stricken
people in localities where township and village enterprises are more
developed.

They Provide a Main Channel for the Absorption of Rural Surplus Labor.
In 1995, 128 million people were employed in township and village enterprises,
taking up 28% of rural labor force. During the Eighth Five-Year Plan period,
35 million people were employed by township and village enterprises,
alleviating employment pressure in China while creating conditions for
agricultural operations run on a moderate scale and raising labor
productivity.

They Provide the Material Foundation for the Promotion of Modernization
of Agriculture. The development of township and village enterprises has
increased input into agriculture, provided large amount of means of production
for agriculture and strongly supported the development of agriculture with
increment value through farm produce processing and subsidization, development
and stimulation of agriculture by industry. During the Eighth Five-Year Plan
period, funds from township and village enterprises for subsidization and
development of agriculture, construction related to agriculture and
various rural undertakings amounted to over RMB 100 billion Yuan.

They are an Effective Force for the Increase in Effective Supply of
Society. Production and operations of township and village enterprises
involve almost all the domains of the national economy. At present, numerous
products of township and village enterprises especially the daily consumer
goods occupy quite a big percentage, for instance, electronics and
communications equipment manufacture accounts for 17%, machinery takes up 26%,
coal 40%, cement 40%, foodsstuffs and beverages 43%, garments 80%, small- and
medium-size farm implements 95% and bricks and tiles 95%, thus making a
historic contribution to the prosperity of urban and rural markets in China.

They Constitute an Important Wing in Promoting the Country’s
Industrialization. In 1995, the increment value of township and village
industries reached RMB 1080.4 billion Yuan, accounting for 44% of national
industries increment value. During the Eighth Five-Year Plan period, 50% of
the net increase in national industries increment value came from township
and village enterprises. Urban and rural industries depend on and support
each other, integrate with each other and promote each other, opening up a
new path of industrialization with Chinese characteristics and acclerating
the process of China’s industrialization.

They are an Effective Way of Enhancing China’s Comprehensive National
Power. In 1995, revenue from business operations of township and village
enterprises nationwide reached RMB 5729.9 billion Yuan; increment value
accomplished amounted to RMB 1459.5 billion Yuan, accounting for over a
quarter of GDP; shipped value of export commodities was RMB 539.5 billion
Yuan, taking up 34% of national export volume; taxes paid to the State were
RMB 128 billion Yuan, accounting for 25% of the country’s tax revenue.
During the Eighth Five-Year Plan period, 30% of China’s GDP came from
township and village enterprises. Development of township and village
enterprises has enhanced China’s overall economic strength.

They Constitute an Important Factor of Social Stability. Development of
township and village enterprises has enabled large amount of rural surplus
labor to have stable occupations and income, provided the material foundation
for the building of government power at the grass-roots level in the rural
areas and enhanced the cohesive power of the Party organizations and
government institutions at the grass-roots level in the rural areas.

They Provide Strong Positions for Cultivation of Spiritual Civilization
in the Rural Areas. Development of township and village enterprises has
promoted the building of small townships and the growth of such undertakings
as science, culture and education, narrowed the gap between the cities and
rural areas and the gap between workers and peasants, consolidated the worker-
peasant alliance, raised the quality of peasants, and trained a huge
industrial army. All this has played an important irreplaceable role in the
cultivation of spiritual civilization in the rural areas.

What warrants special attention is the fact that township and village
enterprises have formed a whole set of unique and flexible mechanisms by
persevering in the organization of production and business operations guided
by the market with elements of production from the market and products to the
market. They include the independent and rapid decision-making mechanism,
the in-and-out labor employment mechanism, the up-and-down cadre mechanism,
the salary-efficiency related distribution mechanism, the clearly-defined
reward and penalty incentive mechanism, the self-responsible profit-loss
restraining mechanism and the self-accumulation development mechanism, etc..
The principle that the enterprises will not eat from “the big pot”, workers
and staff members will not have “iron rice bowls” and cadres will not sit
in “iron chairs” is adhered to. All this has made useful explorations and
provided valuable experiences for the establishment of socialist market
economic system in China.

In 1996, township and village enterprises nationwide continued to
maintain a good mementum, continued to grow through reform and moved
steadily forward through overcoming difficulties with moderate growth
in major economic targets, making a good beginning for the launch of the
Nineth Five-Year Plan. It was estimated that revenue from business operations
during the year would come to RMB 6800 billion Yuan, an 18.7% increase of
the preceding year; increment value accomplished reached RMB 1770 billion
Yuan among which increment value of industries was RMB 1300 billion Yuan,
an increase of 16.5% and 18.5% respectively of the preceding year; total
profit RMB 430 billion Yuan, an increase of 16.3%; taxes paid to the State
RMB 150 billion Yuan, an increase of 17.2%; newly-emplaced labor over 3.5
million persons, total number of workers and staff members 132 million
people. All this has played an important supporting role in the sustained
development of the rural economy and the entire national economy.

