China Laws

PROVISIONAL REGULATIONS ON CONSUMPTION

Category	TAXATION	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1993-12-13	Effective Date	1994-01-01

Provisional Regulations of the People’s Republic of China on Consumption

Appendix: CONSUMPTION TAXABLE ITEMS AND TAX RATES (TAX AMOUNTS) TABLE

Tax

(Adopted at the 12nd Executive Meeting of the State Council on November

26, 1993, promulgated by Decree No.135 of the State Council of the People’s
Republic of China on December 13, 1993 and effective as of January 1, 1994)

Article 1 All units and individuals engaged in the production,
sub-contracting for processing or the importation of consumer goods prescribed
by these Regulations (hereinafter referred to as ‘taxable consumer goods’)
within the territory of the People’s Republic of China are taxpayers of
Consumption Tax (hereinafter referred to as ‘taxpayers’) and shall pay
Consumption Tax in accordance with these Regulations.

Article 2 The taxable items, tax rates (tax amounts) of Consumption Tax
shall be determined in accordance with the Consumption Tax Taxable Items and
Tax Rates (Tax Amounts) Table attached to these Regulations.

Any adjustments to the Consumption Tax taxable items, tax rates (tax
amounts) shall be determined by the State Council.

Article 3 For taxpayers dealing in taxable consumer goods with different
tax rates, the sales amounts and sales volumes for the taxable consumer goods
with different tax rates shall be accounted for separately. If the sales
amounts and sales volumes have not been accounted for separately or if the
taxable consumer goods with different tax rates are combined into a whole set
of consumer goods for sales, the higher tax rate shall apply.

Article 4 Taxable consumer goods produced by the taxpayer shall be
subject to tax upon sales. For self-produced taxable consumer goods for the
taxpayer’s own use in the continuous production of taxable consumer goods, no
tax shall be assessed; tax shall be assessed when the goods are transferred
for other use.

For taxable consumer goods sub-contracted for processing, the tax shall be
collected and paid by the sub-contractor upon delivery to the contractor. For
taxable consumer goods sub-contracted for processing used by the contractor
for the continuous production of taxable consumer goods, the tax paid can be
credited in accordance with the regulations.

Imported taxable consumer goods shall be subject to tax upon import
declaration.

Article 5 The computation of tax payable for Consumption Tax shall follow
either the rate on value or the amount on volume method. The formulas for
computing the tax payable are as follows:

The tax payable computed under the rate on value mentod

= Sales amount * Tax rate

The tax payable computed under the amount on volume mentod

= Sales volume * Tax amount per unit

For taxable consumer goods sold by taxpayer where the sales amounts are
computed in foreign currencies, the taxable amounts shall be converted into
Renminbi according to the exchange rates prevailing in the foreign exchange
market.

Article 6 The “sales amount” as stipulated in Article 5 of these
Regulations shall be the total consideration and other charges receivable from
the buyer for the taxable consumer goods sold by the taxpayer.

Article 7 Self-produced taxable consumer goods for the taxpayer’s own use
that shall be subject to tax in accordance with the stipulations of the first
paragraph in Article 4 of these Regulations shall be assessed according to the
selling price of similar consumer goods produced by the taxpayer. If the
selling price of similar consumer goods is not available, the tax shall be
assessed according to the composite assessable value. The formula for
computing the composite assessable value is as follows:

Composite assessable value = (Cost + Profit) / (1 – Consumption Tax rate)

Article 8 Taxable consumer goods sub-contracted for processing shall be
assessed according to the selling price of similar consumer goods of the
sub-contractor. If the selling price of similar consumer goods is not
available, the tax shall be assessed according to the composite assessable
value. The formula for computing the composite assessable value is as follows:

Composite assessable value

= (Cost of material + Processing fee) / (1 – Consumption Tax rate)

Article 9 Imported taxable consumer goods which adopt the rate on value
method in computing the tax payable shall be assessed according to the
composite assessable value. The formula for computing the composite assessable
value is as follows:

Composite assessable value

= (Customs dutiable value + Customs Duty) / (1 – Consumption Tax rate)

Article 10 Where the taxable value of the taxable consumer goods of the
taxpayer is obviously low and without proper justification, the taxable value
shall be determined by the competent tax authorities.

Article 11 For taxpayers exporting taxable consumer goods, the
Consumption Tax shall be exempt, except as otherwise determined by the State
Council. The measures for exemption of exported taxable consumer goods shall
be regulated by the State Administration for Taxation.

Article 12 Consumption Tax shall be collected by the tax authorities.
Consumption Tax on the importation of taxable consumer goods shall be
collected by the customs office on behalf of the tax authorities.

Consumption Tax on taxable consumer goods brought or mailed into China by
individuals shall be levied together with Customs Duty. The detailed measures
shall be formulated by the Tariff Policy Committee of the State Council
together with the relevant departments.

Articie 13 Taxpayers selling taxable consumer goods and self-producing
taxable consumer goods for their own use, except otherwise as determined by
the State, shall report and pay tax to the local competent tax authorities
governing the taxpayers.

For taxable consumer goods sub-contracted for processing, the Consumption
Tax due shall be paid to the local competent tax authorities where the
sub-contractors are located.

For imported taxable consumer goods, the tax shall be reported and paid by
the importers or their agents to the customs offices where the imports are
declared.

Article 14 The Consumption Tax assessable period shall be one day, three
day, five days, ten days, fifteen days or one month. The actual assessable
periods of the taxpayers shall be separately determined by the competent tax
authorities according to the magnitude of the tax payable of the taxpayers;
tax that cannot be assessed in regular periods can be assessed on a
transaction-by-transaction basis.

Taxpayers that adopt one month as an assessable period shall report and
pay tax within ten days following the end of the period. If an assesable
period of one day, three days, five days, ten days or fifteen days is adopted,
the tax shall be prepaid within five days following the end of the period, and
a monthly return shall be filed with any balance of tax due settled within ten
days from the first day of the following month.

Article 15 Taxpayers importing taxable consumer goods shall pay tax
within seven days after the completion and issuance of the tax payment
certificates by the customs office.

Article 16 The collection and administration of Consumption Tax shall be
conducted in accordance with the relevant provisions of the Law of the
People’s Republic of China on Tax Collection and Administration and these
Regulations.

Article 17 The collection of Consumption Tax from foreign investment
enterprises and foreign enterprises shall be conducted in accordance with the
resolutions of the Standing Committee of the National People’s Congress.

Article 18 The Ministry of Finance shall be responsible for the
interpretation of these Regulations and for the formulation of the rules for
the implementation of these Regulations.

Article 19 These Regulations shall come into effect from January 1, 1994.
The relevant regulations of the State Council regarding the collection of
Consumption Tax prior to the promulgation of these Regulations shall be
superseded on the same date.

Appendix: CONSUMPTION TAXABLE ITEMS AND TAX RATES (TAX AMOUNTS) TABLE

Taxable Items Scope
of charge Tax Unit Tax Rate/Amount

I. Tobacco

1. Grade A cigarettes Including Imported
45%

Cigarettes

2. Grade B cigarettes
40%

3. Cigars
40%

4. Cut tobacco 30%

II. Alcoholic drinks and

alcohol

1. White spirits made from 25%

cereal

2. White spirits made from 15%

potatoes

3. Yellow spirits
ton 240yuan

4. Beer
ton 220yuan

5. Other alcoholic drinks
10%

6. Alcohol 5%

III. Cosmetics Including
cosmetics 30%

sets

IV. Skin-care and hair-care 17%

products

V. Precious jewelry and Including all kinds of
10%

precious jade and stones gold, silver, jewelry,

and precious stone

ornaments

VI. Firecrackers and
15%

fireworks

  VII. Gasoline
litre         0.2yuan
VIII. Diesel oil
litre         0.1yuan

IX. Motor vehicle tyres 10%

X. Motorcycles 10%

Xl. Motor Cars

1. Those with a cylinder 8%

capacity (i.e. emission

capacity) of more than

2,200 ml (including

2,200 ml)

Those with a cylinder 5%

capacity of between

1,000-2,200 ml

(including 1,000 ml)

Those with a cylinder 3%

capacity of less than

1,000 ml

2. Cross-country vehicles

(four-wheel drive)

Those with a cylinder 5%

capacity of more than

2,400 ml (including

2,400 ml)

Those with a cylinder 3%

capacity of less than

2,400 ml

3. Minibuses and vans less than 22 seats

Those with a cylinder 5%

capacity of more than

2,000 ml (including

2,000 ml)

Those with a cylinder 3%

capacity of less than

2,000 ml

CIRCULAR OF THE STATE COUNCIL CONCERNING THE STRICT EXAMINATION AND APPROVAL AND CHECKS ON VARIOUS DEVELOPMENT ZONES

Category	SPECIAL ECONOMIC ZONES AND COASTAL ECONOMIC DEVELOPMENT ZONES	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1993-04-28	Effective Date	1993-04-28

Circular of the State Council Concerning the Strict Examination and Approval and Checks on Various Development Zones

(Promulgated by the State Council on April 28, 1993)

It is one of the important measures of China’s reform and opening-up
policy to set up rationally distributed development zones in places where
conditions permit, concentrate the effort in developing their infrastructure
construction, put into effect preferential policies and create a good
investment environment in order to attract foreign investment. Practice shows
that this is an effective measure and should be maintained in the future.
However, since last year there has been a boom in development zones with
increasing numbers involved in a wider range of activities. As a result, they
have taken over large plots of cultivated land and needed considerable
funding. It is obvious that they have now gone beyond practical needs and,
indeed, economic endurance. In a few places, the tax and land laws issued by
the State are ignored and governments of various levels have exceeded their
authority to make and issue tax-free measures without permission, which has
caused harmful effects. Without strict and resolute measures to check this
trend, it will aggravate the shortage of funding, energy resources,
communications and transportation and supply of raw materials, which will
effect the normal running of the national economy and the healthy development
of opening to the outside world. The following circular is hereby issued
concerning this issue.