Facts have proved that township and village enterprises have become the
main body of China’s rural economy and an important pillar of the national
economy, forming an important component part of building socialism with
Chinese characteristics. Their rise and growth in strength have not only
brought about a profound change in the rural economy and the entire national
economy, but also opened up a new path to realize modernization of
agriculture and the rural areas step by step, accelerate the process of the
country’s industrialization, promote reform, opening up and sustained
development of the economy in an agricultural power like China where peasants
constitute the vast majority. It is a logical path in line with the state of
the nation and the people’s wishes.

Despite the great achievements of township and village enterprises, there
also exist many problems and difficulties in the process of reform and
development. Judging from township and village enterprises themselves,
firstly, some localities blindly embarked on projects of general-purpose
industries, started new projects and engaged in low-level repetitive
construction, structure of industries and products was not rational and
distribution of enterprises was over-dispersed; secondly, property rights of
a number of enterprises have not been clearly defined, there is no
distinction between the government and the enterprises, the mechanism is
weak, causing loss of collective assets; thirdly, some enterprises exercise
extensive management, their operations are unsatisfactory, there are heavy
debt, high material and energy consumption, serious danger of occupational
illnesses and hidden causes of accidents, poor product quality and economic
efficiency; fourthly, there are serious cases of environment pollution, waste
of resources and squandering of cultivated land by a number of enterprises.
Viewed from the external environment, there is lack of understanding of the
great significance of the development of township and village enterprises,
lack of support and lack of strong measures in some localities and
departments where policies are not in place and the development of township
and village enterprises has up till now not been placed in an important
position; in quite a number of localities there has been irrational
overburdening of township and village enterprises, there exist universal
phenomena of unjustified financial levies, charges, penalties and
fund-raising; still there are certain localities and departments engaging in
arbitrary transfer of the assets of township and village enterprises,
changing the nature of ownership of enterprises and infringing on the
legitimate rights and interests of the enterprises; some localities
indiscriminately cut and merged administrative departments of township and
village enterprises. In particular, there exist quite a few difficulties in
the building of administrative organs at the township and village level where
management power is weak and the ranks unstable. In addition, there are great
imbalances among regions and there are still quite a big gap in the
development between the eastern regions and the central and western regions.
These problems of township and village enterprises in the process of reform
and development warrant great attention and must be resolved in a serious
manner.
II.GOALS,TASKS AND MAJOR MEASURES FOR THE DEVELOPMENT OF TOWNSHIP AND
VILLAGE ENTERPRISES IN THE NEXT FIFTEEN YEARS

Township and village enterprises constitute an important point of growth
full of vigor in China’s rural economy and national economy and shoulder
heavy, new historic responsibilities in the process of implementation of
National Socio-Economic Development>. During the Nineth Five-Year Plan
period, a steady growth in such major agricultural produce as cereals, cotton
and oils should be guaranteed in rural economy and foodgrain production
should reach a new level; it should be guaranteed that peasants’ income has
a fast increase, the question of food and clothing of the poverty-stricken
people resolved so that they reach the well-to-do living standards. By 2010,
another new stride should be made in overall agricultural production
capability, rural economy and peasants income level. Realization of these
goals and tasks requires that township and village enterprises continue to
pursue the policy of encouraging subsidization, development and stimulation
of agriculture by industry, that they have a bigger share in the growth of
peasants’ income and that they absorb more rural surplus labor. Realization
of the goals for the Nineth Five-Year Plan and 2010 for the national economy
requires that township and village enterprises make new contributions in
increase of effective supply of society, increase in financial revenue,
expansion of export and foreign exchange earnings, promotion of the nation’s
industrialization and enhancement of the comprehensive national power.
Therefore, whether township and village enterprises has a new and bigger
development and upgrading has a direct bearing on the realization of the
strategic goals of the second and third stages of the country’s modernization.

It is not only necessary but also completely possible that township and
village enterprises achieve a new and bigger development and upgrading.
During the past dozen of years, township and village enterprises have
acquired considerable strength, accumulated rich experiences and provided
the foundation for development and upgrading; rich resources of farm produce,
minerals and large pool of surplur labor in China’s rural areas have provided
the necessary conditions for development and upgrading; the growing enthusiasm
and creativeness of hundreds of millions of peasants to eradicate poverty,
become rich and strive for well-to-do living standards is the powerful
inherent driving force for development and upgrading; implementation of Law of the People’s Republic of China on Township and Village Enterprises>,
the gradual establishment and perfection of the socialist market economic
system, consolidation of the basic position of agriculture, enhancement of
the vigor of state-owned enterprises, the great importance attached by the
Party committees and governments at all levels and strong support by all
walks of life of society have created good external environment for township
and village enterprises. In the process of development and upgrading, township
and village enterprises have rare opportunities but are also faced with
serious challenges, especially under the circumstances that market competition
has become increasingly fierce, there are relative shortage of resources,
serious shortage of talents, weakening advantages in mechanism and low
overall quality, it has become all the more necessary to emancipate the
mind, firm confidence, enhance the sense of responsibility, urgency and
crisis, unswervingly press ahead the development and upgrading of township
and village enterprises.

In the next fifteen years, township and village enterprises should
achieve faster growth in economic aggregate and bigger upgrading in overall
standards. During the Nineth Five-Year Plan period, the average annual growth
rate of increment value of township and village enterprises can be maintained
at around 15%. Efforts should be made to realize the increment value of
township and village enterprises to the tune of RMB 3,000 billion Yuan by the
year 2000, increment value of industries amounting to RMB 2,000 billion Yuan,
shipped value of export commodities reaching around RMB 1,000 billion Yuan,
newly-emplaced rural surplus labor force 30 million people, and number of
persons engaged reaching 160 million people. Township and village enterprises
should continue to maintain a good momentum of development by 2010.

To realize the afore-said goals and tasks, the general guidelines for the
reform and development of township and village enterprises are: taking
Deng Xiao-ping’s theory of building socialism with Chinese characteristics
and the Party’s basic line as the guidance, putting into practice seriously
the spirit of the Fifth and Sixth Plenary Sessions of the Fourteenth Central
Committee of the Communist Party of China, implementing Plan and the 2010 Program of Perspective Goals for National Socio-Economic
Development> and Village Enterprises>, persevering in the simultaneous building of spiritual
and material civilizations, actively promote the basic transformation of
the operational mechanism, taking market demand as the guidance, taking
reform and opening up as the driving force, centering around improvement
in quality and efficiency, give full play to the advantages, optimize the
structures, be rational in distribution, continuously improve mechanism,
rely on scientific and technological advancement, strengthen enterprise
management, enhance overall quality and push township and village enterprises
to a new height.

Development of township and village enterprises should, in real earnest,
shift to the track of relying on scientific and technological advancement and
improving the quality of laborers, improve scale economic efficiency and
technological advancement efficiency, scientific management efficiency and
optimized structure efficiency, embarking on a path of development with
less input, more output, good quality and high efficiency. The eastern
regions should lay stress on improvement, seeking development in improvement;
the central and western regions should put emphasis on development, seeking
improvement in development.

(1) Keep on deepening enterprise reform. Deepening reform of township and
village enterprises must adhere to the standards that they are in the
interest of the development of the national economy, the enhancement

REGULATIONS ON THE ADMINISTRATION OVER PYRAMID MARKETING

Regulations on the Administration over Pyramid Marketing

(Effective Date 1997.01.10)

CHAPTER I GENERAL PROVISIONS

CHAPTER II APPROVAL FOR REGISTRATION OF ENTERPRISES ENGAGED IN

PYRAMID MARKETING

CHAPTER III PARTICIPANTS IN PYRAMID MARKETING ACTIVITIES

CHAPTER IV PYRAMID MARKETING ACTIVITIES

CHAPTER V SUPERVISION AND INSPECTION

CHAPTER VI LEGAL RESPONSIBILITY

CHAPTER VII SUPPLEMENTARY PROVISIONS

Article 1 The regulations have been formulated according to State laws, regulations and relevant policies with a view to strengthening
the supervision and control of pyramid marketing to maintain normal order of the market economy and protect legal rights and
interests of consumers.

Article 2 Pyramid marketing refers to direct selling by a production enterprise of its products to consumers through the medium of
pyramid sales agents without going through shops. It includes both multi-level and single-level pyramid marketings.

Multi-level pyramid marketing refers to such a kind of marketing through multiple levels (two or more levels) of sales agents waith
the product concerned being transmitted from one to other level.

Single-level pyramid marketing refers to the same kind of marketing through only one level of sales agents.

Article 3 An enterprise should get the examination and approval of relative administration for industry and commerce in undertaking
such kind of marketing.

Administrations for industry and commerce shall exercise supervision and control over pyramid marketing activities.

Article 4 Foreign enterprises and individuals are forbidden to engage in pyramid marketing within the territory of the People’s Republic
of China.

Article 5 All enterprises and individuals engaged in pyramid marketing within the territory of the People’s Republic of China must observe
the provisions of this set of regulations.