1. Development zones should follow a double level system of examination
and approval — the State Council and the people’s government of provinces,
autonomous regions and municipalities directly under the Central Government.
The people’s governments at various levels under the provinces, autonomous
regions and municipalities under the Central Government cannot examine and
approve the establishment of various development zones.

2. The State Council has the authority to examine and give approval for
the establishment of economic technology development zones, bonded areas,
hi-tech industrial development zones, state tourist and holiday zones and
frontier economic cooperation zones. If any of the above-mentioned development
zones are to be set up, the people’s government of the concerned province,
autonomous region or municipality directly under the Central Government and
the department of the State Council in charge of the project should guide the
primary planning and the study of its feasibility, then report to the State
Council.

3. In order to attract foreign investment to develop projects in industry,
agriculture, international tourism and hi-tech industry, the people’s
governments of provinces, autonomous regions and municipalities directly under
the Central Government can, according to local resources, practical needs and
conditions, approve the establishment of a small number of development zones
(tourist and holiday zones), make related preferential policies within the
limit of their authority, and report to the State Council. But the development
zones set up with the approval of the people’s governments of the provinces,
autonomous regions and municipalities directly under the Central Government
cannot continue to use the post_title and policy of the development zones set up
with the approval of the State Council.

4. The examination and approval of development zones should strengthen
overall planning and rational distribution, and pay attention to
socio-economic efficiency. The government should strictly control the areas of
development zones and emphasize that such projects should actually result in
development. It will insist that progress on such projects should only be made
according to the capability of those involved to develop the plot, build and
make profits. The government should examine and approve the land strictly
according to the law, save land resources and strictly control the occupation
of cultivated land. In principal, cultivated land within the basic farmland
protective region is not to be occupied.

5. Every region should carry out an inspection of the various development
zones set up without the approval of the State Council or the people’s
governments of provinces, autonomous regions and municipalities directly under
the Central Government. The government should firmly and resolutely terminate
approval for the continued development of zones where the basic construction
conditions are lacking, the project or funding is unsettled, too much land is
occupied or the land is occupied without use. The land should then be returned
to the peasants. To abandon cultivated land or leave a land uncultivated is
strictly forbidden.

6. All regions and departments should uphold the State policies, laws and
regulations, strictly abide by the tax and land laws, and related policies and
regulations issued by the State. It is forbidden to ignore or exceed the
authority of the State and to make preferential policies, reduce tax or yield
interest in disguised form without permission. The people’s governments and
the department of the State Council concerned should strengthen supervision of
this issue.

7. The people’s governments of provinces, autonomous regions and
municipalities directly under the Central Government should report before the
end of June 1993 to the General Office of the State Council on the inspection
work carried out on various development zones.

DECISION OF THE STANDING COMMITTEE OF THE NATIONAL PEOPLE’S CONGRESS REGARDING THE TREATMENT OF THE EXISTING HONG KONG LAWS ACCORDING TO ARTICLE 160 OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION BASIC LAW

Category	SPECIAL ADMINISTRATIVE REGION	Organ of Promulgation	The Standing Committee of the National People’s Congress	Status of Effect	In Force
Date of Promulgation	1997-02-23	Effective Date	1997-02-23

Decision of the Standing Committee of the National People’s Congress Regarding the Treatment of the Existing Hong Kong Laws According to Article 160 of the Basic Law of the Hong Kong Special Administrative Region of the People’s Republic of China

(Adopted at the 24th Meeting of the Standing Committee of the Eighth

National People’s Congress on February 23, 1997)

The Basic Law of the Hong Kong Special Administrative Region of the
People’s Republic of China (hereinafter referred to as the Basic Law)
provides in its Article 160: “Upon the establishment of the Hong Kong Special
Administrative Region, the laws previously in force in Hong Kong shall be
adopted as laws of the Region except for those which the Standing Committee
of the National People’s Congress declares to be in contravention of this
Law. If any laws are later discovered to be in contravention of this Law, they
shall be amended or cease to have force in accordance with the procedure as
prescribed by this Law.” Article 8 of the same Law provides: “The laws
previously in force in Hong Kong, that is, the common law, rules of equity,
ordinances, subordinate legislation and customary law shall be maintained,
except for any that contravene this Law, and subject to any amendment by the
legislature of the Hong Kong Special Administrative Region.” According to the
aforesaid provisions, and having deliberated the suggestions by the
Preparatory Committee for the Hong Kong Special Administrative Region
regarding the treatment of the laws previously in force in Hong Kong, the
24th Meeting of the Eighth National People’s Congress hereby makes the
following decisions:

1. The laws previously in force in Hong Kong, including the common law,
rules of equity, ordinances, subordinate legislation and customary law, shall
be adopted as laws of the Hong Kong Special Administrative Region, except for
those contravening the Basic Law.

2. The ordinances and subordinate legislation previously in force in Hong
Kong, which are listed in Appendix I of this Decision, shall not be adopted
as laws of the Hong Kong Special Administrative Region for their contravening
the Basic Law.

3. Some provisions of certain ordinances and subordinate legislation
previously in force in Hong Kong, which are listed in Appendix II of this
Decision, shall not be adopted as laws of the Hong Kong Special
Administrative Region for their contravening the Basic Law.

4. The laws previously in force in Hong Kong which have been adopted as
laws of the Hong Kong Special Administrative Region shall, starting July 1,
1997, make necessary modification, adaptation, restriction or exception in
applying, so as to tally with the relevant provisions of the Basic Law and
the status of Hong Kong after the resumption of the exercise by the People’s
Republic of China of the sovereignty over Hong Kong. For instance, the
application of the New Territories Land (Exemption) Ordinance shall conform
to the above-mentioned principles.

In addition to the aforesaid principles, among the ordinances and
subordinate legislation previously in force,

(1) If any laws concerning foreign affairs related with the Hong Kong
Special Administrative Region are inconsistent with any national law in force
in Hong Kong, the latter shall prevail, with conformation with the
international rights and obligations which the Central People’s Government
enjoys or bears.

(2) Any provisions granting privileges to Britain or other nations or
regions of the British Commonwealth shall not be maintained, except for those
reciprocity provisions between Hong Kong and Britain or other nations or
regions of the British Commonwealth.

(3) As for provisions concerning the rights, immunity and duties of
military forces stationed to Hong Kong by Britain, those not contravening the
Basic Law and the Garrison Law of the Hong Kong Special Administrative Region
of the People’s Republic of China shall be maintained and apply to the
military forces stationed to Hong Kong by the Central People’s Government of
the People’s Republic of China.

(4) Provisions concerning English language’s higher authenticity than
Chinese language shall be interpreted as both of them are formal languages.

(5) Provisions containing citations of British laws may continue to be
referred to and apply during the transition process before any amendment has
been made to them, provided that they do not impair the sovereignty of the
People’s Republic of China or contravene the Basic Law.

5. Unless the context otherwise requires, the laws previously in force in
Hong Kong adopted as laws of the Hong Kong Special Administrative Region
under Article 4 of this Decision shall have their post_titles or expressions
interpreted and applied in accordance with the substitution principles
provided for in Appendix III.

6. Any laws previously in force in Hong Kong adopted as laws of the
Hong Kong Special Administrative Region may be amended or invalidated in
accordance with the procedures stipulated by the Basic Law, if, in the
future, they are discovered to contravene the Basic Law.

Appendix I

The following ordinances and subordinate legislation among the laws
previously in force in Hong Kong shall not be adopted as laws of the Hong
Kong Special Administrative Region because of their contravening the Basic
Law:

1. Trustees (Hong Kong Government Securities) Ordinance (Chapter 77,
Laws of Hong Kong);

2. Application of English Law Ordinance (Chapter 88, Laws of Hong Kong);

3. Foreign Marriage Ordinance (Chapter 180, Laws of Hong Kong);

4. Chinese Extradition Ordinance (Chapter 235, Laws of Hong Kong);

5. Colony Armorial Bearings (Protection) Ordinance (Chapter 315, Laws of
Hong Kong);

6. Secretary of State for Defence (Succession to Property) Ordinance
(Chapter 193, Laws of Hong Kong);

7. Royal Hong Kong Regiment Ordinance (Chapter 199, Laws of Hong Kong);

8. Compulsory Service Ordinance (Chapter 246, Laws of Hong Kong);

9. Army and Royal Air Force Legal Services Ordinance (Chapter 286, Laws
of Hong Kong);

10. British Nationality (Miscellaneous Provisions) Ordinance
(Chapter 186, Laws of Hong Kong);

11. British Nationality Act 1981 (Consequential Amendments) Ordinance
(Chapter 373, Laws of Hong Kong);

12. Electoral Provisions Ordinance (Chapter 367, Laws of Hong Kong);

13. Legislative Council (Electoral Provisions) Ordinance (Chapter 381,
Laws of Hong Kong); and

14. Boundary and Election Commission Ordinance (Chapter 432, Laws of
Hong Kong).

Appendix II

Certain provisions of the following ordinances and subordinate
legislation among the laws previously in force in Hong Kong shall not be
adopted as laws of the Hong Kong Special Administrative Region because of
their contravening the Basic Law:

1. The definition of “permanent residents of Hong Kong” in Section 2, and
the provisions of “permanent residents of Hong Kong” in Appendix 1,
Immigration Ordinance (Chapter 115, Laws of Hong Kong);

2. Any provisions for the implementation in Hong Kong of the British
Nationality Act;

3. Provisions concerning election in Urban Council Ordinance
(Chapter 101, Laws of Hong Kong);

4. Provisions concerning election in Regional Council Ordinance
(Chapter 385, Laws of Hong Kong);

5. Provisions concerning election in District Boards Ordinance
(Chapter 366, Laws of Hong Kong);

6. Subordinate legislation A, Urban Council, Regional Council and Board
Election Expenses Order and subordinate legislation C, Resolution of the
Legislative Council, of Corrupt and Illegal Practices Ordinance (Chapter 288,
Laws of Hong Kong);

7. Provisions concerning the interpretation and the purpose of the
Ordinance in Section 2(3), provisions concerning the “affection to previous
law” in Section 3 and provisions concerning the “interpretation of laws in
the future” in Section 4, of Hong Kong Bill of Rights Ordinance (Chapter 383,
Laws of Hong Kong);

8. Provisions concerning the Ordinance’s overriding position in
Section 3(2), of Personal Data (Privacy) Ordinance (Chapter 486, Laws of Hong
Kong);

9. Major amendments, having been made since July 17, 1992, to the
Societies Ordinance (Chapter 151, Laws of Hong Kong); and

10. Major amendments, having been made since July 27, 1995, to the Public
Order Ordinance (Chapter 245, Laws of Hong Kong).

Appendix III:

The laws previously in force in Hong Kong adopted as laws of the Hong
Kong Special Administrative Region shall generally have their post_titles and
expressions interpreted and applied in accordance with the following
substitution principles:

1. Any reference of “the Queen”, “royal”, “the British Government”,
“Secretary of State” or other similar post_titles or expressions shall be regarded
as referring to the central or other competent authorities of China, if the
provisions are concerning the Hong Kong land use right or involving the
affairs under the central administration or the relationship between the Hong
Kong Special Administrative Region and the central authorities prescribed by
the Basic Law; in other context, they shall be regarded as referring to
the government of the Hong Kong Special Administrative Region.

2. Any reference of “the Queen in Privy Council” or the “Privy Council”
shall be regarded as referring to the Court of Final Appeal of the Hong Kong
Special Administrative Region, if the provisions are concerning the right of
appeal; in other context, it shall be treated in accordance with the
provisions of the preceding paragraph.

3. Any government organizations or semi-governmental organizations which
have their name preceded by “royal” shall delete the word “royal” and
regarded as organizations of the Hong Kong Special Administrative Region.

4. Any reference of “this colony” shall be regarded as referring to the
Hong Kong Special Administrative Region; any provisions concerning the
territories of Hong Kong shall be applied after relevant interpretations have
been made in accordance with the map of the administrative division of the
Hong Kong Special Administrative Region published by the State Council.

5. Any reference of “Supreme Court” and “High Court” shall be regarded as
respectively referring to the High Court and the Court of First Instance of
the High Court.

6. Any reference of “Governor”, “Governor in Executive Council”, “Chief
Secretary”, “Attorney General”, “Chief Justice”, “Secretary for Home Affairs”,
“Secretary for Constitutional Affairs”, “Commissioner of Customs and Excise”
or “Judges” shall be regarded as respectively referring to the Chief Executive
of the Hong Kong Special Administrative Region, Chief Executive in the
Executive Council, Administrative secretary, Secretary of Justice, Chief
Justice of the Court of Final Appeal or Chief Judge of the High Court,
Secretary for Home Affairs, Secretary for Electoral Affairs, Commissioner of
Customs and Excise and Judges of the High Court.

7. Any post_titles or expressions in the Chinese texts of laws previously in
force in Hong Kong, of or regarding the Legislative Council, the judiciary or
the executive authorities or the personnel thereof shall be interpreted and
applied in accordance with relevant provisions of the Basic Law.

8. Any reference of “the People’s Republic of China”, “China” or other
similar post_titles or expressions shall be regarded as referring to the People’s
Republic of China including Taiwan, Hong Kong and Macao; any individual or
simultaneous reference of the mainland, Taiwan, Hong Kong or Macao shall be
regarded as referring to a part of the People’s Republic of China.

9. Any reference of “foreign countries” or other similar post_titles or
expressions shall be regarded as referring to any country or region other
than the People’s Republic of China or, in accordance with the context of the
law or articles or sections, regarded as referring to “any area outside the
Hong Kong Special Administrative Region”; any reference of “foreigners” or
other similar post_titles or expressions shall be regarded as referring to any
persons other than citizens of the People’s Republic of China.

10. Any provisions as “the stipulations of this ordinance shall not
prejudice nor may be regarded as prejudice to the rights of the Queen, her
crown prince or successor to the throne” shall be interpreted as “the
stipulations of this ordinance shall not prejudice nor may be regarded as
prejudice to the rights enjoyed by the Central Government or the government
of the Hong Kong Special Administrative Region according to the provisions of
the Basic Law and other laws.

CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON APPLICABLE RATE OF INCOME TAX FOR THE BRANCHES OF THE ENTERPRISES WITH FOREIGN INVESTMENT

The State Administration of Taxation

Circular of the State Administration of Taxation on Applicable Rate of Income Tax for the Branches of the Enterprises with Foreign
Investment

GuoShuiFa [1997] No.49

April 9, 1997

The state and local tax bureaus of various provinces, autonomous regions, municipalities directly under the Central Government and
municipalities separately listed on the State plan:

Recently, the issues on how to determine the applicable income tax rate for the branches established in the area within the territory
of our country where different rates of income tax exist by the enterprises with foreign investment under the Income Tax Law of the
People’s Republic of China on the Enterprises with Foreign Investment and Foreign Enterprises (hereinafter referred to as Tax Law)
have been enquired for many times by the local taxation institutions. In accordance with Article 5 and Article 7 of Law of Income
Tax and Article 71 of Rules for the Implementation of it, the above issues should be handled depending on the following situations:

The branches established in our country by the enterprises with foreign investment and undertaking the production, commodity trade
and services are applied to the income tax rate of the local enterprises with the same trade. The headquarters of the foreign-funded
enterprises should pay the income tax of the branches on a consolidated basis.

II.

The profits of products by the enterprises with foreign investment which produce and sell the products in our country by their own
is applied to the income tax rate of the local enterprises in the area where the products are produced, no matter whether the enterprises
sell the products through the sales agent or not and no matter how the sales organizations square the account. The income tax should
be calculated and paid on a consolidated basis by their headquarters.

III.

The previous settlements opposite to this Circular can be adjusted according to the relevant provisions of this Circular from 1996.

The State Administration of Taxation
1997-04-09

INTERIM MEASURES ON THE ESTABLISHMENT OF CHINESE-FOREIGN EQUITY JOINT RESEARCH AND DEVELOPMENT INSTITUTIONS AND CHINESE-FOREIGN CONTRACTUAL JOINT RESEARCH AND DEVELOPMENT INSTITUTIONS

The State Science and Technology Commission

Interim Measures on the Establishment of Chinese-foreign Equity Joint Research and Development Institutions and Chinese-foreign Contractual
Joint Research and Development Institutions

the State Science and Technology Commission

September 10,1997

Chapter I General Provisions

Article 1

These Measures are formulated in accordance with the provisions of Article 36 of the Law of the People’s Republic of China on Progress
of Science and Technology for the purposes of safeguarding the lawful rights and interests of Chinese-foreign (overseas) equity joint
research and development institutions and Chinese-foreign (overseas )contractual joint research and development institutions (hereinafter
referred to as “Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions”), enhancing basic
research, applied research and experimental developments, and fostering international scientific and technological cooperation and
exchange.

Article 2

These Measures are applicable to Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions
established by foreign and overseas organizations or individuals (hereinafter referred to as “the foreign party”) with Chinese scientific
research institutes and research and development institutions of higher education institutions (hereinafter referred to as “the Chinese
party”) within the territory of the People’s Republic of China.

Article 3

A Chinese-foreign equity joint research development institution refers to a research and development institution which is jointly
established by a Chinese party and a foreign party on the basis of a joint venture agreement where both parties invest capital, equipment
and scientific and technological resources. The investment amount of the foreign party in a Chinese-foreign equity joint research
and development institution must account for no less than 25 per cent of the total investment amount. A Chinese-foreign equity joint
research and development institution shall have the qualification of an institution legal person.

Article 4

A Chinese-foreign contractual joint research and development institution refers to a research and development institution which is
established in cooperation by a Chinese party and a foreign party on the basis of a contract. A Chinese-foreign contractual joint
research and development institution shall not have the qualification of a legal person.

Article 5

The establishment of a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution shall abide
by the laws, regulations and policies of the People’s Republic of China and implement the principles of equity and mutual benefit,
honesty and trustworthiness, sharing of achievements, joint assumption of risk, protection of intellectual property and respect for
international practices.