CHAPTER II APPROVAL FOR REGISTRATION OF ENTERPRISES ENGAGED IN PYRAMID

Article 6 For engaging in pyramid marketing, an enterprise should meet the following condition:

1. It has the status of a corporate legal person;

2. It has at least a registered capital of RMB5 million;

3. It sells products it produces within the territory of China;

4. Quality of its products has been verified as up to standard;

5. It has a pyramid marketing plan and a sound pyramid sales agents management system.

Article 7 For carrying out pyramid marketing, an enterprise and its subsidiaries should file an application with an administration
for industry and commerce with which it was registered to be examined by relative administrations of the province
(autonomous region or municipality under the direct administration of the State Council) where the enterprise concerned resides.
After verified as being qualified, the application shall be submitted to the State Administration for Industry and Commerce
for approval.

Article 8 In applying for pyramid marketing, an enterprise should submit the following documents:

1. An application form signed by the legal representative;

2. Business license of the corporate legal person or business licenses of its subsidiaries;

3. Business conditions, including investment scale, production sites, technical conditions and subsidiaries;

4. A plan for the marketing operations, including requirements and formalities for participating in pyramid selling, computation
procedures in concern of payments to pyramid sales agents, methods of withdrawal from pyramid marketing, code of conduct
for pyramid sales agents and method of training and management and other related materials;

5. Areas for pyramid marketing;

6. Varieties, specifications and trademarks of the products for pyramid marketing;

7. Certificates certifying the quality of the products for pyramid marketing;

8. Costs and selling prices of the products for pyramid marketing;

9. Rules for returning goods, claiming for damages and after-sales services;

10. Sample contracts between the enterprise and pyramid sales agents and sample of the certificates for the pyramid agents;

11. Other materials deemed as necessary by laws and regulations or by organizations of examination and approval.

The term “organizations of examination and approval” used in the preceding paragraph refers to the administration for
industry and commerce with which the enterprise concerned is registered, provincial (autonomous regional and municipal)
administrations for industry and commerce and the State Administration for Industry and Commerce (the same below).

Article 9 The State Administration for Industry and Commerce shall, according to the relevant regulations and the provisions of this
set of regulations, examine the qualification of an enterprise for multi-level or single-level pyramid marketing after such
a qualification has been verified by provincial (autonomous regional and municipal) administrations for industry
and commerce and take the dicision of approval or disapproval. It shall issue a Certificate of Multi-level Pyramid Marketing
or Certificate of Single-Level Pyramid Marketing to the enterprise concerned if the decision of approval is made.

An enterprise approved to engage in multi-level or one-level pyramid marketing should, within 15 days after receiving the
Certificate of Multi-level Pyramid Marketing or Certificate of Single-Level Pyramid Marketing, go through registration
procedures for altering the line of business and methods of operation.

Article 10 An enterprise approved to engage in multi-level or single- level pyramid marketing should change the registration according to
the procedures provided for in Article 7 of this set of regulations if it increases or reduces subsidiaries for pyramid
marketing, changes the products for or terminates the pyramid marketing.

In changing the contents provided for in 4, 8, 9 and 10 of Article 8 of this set of regulations, an enterprise should report to
the organization of examination and approval for the record within 30 days after the changes.

Article 11 An enterprise engaging in pyramid marketing should not transfer or consign its right of the marketing concerned.

It is forbidden for an enterprise engaged in single-level pyramid marketing to engage in multi-level pyramid marketing.

CHAPTER III PARTICIPANTS IN PYRAMID MARKETING ACTIVITIES

Article 12 Citizens at the age of 18 and above and with the full ability of performing civil acts may serve as agents for a pyramid marketing.

The following people are not allowed to serve as such agents:

1. Government functionaries;

2. Military persons in service;

3. Students of full-time schools;

4. Other people who are forbidden to engage in part-time sales by law and regulations.

Multi-level pyramid sales agents should have permanent resident ID card in the administrative area in which the enterprise
for the pyramid marketing resides.

Article 13 An enterprise engaged in pyramid marketing should inform its sales agents of the following matters before they start operations:

1. Items registered in the Business License of Corporate Legal Person and the Business Licenses of its subsidiaries;

2. The varieties of products to be put on sales by the pyramid marketing and the areas for the marketing as approved by the administration
for industry and commerce concerned;

3. Development and plans for pyramid marketing;

4. Operational rules and notices for the trading;

5. Prices, properties, uses and results of quality inspection of the products for pyramid marketing;

6. Requirements for participating in pyramid marketing.

The matters mentioned above should be affirmed by the agents concerned of notice in a written form.