Article 6

Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions shall, in the fields of natural
science and its interrelated scientific and technological fields, engage in basic research, applied research, high scientific and
technological research, social public welfare-related scientific research, and in technological developments and experimental developments
within the above mentioned fields.

Where a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution is to engage in production
or business operations, it must obtain approval from its competent department in advance, then separately undertake enterprise legal
person registration with the local administrative department for industry and commerce and apply for the relevant business license.

Article 7

To establish a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution, the foreign party
to the equity or cooperation shall supply advanced scientific and technological achievements, information materials and testing equipment
or send highly skilled scientific and technological personnel to participate in the joint research and development work.

Article 8

The State Science and Technology Commission shall be responsible for macro-administration, coordination and guidance in respect of
Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions throughout the country. The various
departments and directly affiliated organizations of the State Council shall centrally administer Chinese-foreign equity and Chinese-foreign
contractual joint research and development institutions within their respective departments. The science and technology commissions
of the provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed in
the State plan shall centrally administer Chinese-foreign equity and Chinese-foreign contractual join research and development institutions
within their respective administrative areas.

Chapter II Establishment, Alteration and Termination

Article 9

The establishment of a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution must meet
the following requirements:

(1)

complying with the overall arrangements of the State’s allocation of scientific and technological resources;

(2)

its research and development shall be in a direction which complies with technology and industry policies of the State;

(3)

possessing articles of association complying with China’s laws, regulations and policies;

(4)

possessing necessary scientific research funds, testing equipment, intelligence information and other scientific research requirements;

(5)

possessing a certain number of scientific research personnel;

(6)

possessing fixed premises and organizational structure;

(7)

other requirements stipulated by the competent department.

Article 10

The establishment of a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution shall be examined
and approved according to the following jurisdictions:

(1)

When a research and development institution under the jurisdiction of a department or a directly subordinate institution of the State
Council applies to establish a Chinese-foreign equity joint research and development institution, the matter shall be approved by
the competent department, and reported to the State Science and Technology Commission for examination and verification, and then
examined and approved by the Office of the State Commission for Public Service Structure and Establishment Administration.

(2)

When a research and development institution under the jurisdiction of a province, autonomous region, municipality directly under the
Central Government or municipality separately listed in the State plan applies to establish a Chinese-foreign equity joint research
and development institution, the matter shall be approved by the local competent department, and reported to the science and technology
commission of the province, autonomous region, municipality directly under the Central Government or municipality separately listed
in the State plan for examination and verification, and then examined and approved by the local departments for public service structure
and establishment administration.

(3)

When a research and development institution applies to establish a Chinese-foreign contractual joint research and development institution,
the matter shall be examined and approved by the competent department in accordance with the subordination framework, and then reported
to the science and technology committee at the same level for the record.

Article 11

To establish a Chinese-foreign equity joint research and development institution, the joint venture agreement shall specify the following
items:

(1)

the names, addresses and countries or regions of the two parties to the joint venture;

(2)

the name and domicile of the research and development institution;

(3)

the field, specialization and direction of research and development;

(4)

the total capital amount of the institution;

(5)

the means of investment, investment amounts and conditions for the transfer of investment in respect of all parties;

(6)

the organizational structure of the research and development institution;

(7)

the enpost_titlement to and sharing of scientific and technological achievements and intellectual properties;

(8)

the life of the joint venture and liquidation procedures after its termination;

(9)

liability for breach of contract;

(10)

measures for resolving disputes;

(11)

the language(s) to be used in the agreement and the conditions required for the agreement to take effect.

A feasibility proof and assessment report, the articles of association of the research and development institution and a capital verification
certificate shall be attached to the joint venture agreement.

Article 12

To establish a Chinese-foreign contractual joint research and development institution, the contractual venture contract shall specify
the following items:

(1)

the names, addresses and countries or regions of the two parties to the contractual venture;

(2)

the type of the research and development institution and its name and domicile;

(3)

the fields of scientific experimentation, research and development or technological innovations in which the institution is to engage;

(4)

the conditions of cooperation;

(5)

the means of cooperation;

(6)

the enpost_titlement to and sharing of scientific and technological achievements and intellectual properties;

(7)

the life of the contractual venture and relevant matters after its termination;

(8)

liability for breach of contract;

(9)

measures for resolving disputes;

(10)

the language(s) to be used in the contract and the conditions required for the contract to take effect.

A feasibility study report and the articles of association of the research and development institution shall be attached to the contract.

Article 13

No Chinese-foreign equity or Chinese-foreign contractual joint research and development institution may be established in any fields
which involve State security or vital interests where confidentiality is essential, or in any fields in which investment in China
by foreign or overseas organizations is prohibited in accordance with the laws, regulations or policies of the State.

Article 14

A Chinese-foreign equity joint research and development institution which is to be divided or merged, or to alter its articles of
association, relocate or amend its name, etc., must obtain approval from its original examination and approval organ. Its claims
and debts shall be borne by the altered research and development institution.

A Chinese-foreign contractual joint research and development institution which is to alter the contents of its contract must report
the matter to its original examination and approval organ for the record.

Article 15

A Chinese-foreign equity or Chinese-foreign contractual joint research and development institution may apply for renewal with its
original examination and approval organ 60 days before the expiry of the joint venture agreement or contract.

Article 16

To establish a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution, the two parties may
use currency, factories, equipment, instruments and other assets as investment; they may also use intellectual properties, scientific
and technological achievements, land-use rights and other intangible assets as investment. These assets shall be assessed by an assets
assessment institution recognized by the administration department of State-owned assets.

Chapter III Rights and Obligations

Article 17

A Chinese-foreign equity joint research and development institution shall enjoy the following rights:

(1)

enjoying legal person property rights;

(2)

formulating research and development plans, deciding research and development topics;

(3)

deciding internal organizational structures and personnel allocations;

(4)

employing scientific and technological personnel and deciding their wages and remuneration on its own;

(5)

obtaining intellectual properties and entering into technology transfer contracts with other parties in respect of these intellectual
properties.

Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions may apply to undertake science
and technology projects listed in State plans or science and technology projects commissioned by enterprises or society.

Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions meeting the requirements stipulated
by the State may, upon approval by the relevant departments, recruit students with masters or doctorate degree.

Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions may open their laboratories, research
centers, experimental bases, etc., to domestic and foreign parties.

Article 18

Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions shall, in accordance with the provisions
of the laws and regulations of the People’s Republic of China, stick to their research and development direction, and promote the
progress of science and technology, the transformation of scientific and technological achievements and the popularization of scientific
and technological knowledge.

Article 19

A Chinese-foreign equity joint research and development institution which employs scientific and technological personnel shall enter
into a contract of appointment with these personnel. The contract shall specify the appointment, dismissal, wage and remuneration,
welfare benefits, labor protection, personal insurance, intellectual properties and other issues. When appointing part-time personnel,
an agreement shall be concluded with the unit to which the personnel belong.

Article 20

For scientific and technological achievements and intellectual properties which result from the work of a Chinese-foreign equity or
Chinese-foreign contractual joint research and development institution, their enpost_titlement to and sharing shall be handled in accordance
with the provisions of the joint venture agreement or contractual contract. If no relevant provisions are included in the joint venture
agreement or contractual contract, the above-mentioned achievements shall be jointly owned by the two parties, and the Chinese party
shall enjoy priority right of usage and transfer.

Chapter IV Awards and Penalties

Article 21

The inventions, discoveries and other scientific and technological achievements which are completed by Chinese-foreign equity and
Chinese-foreign contractual joint research and development institutions within the Chinese territory may, subject to the recommendation
by the competent department, receive a State Natural Science Prize, Invention Prize or Scientific and Technological Progress Prize
of the People’s Republic of China.

Foreign joint venture partners and contractual venture partners in Chinese-foreign equity and Chinese-foreign contractual joint research
and development institutions, who have made an important contribution in promoting China’s scientific and technological advancement,
may be awarded an International Science and Technology Cooperation Prize in accordance with the provisions of Article 54 of the
Law of the People’s Republic of China on Progress of Science and Technology.

Article 22

Where a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution departs from its research
and development direction and violates the laws or regulations of China, it shall be ordered by the competent department to rectify
the situations within a prescribed time limit; if the rectification is ineffective, the institution shall be dismantled.

Where a Chinese-foreign equity or Chinese-foreign contractual joint research and development institution infringes upon or steals
other’s intellectual properties or encroaches other’s technological and economic rights and interests, it shall bear the corresponding
legal liability.

Article 23

Where any of the relevant administrative departments or their staff neglect their duties, commit illegalities by fraudulent means
or for personal gains, or oppress or obstruct research and development activities, penalties shall be imposed in accordance with
the laws and administrative regulations.

Chapter V Supplementary Provisions

Article 24

Financial administration and accounting practices of Chinese-foreign equity and Chinese-foreign contractual joint research and development
institutions shall be governed in accordance with relevant provisions of the Ministry of Finance.

Article 25

Chinese-foreign equity and Chinese-foreign contractual joint research and development institutions established before the promulgation
of these Measures shall undertake examination and approval procedures again in accordance with the provisions of these Measures.

Article 26

The State Science and Technology Commission shall be responsible for the interpretation of these Measures.

Article 27

These Measures shall enter into force as of the date of promulgation.

The State Science and Technology Commission
1997-09-10

CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION CONCERNING HANDLING THE ISSUES ON THE BUSINESS INCOME TAX OF ENTERPRISES WITH FOREIGN INVESTMENT WHEN FOREIGN INVESTMENT IS UNCOMPLETED

The State Administration of Taxation

Circular of the State Administration of Taxation Concerning Handling the Issues on the Business Income Tax of Enterprises with Foreign
Investment When Foreign Investment is Uncompleted

GuoShuiFa [1999] No.60

April 14,1999

The state taxation bureaus various provinces, autonomous regions, municipalities directly under the Central Government and municipalities
separately listed on the State plan, Shenzhen local Taxation Bureau:

In order to implement the preferential tax policy for the enterprises with foreign investment and reinforce the administration of
taxation, the issues on handling the problems of the income tax of the enterprises with foreign investment that the investment of
foreign investors is uncompleted are clarified as following according to the Law of Income Tax of the People’s Republic of China
on Enterprises with Foreign Investment and Foreign Enterprises:

The situation that the investment of foreign investors of the enterprises with foreign investment is uncompleted means that foreign
investors of the enterprises with foreign investment do not fulfilled or fulfilled totally the investment obligations of registered
capital during the time limit confirmed in the relevant laws, the rules and regulations or the investment contract

II.

The enterprises with foreign investment which are cancelled legally the qualifications by the relevant departments resulting from
uncompleted investment of foreign investors are not applied taxation obligations prescribed in the tax law and provisions on the
income tax for the enterprises with foreign investment if they engage in the various businesses with the name of enterprises with
foreign investment. They should pay the business income tax under the relevant tax laws on the domestic-funded enterprises.

III.

The enterprises with foreign investment whose investment of foreign investors is uncompleted may pay the income tax under the tax
law and provisions for the enterprises with foreign investment before their qualifications are cancelled legally by the relevant
departments. The enterprises with foreign investment whose capital of the foreign partner cannot account for 25% of all investors’
capital in place should not enjoy the preferential income taxation.

IV.

If the enterprises with foreign investment without the qualification cancelled whose investment of foreign investors is uncompleted
can invest capital lacked or its capital accounts for 25% of all investors’ capital in place in later years, they can enjoy the
preferential policy of the lower tax rate from then on and the remaining term of derating tax term at fixed time since enterprise
profit-making year after verification by the local competent taxation authority. The preferential tax hereinbefore should not be
made up.

The local taxation institutions should carry out strictly this Circular when they compute and collect the business income tax in 1998.
During the effective time prescribed in the second Paragraph of Article 31 in the Law of the People’s Republic of China on the
Administration of Tax Collection, the events concerning hereinabove before 1998 should be executed according to this Circular.

The State Administration of Taxation
1999-04-14

EXPERIMENTAL MEASURES FOR COMMERCIAL ENTERPRISES WITH FOREIGN INVESTMENT

19990617the State Council20040601

The State Economic and Trade Commission, the Ministry of Foreign Trade and Economic Cooperation

Decree of the State Economic and Trade Commission and the Ministry of Foreign Trade and Economic Cooperation

No.12

“Experimental Measures for Commercial Enterprises with Foreign Investment” is approved by the State Council of the People’s Republic
of China on June 17, 1999, and is promulgated now. This law is effective since promulgation.

Director of the State Economic and Trade Commission: Sheng Huaren

Minister of the Ministry of Foreign Trade and Economic Cooperation: Shi Gangsheng

June 25,1999

Experimental Measures for Commercial Enterprises with Foreign Investment

Article 1

These Measure are formulated in accordance with such laws and regulations as the Law of the People’s Republic of China’s on Chinese
and Foreign Equity Joint ventures and the Law of the People’s Republic of China on Chinese and Foreign Cooperative Joint Ventures
in order to deepen the opening-up policy, promote the revolution and development of commercial enterprises, propel the building of
domestic market and ensure the healthy and orderly implementation of pilots that widen commercial field and employ foreign investment.

Article 2

These Measures apply to equity or cooperative commercial enterprises established by foreign and Chinese companies, enterprises within
China (hereinafter referred to as jointly-operated commercial enterprises). The establishment of commercial enterprises wholly funded
by foreigners is not allowed temporarily.

Article 3

The jointly-operated commercial enterprises must adapt to the commercial development plans of the cities where they are located, be
able to introduce the advanced marketing and managing experience in the globe, stimulate the modernization of domestic commerce,
propel the export of domestic products, and bring economic and social benefits.

Article 4

The areas in which jointly-operated commercial enterprises may be established shall be prescribed by the State Council, presently
they are confined to provincial capitals, capitals of autonomous regions, municipalities directly under the Central Government, municipalities
separately listed on the State plan and special economic zone (hereinafter referred to as pilot areas).

Article 5

The investors of jointly-operated commercial enterprises must conform to the following conditions:

(1)

Foreign operators or the major ones of foreign operators in the jointly-operated commercial enterprises (hereinafter referred to as
foreign operators) shall be enterprises that possess comparatively strong economic power, advanced marketing skills and managing
experiences, wide international marketing network, good reputation and remarkable operating achievement and the capability of propelling
the export of China’s products through the established jointly-operated commercial enterprises. Foreign operators who apply to establish
retail-oriented jointly operated commercial enterprises shall possess an average sale of more than 2 billion US Dollars three years
before application and asset of more than 0.2 billion US Dollars one year before application. Foreign operators who apply to establish
wholesale-oriented jointly-operated commercial enterprises shall possess an average wholesale volume of more than 2.5 billion US
Dollars 3 years before application and asset of more than 0.3 billion US Dollars one year before application.

(2)

The Chinese operators or the major ones of Chinese operators (hereinafter referred to as Chinese operators) shall be current enterprises
that possess comparatively strong economic power and operating capacity. Their asset shall be more than 50 million RMB (30 million
RMB in the middle and western areas) one year before application. If Chinese operators are commercial enterprises, the average sale
of the three years before application shall be more than 0.3 billion RMB (0.2 billion in the middle and western areas); if they are
foreign trade enterprises, the average self-operated import and export volume three years before application shall be more than 50
million US Dollars (the export volume shall be no less than 30 million US Dollars).

Article 6

Jointly-operated commercial enterprises must conform to the following conditions:

(1)

conforming to the relevant Chinese laws, regulations and provisions;

(2)

conforming to commercial development plans of the cities where they are located;

(3)

The registered asset of retail-oriented jointly-operated commercial enterprises shall not be less than 50 million RMB, that of those
in middle and western areas shall not be less than 30 million RMB; the registered asset of wholesale-oriented commercial enterprises
shall not be less than 80 million RMB, that of those in middle and western areas shall not be less than 60 million RMB.

(4)

If the jointly-operated commercial enterprises have the operation of more than 3 chain stores (except the grocery store for people’s
convenience, professional stores and exclusive stores), Chinese operators shall offer a proportion of more than 51% of the total
capital; if the jointly-operated commercial enterprises are in good operating condition, the foreign operators have purchased a large
quantity of domestic products and there is a possibility to take the advantage of foreign operators’ international marketing network
to promote the export of domestic products, foreign operators can hold the share after the approval of the State Council. Chinese
operators shall provide no less than 35% of the total capital in the jointly-operated commercial enterprises with no more than three
branch stores (including three) as well as in grocery store for people’s convenience, professional stores and exclusive stores which
are in chain operation. In the wholesale oriented jointly-operated commercial enterprises (including retail enterprises engaged in
wholesale business simultaneously), Chinese operators must offer a proportion of more than 51% of the total capital.

(5)

The branch store of the jointly-operated commercial enterprises are confined to the concatenate form that foreign and Chinese operators
both invest and operate directly. Other concatenate forms such as free chains or concessionary chains are prohibited temporarily.

(6)

The operating period shall not exceed 10 years, 40 years for the middle and western areas.

Article 7

Under the condition that foreign operators contract with jointly-operated commercial enterprises concerning the use of trademark and
trade name and technological transfer, the related expenses that foreign operators collect shall not exceed 0.3% of the enterprise’s
sale volume of the year and the limited period for collection is 10 years.

Article 8

Jointly-operated commercial enterprises shall be established according to the following procedure: Chinese operators shall submit
feasibility reports (fungible of project propositions) and relevant documents to economic and trade commissions (economic commissions,
planning and economic commissions, the same in the following part) in the pilot areas, which in conjunction with the competent domestic
trade departments shall report to the State Economic and Trade Commission according to the prescribed procedures. The State Economic
and Trade Commission shall examine and approve the reports after consulting the Ministry of Foreign Trade and Economic Cooperation.
After the feasibility reports (fungible of project propositions) have been approved, the foreign trade and economy departments in
the pilot areas shall submit the contracts and articles of associations to the Ministry of Foreign Trade and Economic Cooperation
according to the prescribed procedures, which shall examine and approve the contracts and articles of associations. Jointly-operated
commercial enterprises which have been approved shall, within one month since the date of receiving the approval certificate, register
with the State Administration for Industry and Commerce on the strength of the Approval Certificate for Enterprises with Foreign
Investment issued by the State Administration for Industry and Commerce.