Article 14 An enterprise with pyramid marketing operations should sign written contracts with pyramid sales agents to define each other’s
rights and obligations. Such a contract should mainly contain the following:

1. Rights and obligations of pyramid sales agents;

2. Conditions, method of computation and procedures of payments to the agents concerned and the means of withholding their individual
income taxes concerned;

3. Responsibility of the quality of products;

4. Time limit, procedures and costs of returning of products;

5. Procedures for withdrawal from pyramid marketing;

6. Settlement of disputes;

7. Other matters as prescribed by law and regulations.

Article 15 An enterprise approved to carry out pyramid marketing is not allowed to ask the sales agents to pay membership fees, honest money
or buy a certain amount of products as the preconditions for participating in pyramid marketing. Neither should it collect
training fees, commissions and other fees under any other pretexts from the agents nor force them to buy related materials.

Article 16 A pyramid sales agent is free to withdraw from the marketing activities. When withdrawing from pyramid sales, a pyramid sales
agent may return to the enterprise products remaining unsold and the enterprise should accept the goods returned,
except in cases where the products have been so damaged that they have no value of re-selling due to the fault of the pyramid
sales agent.

When a pyramid sales agent withdraws from the activities within 30 days after the activities start and returns the products
unsold, the enterprise may deduct a certain amount of expenses, but the expenses deducted should not exceed 10 percent
of the sale amount of the returned products.

In case of goods returned as provided for in the first and second paragraphs of this article, the enterprise may deduct from
the part due to the agent concerned an amount that has been before hand paid to the agent in concern of that part of returned
products.

Article 17 An enterprise should not force an agent to develop a fixed number of sales agents at the next lower level or compute remuneration
to the said agent according to the number of sales agents at the next lower level.

Article 18 An enterprise engaged in pyramid marketing should strength its control over its pyramid sales agents.

An enterprise engaged in pyramid marketing should provide training to its sales agents before they start work. The contents of
training should cover professional knowledge, State laws and regulations and professional ethical codes.

If a pyramid sales agent is found to be engaged in illegal selling activities and the enterprise concerned has failed
to perform its duties, both the agent and the enterprise should hold responsibility.

Article 19 Employment of foreigners by an enterprise engaged in pyramid marketing should observe the relevant regulations on the entry and
exit of foreigners and the administration in concerns of foreigners taking up jobs in China.

Lecturers for professional training must have definite identification certificates and have no criminal records. Employment
or invitation of people from Hong Kong, Macao and Taiwan or foreigners as training lecturers should abide by relevant
regulations of the State.

CHAPTER IV PYRAMID MARKETING ACTIVITIES

Article 20 Pyramid marketing of enterprises and agents should be undertaken in areas as having been approved by the State Administration
for Industry and Commerce and is not allowed to be carried out beyond the administrative area of the enterprises registration.

Article 21 Pyramid enterprises can only sell products they produce within the territory of China in varieties approved by the
State Administration for Industry and Commerce.

Pyramid marketing enterprises should not sell products whose sales are forbidden or restricted by law and regulations and other
products which are considered as not fit for pyramid marketing by the State Administration for Industry and Commerce.

Article 22 A consumer may return goods to or claim for damages from pyramid marketing enterprises or agents due to infringement of
legal rights and interests arisen from quality of the products for pyramid selling, and the enterprises or agent concerned
should accept the goods returned or pay compensation.

A request for a return of goods by a consumer should be made within 30 days after the purchase and the pyramid marketing enterprise
and sales agent concerned should accept the goods returned and not demand for any cost from the consumer, except that the
goods returned have been so damaged as to lose all their value of reselling due to fault of the consumer.

After accepting goods returned from or paying compensation to the consumer concerned, the sales agent may claim for compensation
from the pyramid marketing enterprise concerned if the latter should be responsible for the default according to the
marketing contract signed.

In pyramid marketing, the sales agent should make immediate settlement with the enterprise concern and is not allowed to
make advanced payments.

Article 23 The prices for pyramid marketing should not be higher than the mean prices of the same or similar products at the same grade,
same areas and the same period. Fraudulence in prices is forbidden.

Article 24 Enterprises engaged in pyramid marketing must not induce people to participate in the pyramid selling or buy their products
by making false or mis leading statements about the nature of work and income of pyramid sales agents and the quality,
uses, place of origin and effect of the products for pyramid marketing.

Advertisements, training and gatherings organized by enterprises engaged in pyramid marketing must not include materials that are
detrimental to social stability and security or involving religions and superstition propagation.

Article 25 In promoting sales, pyramid sales agents should observe the following rules:

1. Present to the consumers the pyramid sales certificate which should bear the photographs, names, numbers of identification
cards of the agents concerned and the variety of products and places of the pyramid marketing and the seal of the enterprises
engaged in pyramid marketing.

2. Acknowledge the consumers the addresses of the enterprises engaged in pyramid marketing and of the pyramid sales agents and
ways of making contacts.

3. Explain faithfully to the consumers the quality, property, uses, validity period, method of use, effect, points for attention
and after- sale services of the products for pyramid marketing and the conditions, time limit and method of returning
goods. False or misleading explanations must not be made.

4. Demonstrate the use of the products if possible.

5. Carry out the sales at reasonable time of the day.

6. Before carrying out door-to-door sales, agreements of the consumers should be solicited in advance. Once a consumer wishes
a withdrawal or expressed inconvenience, the sales should stop.

7. Present to consumer certificates of the purchases, which should bear the seal of the enterprises engaged in pyramid marketing
and the signature of the pyramid sales agents.

CHAPTER V SUPERVISION AND INSPECTION

Article 26 An enterprise engaged in pyramid marketing should report to the original administration for industry and commerce to which it
has been registered the number of pyramid sales agents, amount and sales of products and remuneration to pyramid sales agents
for the record.

Article 27 An enterprise engaged in pyramid marketing should report to the original administration for industry and commerce to which it
has been registered its training program for the record. The training program should include contents of training courses,
training sites, the number of people participating, time of training and trainers.

Article 28 Related administrations for industry and commerce may carry out on-the-spot supervisions and checks of the sales and training
activities of the enterprises engaged in pyramid marketing and punish any acts that violate the State laws and regulations
and the provisions of this set of regulations.

For acts falling into the jurisdiction of other departments, the acts concerned should be sent to and handled by the related
departments.

Article 29 An enterprise engaged in pyramid marketing should, apart from keeping related materials as required by law and regulations,
should also keep the following materials in a period of at least five years and accept the inspection by administrations for
industry and commerce.

1. The original bills and documents for pyramid marketing of products, accounting books, bank bills and vouchers, bills and
vouchers for transportations and storage;

2. Books recording the names, addresses, identification numbers and the numbers of pyramid sales agents;

3. Information about training of pyramid sales agents;

4. Records and documents concerning remunerations paid to pyramid sales agents; and

5. Other materials related to pyramid marketing.

Article 30 Punishments shall be meted out by administrations for industry and commerce according to the following provisions for
any violation of the provisions of this set of regulations by enterprises or individuals:

1. For cases that have violated the provisions of first paragraph of Article 3 and Article 20 of this set of regulations
a ban to the operation of corresponding business with a confiscation of the products for pyramid marking and the sales
proceeds and illegal income shall be imposed by administrations for industry and commerce according to the Law of the People’s
Republic of China on the Protection of the Rights and Interests of Consumers.

2. For cases that have violated the provisions of the second paragraph of Article 11 of this set of regulations, confiscation
of products, sales proceeds and illegal proceeds from multilevel pyramid marketing plus a fine shall be imposed by the
administrations for industry and commerce according to the provisions of the Law of the People’s Republic of China on the Protection
of the Rights and Interests of Consumers. If the case is serious enough, the enterprise involved shall be disqualified
for single-level pyramid marketing.

3. For cases that have violated the provisions of Article 8 and Article 10 in obtaining the registration for pyramid marketing
by submitting false documents or by other means, punishments shall be meted out by administrations for industry and commerce
according to the provisions of Article 59 of the Regulations of the People’s Republic of China on the Management of Registration
of Corporations or the provisions of 1(2) of Article 66 of the Detailed Rules for the Implementation of the Regulations
of the People’s Republic of China on the Management of Registration of Corporations.

4. For cases that have violated the provisions of first paragraph of Article 11 of this set of regulations, punishments shall
be meted out according to the provisions of Article 59 of the Regulations of the People’s Republic of China on the
Management of Registration of Corporations or the provisions of 1(6) of Article 66 of the Detailed Rules for the Implementation
of the Regulations of the People’s Republic of China on the Management of Registration of Corporations.

5. For cases that have violated the provisions of Article 21 of this set of regulations, the enterprises involved shall be punished
according to the provisions of Article 71 of the Regulations of the People’s Republic of China on the Management of Registration
of Corporations or the provisions of 1(4) of Article 66 of the Detailed Rules for the Implementation of the Regulations
of the People’s Republic of China on the Management of Registration of Corporations; and the pyramid sales agents involved
shall be fined for more than RMB500 and less that RMB2,000 and be disqualified for pyramid sales.

6. For cases that have violated provisions of Article 12, Article 13, Article 14, second paragraph of Article 18, Article
19, second and fourth paragraphs of Article 22, Article 26, Article 27 and Article 29, the enterprises involved shall be
ordered to correct within a prescirbed time limit and a fine of less than RMB30,000 shall be imposed. For more serious cases,
the enterprises involved shall be disqualified for pyramid marketing.

7. For cases that have violated the provisions of Article 15, Article 16 and Article 17, the products, sales amount and illegal
proceeds from the pyramid marketing shall be confiscated, together with a fine according to the provisions of the Law of the
People’s Republic of China on the Protection of the Rights and Interests of Consumers.