Article 9

To establish jointly-operated commercial enterprises, the following documents shall be submitted:

the declaring document on the study of feasibility

(1)

the feasibility report compiled by all operators (fungible of project proposition);

(2)

bank’s certification on property and credit, certificate of registration (photocopy), legal representative certificate (photocopy)
of all operators;

(3)

all operators’ annual asset and liability table, profit and loss table of the recent three years audited by accounting agency;

(4)

(if Chinese operator makes investment with State-owned property) the confirmation document of State-owned property managing departments
on the assessing report concerning Chinese operator’s investing State-owned property;

(5)

the species of merchandises that the planned jointly-operated commercial enterprises will operate;

(6)

CONTRACT LAW OF THE PEOPLE’S REPUBLIC OF CHINA

The National People’s Congress

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

No.15

Contract Law of the People’s Republic of China has been adopted at the Second Session of the Ninth National People’s Congress on March
15, 1999, and is hereby promulgated, it will come into force as of October 1, 1999.

President of the People’s Republic of China Jiang Zemin

March 15, 1999

Contract Law of the People’s Republic of China

General Provisions

Chapter 1 General Provisions

Article 1

This Law is enacted in order to protect the lawful rights and interests of the contracting parties, to maintain social and economic
order, and to promote the process of socialist modernization.

Article 2

A contract in this Law refers to an agreement among natural persons, legal persons or other organizations as equal parties for the
establishment, modification of a relationship involving the civil rights and obligations of such entities.

Agreements concerning personal relationships such as marriage, adoption, guardianship, etc. shall be governed by the provisions in
other laws.

Article 3

Contracting parties shall have equal legal status, and no party may impose its will on the other party.

Article 4

The parties have the right to lawfully enter into a contract of their own free will in accordance with the law, and no unit or individual
may illegally interfere therewith.

Article 5

The parties shall adhere to the principle of fairness in deciding their respective rights and obligations.

Article 6

The parties shall observe the principle of honesty and good faith in exercising their rights and performing their obligations.

Article 7

In concluding and performing a contract, the parties shall comply with the laws and administrative regulations, respect social ethics,
and shall not disrupt the social and economic order or impair the public interests.

Article 8

A lawfully established contract shall be legally binding on the parties thereto, each of whom shall perform its own obligations in
accordance with the terms of the contract, and no party shall unilaterally modify or terminate the contract.

The contract established according to law is protected by law.

Chapter 2 Conclusion of Contracts

Article 9

In entering into a contract, the parties shall have appropriate capacities for civil rights and civil acts.

A party may appoint an agent to enter into a contract on its behalf in accordance with the law.

Article 10

The parties may use written, oral or other forms in entering into a contract.

A contract shall be in written form if the laws or administrative regulations so provide. A contract shall be concluded in written
form if the parties so agree.

Article 11

“Written form” refers to a form such as a written contractual agreement, letter, electronic data text(including a telegram, telex,
fax, electronic data exchange and e-mail)that can tangibly express the contents contained therein.

Article 12

The contents of a contract shall be agreed upon by the parties, and shall generally contain the following clauses:

(1)

post_titles or names and domiciles of the parties;

(2)

subject matter;

(3)

quantity;

(4)

quality;

(5)

price or remuneration;

(6)

time limit, place and method of performance;

(7)

liability for breach of contract; and

(8)

method to settle disputes.

The parties may conclude a contract by reference to a model text of each kind of contract.

Article 13

The parties shall conclude a contract in the form of an offer and an acceptance.

Article 14

An offer is an expression of an intent to enter into a contract with another person. Such expression of intent shall comply with the
following:

(1)

its contents shall be specific and definite;

(2)

it indicates that the offeror will be bound by the expression of intent in case of acceptance by the offeree.

Article 15

An invitation for offer is an expression of an intent to invite other parties to make offers thereto. Mailed price lists, public notices
of auction and tender, prospectuses and commercial advertisements, etc. are invitations for offer.

Where the contents of a commercial advertisement meet the requirements for an offer, it shall be regarded as an offer.

Article 16

An offer becomes effective when it reaches the offeree.

If a contract is concluded through data-telex, and a recipient designates a specific system to receive the date-telex, the time when
the data-telex enters such specific system shall be the time of arrival; if no specific system is appointed, the time when the data-telex
first enters any of the recipient’s systems shall be regarded as the time of arrival.

Article 17

An offer may be withdrawn. The withdrawal notice shall reach the offeree before or at the same time when the offer arrives.

Article 18

An offer may be revoked. The revocation notice shall reach the offeree before it has dispatched a notice of acceptance.

Article 19

An offer may not be revoked, if

(1)

the offeror indicates a fixed time for acceptance or otherwise explicitly states that the offer is irrevocable; or

(2)

the offeree has reasons to rely on the offer as being irrevocable and has made preparation for performing the contact.

Article 20

An offer shall lose efficacy under any of the following circumstances:

(1)

the notice of rejection reaches the offeror;

(2)

the offeror revokes the offer in accordance with the law;

(3)

the offeree fails to dispatch an acceptance before the expiration of the time limit for acceptance;

(4)

the offeree makes substantial changes to the contents of the offer.

Article 21

An acceptance is the expression of an intention to by the offeree to assent to the offer.

Article 22

The acceptance shall be made in the form of a notice, except where acceptance may be made by an act on the basis of customary business
practice or as expressed in the offer.

Article 23

An acceptance shall reach the offeror within the time limit prescribed in the offer.

Where no time limit is prescribed in the offer, the acceptance shall reach the offeror in accordance with the following provisions:

(1)

if the offer is made in dialogues, the acceptance shall be made immediately unless otherwise agreed upon by the parties;

(2)

If the offer is made in forms other than a dialogue, the acceptance shall reach the offeror within a reasonable period of time.

Article 24

Where an offer is made by letter or telegram, the time limit for acceptance shall accrue from the date shown in the letter or from
the date on which the telegram is handed in for dispatch. If no such date is shown in the letter, it shall accrue from the postmark
date on the envelope. Where an offer is made by means of instantaneous communication, such as telephone or facsimile, etc. the time
limit for acceptance shall accrue from the moment that the offer reaches the offeree.

Article 25

A contract is established when the acceptance becomes effective.

Article 26

An acceptance becomes effective when its notice reaches the offeror. If notice of acceptance is not required, the acceptance shall
become effective when an act of acceptance is performed in accordance with transaction practices or as required in the offer.

Where a contract is concluded in the form of date-telex, the time of arrival of an acceptance shall be governed by the provisions
of Paragraph 2, Article 16 of this Law.

Article 27

An acceptance may be withdrawn, but a notice of withdrawal shall reach the offeror before or at the same time when the notice of acceptance
reaches the offeror.

Article 28

Where an offeree makes an acceptance beyond the time limit for acceptance, the acceptance shall be a new offer except that the offeror
promptly informs the offeree of the effectiveness of the said acceptance.

Article 29

If the offeree dispatched the acceptance within the time limit specified for acceptance, and under normal circumstances the acceptance
would have reached the offeror in due time, but due to other reasons the acceptance reaches the offeror after the time limit for
acceptance has expired, such acceptance shall be effective, unless the offeror notifies the offeree in a timely manner that it does
not accept the acceptance due to the failure of the acceptance to arrive within the time limit.

Article 30

The contents of an acceptance shall comply with those of the offer. If the offeree substantially modifies the contents of the offer,
it shall constitute a new offer. The modification relating to the subject matter, quality, quantity, price or remuneration, time
or place or method of performance, liabilities for breach of contract and method of dispute resolution, etc. shall constitute the
substantial modification of an offer.

Article 31

If the acceptance does not substantially modifies the contents of the offer, it shall be effective, and the contents of the contract
shall be subject to those of the acceptance, except as rejected promptly by the offeror or indicated in the offer that an acceptance
may not modify the offer at all.

Article 32

Where the parties conclude a contract in written form, the contract is established when it is signed or sealed by the parties.

Article 33

Where the parties conclude the contract in the form of letters or data-telex, etc., one party may request to sign a letter of confirmation
before the conclusion of the contract. The contract shall be established at the time when the letter of confirmation is signed.

Article 34

The place of effectiveness of an acceptance shall be the place of the establishment of the contract.

If the contract is concluded in the form of data-telex, the main business place of the recipient shall be the place of establishment.
If the recipient does not have a main business place, its habitual residence shall be considered to be the place of establishment.
Where the parties agree otherwise, such agreement shall apply.

Article 35

Where the parties conclude a contract in written form, the place where both parties sign or affix their seals on the contract shall
be the place of establishment.

Article 36

Where a contract is to be concluded in written form as required by relevant laws and administrative regulations or as agreed by the
parties, and the parties failed to conclude the contract in written form, but one party has performed the principal obligation and
the other party has accepted it, the contract is established.

Article 37

Where a contract is to be concluded in written form, if one party has performed its principal obligation and the other party has accepted
it before signing or sealing of the contract, the contract is established.

Article 38

Where the State has issued a mandatory plan or a State purchasing order based on necessity, the relevant legal persons and the other
organizations shall conclude a contract between them in accordance with the rights and obligations as stipulated by the relevant
laws and administrative regulations.

Article 39

Where standard terms are adopted in concluding a contract, the party supplying the standard terms shall define the rights and obligations
between the parties abiding by the principle of fairness, and shall inform the other party to note the exclusion or restriction of
its liabilities in a reasonable way, and shall explain the standard terms upon request by the other party.

Standard terms are clauses that are prepared in advance for general and repeated use by one party, and which are not negotiated with
the other party when the contract in concluded.

Article 40

When standard terms are under the circumstances stipulated in Articles 52 and 53 of this Law, or the party which supplies the standard
terms exempts itself from its liabilities, increases the liabilities of the other party, and deprives the material rights of the
other party, the terms shall be invalid.

Article 41

If a dispute over the understanding of the standard terms occurs, it shall be interpreted in accordance with common understanding.
Where there are two or more kinds of interpretation, an interpretation unfavorable to the party supplying the standard terms shall
prevail. Where the standard terms are inconsistent with non-standard terms, the latter shall prevail.

Article 42

The party shall be liable for damage if it is under one of the following circumstances in concluding a contract and thus causing losses
to the other party:

(1)

pretending to conclude a contract, and negotiating in bad faith;

(2)

deliberately concealing important facts relating to the conclusion of the contract or providing false information;

(3)

performing other acts which violate the principle of good faith.

Article 43

A trade secret the parties learn in concluding a contract shall not be disclosed or improperly used, no matter the contract is established
or not. If the party discloses or improperly uses such trade secret and thus causing loss to the other party, it shall be liable
for damages.

Chapter 3 Validity of Contracts

Article 44

The contract established according to law becomes effective upon its establishment.

With regard to contracts that are subject to approval or registration as stipulated by relevant laws or administrative regulations,
the provisions thereof shall be followed.

Article 45

The parties may agree on that the effectiveness of a contract be subject to certain conditions. A contract whose effectiveness is
subject to certain conditions shall become effective when such conditions are accomplished. The contract with dissolving conditions
shall become invalid when such conditions are satisfied.

If a party improperly prevent the satisfaction of a condition for its own interests, the condition shall be regarded as having been
accomplished. If a party improperly facilitates the satisfaction of a condition, such condition shall be regarded as not to have
been satisfied.

Article 46

The parties may agree on a conditional time period as to the effectiveness of the contract. A contract subject to an effective time
period shall come into force when the period expires. A contract with termination time period shall become invalid when the period
expires.

Article 47

A contract concluded by a person with limited civil capacity of conduct shall be effective after being ratified afterwards by the
person’s statutory agent, but a pure profit-making contract or a contract concluded which is appropriate to the person’s age, intelligence
or mental health conditions need not be ratified by the person’s statutory agent.

The counterpart may urge the statutory agent to ratify the contract within one month. It shall be regarded as a refusal of ratification
that the statutory agent does not make any expression. A bona fide counterpart has the right to withdraw it before the contract is
ratified. The withdrawal shall be made by means of notice.

Article 48

A contract concluded by an actor who as no power of agency, who oversteps the power of agency, or whose power of agency has expired
and yet concludes it on behalf of the principal, shall have no legally binding force on the principal without ratification by the
principal, and the actor shall be held liable.

The counterpart may urge the principal to ratify it within one month. It shall be regarded as a refusal of ratification that the principal
does not make any expression. A bona fide counterpart has the right to withdraw it before the contract is ratified. The withdrawal
shall be made by means of notice.

Article 49

If an actor has no power of agency, oversteps the power of agency, or the power of agency has expired and yet concludes a contract
in the principal’s name, and the counterpart has reasons to trust that the actor has the power of agency, the act of agency shall
be effective.

Article 50

Where a statutory representative or a responsible person of a legal person or other organization oversteps his/her power and concludes
a contract, the representative act shall be effective except that the counterpart knows or ought to know that he/she is overstepping
his/her powers.

Article 51

Where a person having no right to disposal of property disposes of other persons’ properties, and the principal ratifies the act afterwards
or the person without power of disposal has obtained the power after concluding a contract, the contract shall be valid.

Article 52

A contract shall be null and void under any of the following circumstances:

(1)

a contract is concluded through the use of fraud or coercion by one party to damage the interests of the State;

(2)

malicious collusion is conducted to damage the interests of the State, a collective or a third party;

(3)

an illegitimate purpose is concealed under the guise of legitimate acts;

(4)

damaging the public interests;

(5)

violating the compulsory provisions of laws and administrative regulations.

Article 53

The following exception clauses in a contract shall be null and void:

(1)

those that cause personal injury to the other party;

(2)

those that cause property damages to the other party as result of deliberate intent or gross negligence.

Article 54

A party shall have the right to request the people’s court or an arbitration institution to modify or revoke the following contracts:

(1)

those concluded as a result of significant misconception;

(2)

those that are obviously unfair at the time when concluding the contract.

If a contract is concluded by one party against the other party’s true intentions through the use of fraud, coercion, or exploitation
of the other party’s unfavorable position, the injured party shall have the right to request the people’s court or an arbitration
institution to modify or revoke it.

Where a party requests for modification, the people’s court or the arbitration institution may not revoke the contract.

Article 55

The right to revoke a contract shall extinguish under any of the following circumstances:

(1)

a party having the right to revoke the contract fails to exercise the right within one year from the day that it knows or ought to
know the revoking causes;

(2)

a party having the right to revoke the contract explicitly expresses or conducts an act to waive the right after it knows the revoking
causes.

Article 56

A contract that is null and void or revoked shall have no legally binding force ever from the very beginning. If part of a contract
is null and void without affecting the validity of the other parts, the other parts shall still be valid.

Article 57

If a contract is null and void, revoked or terminated, it shall not affect the validity of the dispute settlement clause which is
independently existing in the contract.

Article 58

The property acquired as a result of a contract shall be returned after the contract is confirmed to be null and void or has been
revoked; where the property can not be returned or the return is unnecessary, it shall be reimbursed at its estimated price. The
party at fault shall compensate the other party for losses incurred as a result therefrom. If both parties are fault, each party
shall respectively be liable.

Article 59

If the parties have maliciously conducted collusion to damage the interests of the State, a collective or a third party, the property
thus acquired shall be turned over to the State or returned to the collective or the third party.

Chapter 4 Performance of Contracts

Article 60

Each party shall fully perform its own obligations as agreed upon.

The parties shall abide by the principle of good faith, and perform obligations of notification, assistance, and confidentiality,
etc. in accordance with the nature and purpose of the contract and the transaction practice.

Article 61

Where, after the contract becomes effective, there is no agreement in the contract between the parties on such contents as quality,
price or remuneration, or place of performance etc., or such agreement is ambiguous, the parties may agree upon supplementary terms
through consultation; if a supplementary agreement cannot be reached, such terms shall be determined in accordance with the relevant
provisions of the contract or the transaction practices.

Article 62

Where certain contents agreed upon by the parties in the contract are ambiguous and cannot be determined in accordance with the provisions
in Article 61 of this Law, the following provisions shall be applied:

(1)

if quality requirement is not clear, performance shall be in accordance with the state standard or industry standard; absent any state
or industry standard, performance shall be in accordance with the customary standard or any particular standard consistent with the
purpose of the contract;

(2)

if price or remuneration is not clear, performance shall be in accordance with the prevailing market price at the place of performance
at the time the contract was concluded, and if adoption of a price commissioned by the government or based on government issued pricing
guidelines is required by law, such requirement applies;

(3)

where the place of performance is not clear, if the obligation is payment of money, performance shall be at the place where the payee
is located; if the obligation is delivery of immovable property, performance shall be at the place where the immovable property is
located; for any other subject matter, performance shall be effected at the place of location of the party fulfilling the obligations.

(4)

if the time of performance is not clear, the obligor may perform, and the obligee may require performance, at any time, provided that
the other party shall be given the time required for preparation;

(5)

if the method of performance is not clear, performance shall be rendered in a manner which is conducive to realizing the purpose of
the contract;

(6)

if the responsibility for the expenses of performance is not clear, the party fulfilling the obligations shall bear the expenses.

Article 63

Where the government-fixed price or government-directed price is followed in a contract, if the said price is readjusted within the
time limit for delivery as stipulated in the contract, the payment shall be calculated according to the price at the time of delivery.
Where a party delays in delivering the subject matter, the original price shall be adopted if the price rises; and the new price
shall be adopted if the price falls. Where a party delays in taking delivery of the subject matter or making payment, the new price
shall be adopted if the price rises, and the original price shall be adopted if the price falls.

Article 64

Where the parties agree that the obligor shall perform the obligations to a third party, and the obligor fails to perform its obligations
to such third party or its performance of the obligations is not in conformity with the agreement, the obligor shall be liable to
the obligee for breach of contract.

Article 65

Where the parties agree that a third party performs the obligations to the obligee, and the third party fails to perform the obligations
or the performance is not in conformity with the agreement, the obligor shall be liable to the obligee for breach of contract.

Article 66

Where both parties have obligations toward one another and there is no order of priority in respect of the performance of obligations,
the parties shall perform the obligations simultaneously. Each party has the right to reject any demand by the other party for performance
prior to the performance by the other party. If the performance of the obligations of the party who is to perform first is not in
conformity with the agreement, the party who is perform later has the right to reject the other party’s demand for corresponding
performance.

Article 67

Where both parties have obligations toward each other and there is an order of priority in respect of the performance, and the party
who is to perform first fails to perform, the party who is to perform later has the right to reject the other party’s demand for
performance. If the performance of the obligations of the party who is to perform first is not in conformity with the agreement,
the party who is to perform later has the right to reject the other party’s demand for corresponding performance.