8. For cases that have violated provisions of the first and third paragraphs of Article 22 of this set of regulations,
the enterprises involved shall be punished according to the Law of the People’s Republic of China on the Protection of the
Rights and Interests of Consumers, with a fine ranging from more than RMB500 to less than RMB2,000, and the enterprises involved
shall be ordered to terminate the qualifications of the pyramid sales agents involved.

9. For cases that have violated the provisions of Article 23 of this set of regulations, the administration for industry and
commerce that undertook the examination and registration shall order the enterprises involved to correct within a prescribed
time limit. If the enterprises involved refuse to correct, the products and sales income and illegal proceeds from the pyramid
marketing shall be confiscated, together with a fine according to the provisions of the Law of the People’s Republic of China
on the Protection of the Rights and Interests of Consumers.

10. For cases that have violated the provisions of Article 24 of this set of regulations, punishments shall be meted out according
to the provisions of the Advertising Law of the People’s Republic of China and the Anti-Unfair Competition Law of the People’s
Republic of China.

11. For cases that have violated the provisions of Article 25 of this set of regulations, a fine ranging from more than RMB500
to less than RMB2,000 shall be imposed on a pyramid sales agent involved and the enterprises involved shall be ordered
to terminate the operations of the pyramid sales agent involved.

CHAPTER VII SUPPLEMENTARY PROVISIONS

Article 31 The power of interpreting the provisions of this set of regulations rests with the State Administration for Industry
and Commerce.

Article 32 The regulations shall become effective as of the date of promulgation.

CIRCULAR OF THE STATE COUNCIL CONCERNING THE ADJUSTMENT IN THE TAXATION POLICY OF IMPORT EQUIPMENT

Category	TAXATION	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1997-12-29	Effective Date	1998-01-01

Circular of the State Council Concerning the Adjustment in the Taxation Policy of Import Equipment

(December 29, 1997)

For purposes of further expanding foreign capital utilization, inducting
advanced technologies and equipment from abroad, promoting adjustments in
industries structures and technological advancement and maintaining the
sustained, rapid and healthy development of the national economy, the State
Council has decided that as of January 1, 1998, tariffs and import link
value-added tax shall be exempted within the prescribed scope with respect
to import equipment of domestic investment projects and foreign business
investment projects the development of which is encouraged by the state.
The relevant questions are hereby notified as follows:

I.Scope of Tax Exemption for Import Equipment

(1)Tariffs and import link value-added tax shall be exempted with respect
to import equipment for their own use within the total amount of investment
in foreign business investment projects that transfer technology and are
consistent with the category of encouragement and the restricted B category
under the Catalog of Industries Guidance for Foreign Business Investment,
with the exception of commodities listed in the Catalog of Import Commodities
for Foreign Business Investment Projects with no Tax Exemption.

Reference shall be made to the preceding paragraph in the implemenation
of the import equipment for their own use by projects utilizing foreign
government loans and loans of international financial institutions and
import equipment provided by foreign businesses for processing trade without
evaluation, that is, tariffs and import link value-added tax shall be exempted
with the exception of the commodities listed in the Catalog of Import
Commodities for Foreign Business Investment Projects with no Tax Exemption.

(2)Tariffs and import link value-added tax shall be exempted with respect
to import equipment for their own use within the total amount of investment
of domestic investment projects in line with the Current Catalog of Key
Industries, Products and Technologies the Development of Which is Encouraged
by the State, with the exception of the commodities listed in the Catalog of
Import Commodities for Domestic Investment Projects with no Tax Exemption.

(3)Tariffs and import link value-added tax shall likewise be exempted
with respect to technologies and matching components and parts imported
alongwith the equipment in accordance with the contracts for projects in line
with the aforesaid provisions.

(4)Tax reduction and exemption for import equipment outside the aforesaid
prescribed scope shall be decided upon by the State Council.

II.Administration of Tax Exemption for Import Equipment

(1)Existing relevant provisions of the state shall still be observed
in terms of examaination and approval authority and procedures for feasibility
study of investment projects. Above-ceiling projects shall be subject to
examination and approval by the State Planning Commission or the State
Economic and Trade Commission respectively. Below-ceiling projects shall
be subject to examination and approval of people’s governments at the
provincial level, the departments concerned under the State Council, people’s
governments of municipalities listed as independent units in state plans and
enterprise groups undergoing experiment by the state authorized by the
State Council. However, foreign business investment projects shall be
subject to examination and approval in pursuance of the Interim Provisions
for Direction Guidance for Foreign Business Investment. In making official
replies to feasibility studies, the examination and approval authorities
shall issue a letter of confirmation in uniform format for projects in line
with the encouragement category and the restricted B category of the
Catalog for Guidance for Foreign Business Investment Industries, or the
Current Catalog of Key Industries, Products and Technologies the development
of which is Encouraged by the State, or projects utilizing foreign government
loans and loans of international financial institutions. For below-ceiling
projects, the letter of confirmation shall be submitted along with the
feasibility study according to the nature of investment in the project to
the State Planning Commission or the State Economic and Trade Commission
respectively for the record. Units violating the provisions of examination
and approval shall be dealt with seriously.

(2)A project unit shall complete the formalities for import duty
exemption at the competent custom office on the strength of the letter of confirmation issued by the examination and approval authority
of the project
feasibility study, among them foreign business investment projects must
go through the formalities on the strength of approval documents for the
establishment of enterprises of the departments of foreign economic relations
and trade and the business licenses issued by the departments of industry and
commerce administration. Units of processing trade shall go through the
formalities of import duty exemption for the import of equipment provided
by foreign businesses without evaluation on the strength of the approved
contract for processing trade. The customs office shall carry out examination
and verification in accordance with those formalities and with reference to
the Catalog of Commodities not Eligible for Tax Exemption.

(3)The General Administration of Customs shall make uniform numbers,
establish a data bank, strengthen auditing, enforce stringent supervision and
control over projects approved for tax exemption and actively cooperate with
the departments concerned in conducting successful verification.

(4)All units concerned should pay attention to the simplification of operations links and examination and
approval procedures, accelerate the
speed of examination and approval so as to ensure the implementation of this major policy of tax exemption and render it effective.

III.Tax Exemption for Import Equipment for Transfer Projects

(1)For import equipment for technological transformation projects
approved in accordance with the prescribed procedures of the state prior to
March 31, 1996, import duty and import link value-added tax shall be exempted
as of January 1, 1998 according to the scope of tax reduction and exemption
for equipment previously approved. The project units shall go through the
formalities of tax exemption at the competent customs office on the strength
of the original approval documents.

(2)For import equipment for foreign business investment projects and
domestic investment projects the establishment of which was approved in
accordance with the prescribed procedures of the state between April 1, 1996
and December 31, 1997, as well as the import equipment for projects
utilizing foreign government loans and loans of international financial
institutions, the import duty and import link value-added tax shall be
exempted as of January 1, 1998 with the exception of the import commodities
not eligible for tax exemption expressly defined by this Provision. The
project units shall go through the formalities of tax exemption at the
competent customs office on the strength of the original approval documents.

2003

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ENERGY CONSERVATION LAW OF THE PEOPLE’S REPUBLIC OF CHINA

MEASURES FOR CUSTOMS SUPERVISION AND CONTROL OF THE BONDED AREAS

PROVISIONS OF THE STATE COUNCIL CONCERNING HOISTING AND USING THE NATIONAL AND REGIONAL FLAGS AT THE SAME TIME IN THE HONGKONG SPECIAL ADMINISTRATIVE REGION

INTERIM PROCEDURES OF SHANGHAI MUNICIPALITY ON JOINT-STOCK COOPERATIVE ENTERPRISES

CIRCULAR OF THE CENTRAL COMMITTEE OF THE COMMUNIST PARTY OF CHINA AND THE STATE COUNCIL CONCERNING THE TRANSMISSION OF THE REPORT ON THE SUGGESTIONS WITH REGARD TO THE CONDITIONS OF TOWNSHIP AND VILLAGE ENTERPRISES IN CHINA AND THEIR FUTURE REFORM AND DEVELOPMENT BY THE MINISTRY OF AGRICULTURE

REGULATIONS ON THE ADMINISTRATION OVER PYRAMID MARKETING

CIRCULAR OF THE STATE COUNCIL CONCERNING THE ADJUSTMENT IN THE TAXATION POLICY OF IMPORT EQUIPMENT

MEASURES FOR THE ADMINISTRATION OF STOCK EXCHANGES

CONSTITUTION ACT, 1982 – page 22

CONSTITUTION ACT, 1982 – page 21

CONSTITUTION ACT, 1982 – page 20

CONSTITUTION ACT, 1982 – page 19

CONSTITUTION ACT, 1982 – page 18

CONSTITUTION ACT, 1982 – page 17

CONSTITUTION ACT, 1982 – page 16

CONSTITUTION ACT, 1982 – page 12

CONSTITUTION ACT, 1982 – page 11

CONSTITUTION ACT, 1982 – page 10

CONSTITUTION ACT, 1982 – page 9

CONSTITUTION ACT, 1982 – page 8

CONSTITUTION ACT, 1982 – page 7

Category	GEOLOGY, MINERAL RESOURCES AND ENERGY INDUSTRY	Organ of Promulgation	The Standing Committee of the National People’s Congress	Status of Effect	In Force
Date of Promulgation	1997-11-01	Effective Date	1998-01-01

Category	SECURITIES	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1997-12-10	Effective Date	1997-12-10