Article 68

The party required to perform first may suspend its performance if it has conclusive evidence showing that the other party is under
any of the following circumstances:

(1)

its business has seriously deteriorated;

(2)

it has engaged in transfer of assets or withdrawal of funds for the purpose of evading debts;

(3)

it has lost its business creditworthiness;

(4)

it is in any other circumstance which will or may cause it to lose its ability to perform.

Where a party suspends performance without conclusive evidence, it shall be liable for breach of contract.

Article 69

If a party suspends its performance in accordance with the provisions of Article 68 of this Law, it shall timely notify the other
party. If the other party provides appropriate assurance for its performance, the party shall resume performance. After performance
was suspended, if the other party fails to regain its ability to perform and fails to provide appropriate assurance within a reasonable
time, the suspending party may terminate the contract.

Article 70

Where the obligee fails to notify the obligor of its separation, merger, or change of the domicile, thereby making it difficult for
the obligor to perform its obligations, the obligor may suspend its performance or escrow the subject matter.

Article 71

The obligee may reject the obligor’s advance performance of its obligations, except that the advance performance does not harm the
obligee’s interests.

Any additional expense incurred by the obligee due to the obligor’s advance performance of its obligations shall be borne by the obligor.

Article 72

An obligee may reject the obligor’s partial performance, except that the partial performance of its obligations does not harm the
obligee’s interests.

Any additional expense incurred by the obligee due to the obligor’s partial performance of its obligations shall be borne by the obligor.

Article 73

Where the obligor is remiss in exercising its due creditor’s right, thereby harming the obligee’s interests, the obligee may petition
the People’s Court for subrogation in its own name, except that the creditor’s right exclusively belongs to the obligor.

The extent to which the subrogation rights can be exercised is limited to the obligee’s rights. The expenses necessary for the obligee
to exercise such subrogation rights shall be borne by the obligor.

Article 74

Where the obligor waives its creditor’s right against a third party that is due or assigns its property without reward, thereby harming
the obligee’s interests, the obligee may petition the People’s Court for cancellation of the obligor’s act. Where the obligor assigns
its property at a low price which is manifestly unreasonable, thereby harming the obligee’s interests, and the assignee is aware
of the situation, the obligee may also petition the People’s Court for cancellation of the obligor’s act.

The extent to which the right to cancel can be exercised is limited to the rights of the obligee. The expenses necessary for the obligee
to exercise the right to cancel shall be borne by the obligor.

Article 75

The right to cancel shall be exercised within one year form the date the obligee knows or should have known of the matter for cancellation.
Such right to cancel shall lapse if the obligee fails to exercise such rights within five years from the date of the occurrence of
such act.

Article 76

Once a contract becomes effective, a party may not refuse to perform its obligations thereunder due to a change in its name, or its
legal representative, the person in charge, or the person handling the contract.

Chapter 5 Modification and Assignment of Contracts

Article 77

A contract may be modified if the parties reach a consensus through consultation.

If the laws or administrative regulations so provide, approval and registration procedures for such modification shall be gone through
in accordance with such provisions.

Article 78

Where an agreement by the parties on the contents of a modification is ambiguous, the contract shall be presumed as not having been
modified.

Article 79

The obligee may assign its rights under a contract, in whole or in part, to a third party, except under the following circumstances:

(1)

such rights may not be assigned in light of the nature of the contract;

(2)

such rights may not be assigned according to the agreement between the parties;

(3)

such rights may not be assigned according to the provisions of the laws.

Article 80

Where the obligee assigns its rights, it shall notify the obligor. Such assignment will have no effect on the obligor without notice
thereof.

A notice by the obligee to assign its rights shall not be revoked, unless such revocation is consented to by the assignee.

Article 81

Where the obligee assigns its right, the assignee shall acquire the collateral rights related to the principal rights, except that
the collateral rights exclusively belong to the obligee.

Article 82

Upon receipt of the notice of assignment of rights, the obligor may assert against the assignee any defenses it has against the assignor.

Article 83

Upon receipt by the obligor of the notice of assignment of rights, the obligor shall have vested rights against the assignor, and
if the rights of the obligor vest prior to or at the same time as the assigned rights, the obligor may claim an offset against the
assignee.

Article 84

Where the obligor delegates its obligations under a contract in whole or in part to a third party, such delegation shall be subject
to the consent of the obligee.

Article 85

Where the obligor delegates its obligation, the new obligor may exercise any defense that the original obligor had against the obligee.

Article 86

Where the obligor delegates its obligation, the new obligor shall assume the incidental obligations related to the main obligations,
except that the obligations exclusively belong to the original obligor.

Article 87

Where the laws or administrative regulations stipulate that the assignment of rights or transfer of obligations shall undergo approval
or registration procedures, such provisions shall be followed.

Article 88

Upon the consent of the other party, one party may transfer its rights together with its obligations under contract to a third party.

Article 89

CIRCULAR OF THE GENERAL ADMINISTRATION CUSTOMS ON IMPORT TAXATION POLICY FOR FURTHER ENCOURAGING FOREIGN INVESTMENT

The Customs General Adiministration

Circular of the General Administration Customs on Import Taxation Policy for Further Encouraging Foreign Investment

ShuShui [1999] No.791

November 22, 1999

In accordance with the spirit of the instructions of the State Council, With a view to encouraging foreign investment, the Customs
General Administration has decided, after consulted with the Ministry of Foreign Trade and Economic Cooperation, the State Economic
and Trade Commission and the Ministry of Finance, to further expand the preferential import taxation policy on foreign investment.
The relevant issues are notified as follows:

Article 1

For importation, within their productive operation scope originally approved, of self-using equipment and technology, fittings and
spare parts that can not be produced at home or their capacities can not meet the demands, by the established foreign investment
enterprises under Encouraged Category and Restrictive Category B, research and development centres with foreign investment, foreign
investment enterprises with advanced technology and foreign investment enterprises of export oriented products (hereinafter referred
to as five categories of enterprises for short) for technology reform, Customs duties and import tax may be exempt in accordance
with the Circular of the State Council on the Adjustment of the Taxation Policy On Imported Equipment (GuoFa [1999] No. 37).

Those enjoying tax exemption incentives specified in this Article should meet the following conditions:

(1)

Their sources of funds should be self-owned funds (specifically referred to the enterprise’s reserve funds, development funds, deducting
depreciation fee and profit after tax payment) outside the total amount of investment of the five categories of enterprises;

(2)

The use of imported commodities: renewal or maintenance, within the productive operation scope originally approved, of the original
equipment of the enterprises (complete set of equipment and production lines are not included);

(3)

Import commodities scope: equipment not capable to produce at home (commodities outside the List of Import Commodities by Home Investment
Projects Not to Be Exempted from Tex) as well as technology, fittings and spare parts forming complete set with the above mentioned
equipment (including those imported along with the equipment or those imported in separation).

Procedures to go through for levy or exemption from tax:

(1)

Importation testimony produced: Testimonial Paper for Importation, by Enterprises with Foreign Investment, of Renewal Equipment,
Technology, Fittings and Spare Parts (for the form, see Attachment one below) produced by the departments concerned in accordance
with the provisions of sub-sections one and two, Paragraph 1 of this Article, of which testimonial paper for enterprises under Encouraged
Category and Restrictive Category B should be produced by the original authorities for examination and approval that had produced
project confirmation (for the above mentioned enterprises set up with approval prior to the date of December 31, 1997, their testimonial
paper should be produced by the original authorities for examination and approval); testimonial paper for research and development
centres with foreign investment should be produced by the original authorities for examination and approval (for the details, see
the sub-section one, Paragraph l, Article 2 of the present Circular); testimonial paper for products export-oriented enterprises
and enterprises with advanced technology should be produced by the Ministry of Foreign Trade and Economic Cooperation or by the departments
of foreign trade and economic cooperation of the various provinces, autonomous regions, municipalitie directly under the Central
Government and municipalities separately listed on the State plan that had issued Confirmation Paper for products Export-Oriented
Enterprises with Foreign Investment and Confirmation Paper for Enterprises with Foreign Investment with Advanced Technology.

(2)

Procedures to go through for testimony for levy or exemption from tax: Customs directly under the General Administration of Customs
in the places where the enterprises are located shall produce testimonial paper by the above mentioned testimonial papers, contracts
and import licenses and other material related after verifying the importation commodities scope against the provisions of sub-section
three, Paragraph l of this Article.

Specific rules:

(1)

In case the five categories of enterprises carry out technology reform beyond the scope as defined by sub-section two, Paragraph
1 of this Article, their importation should be testified by Registration Certificate for Confirmation of Technology Reform Projects
produced according to their respective examination and approval power by the State or the provincial economic and trade commission
(for the form, see Attachment 2);

(2)

In case the five categories of enterprises carry out equipment renewal and maintenance or technology reform by using their own funds,
which needs to import commodities within the confines of the List of Import Commodities by Home Investment Projects Not to Be Exempt
from Tax, and if the commodities are surely of the same kind of products whose capacities can not meet the demands, they shall be
verified by the State industrial department in charge of the said products, and shall have to produce from the same department Certificate
for Importation of the Same Kind of Equipment Needed by Enterprises with Foreign Investment for Equipment Renewal or Technology Reform
that Can Not Be Produced at Home (for the form, see Attachment 3). And Customs directly under the Customs General Administration
shall handle the procedures for examination and approval for tax exemption for the equipment and technology forming a complete set
imported, by the above mentioned testimony and Certificate for Importation by Enterprises with Foreign Investment, of Renewal Equipment,
Technology, Fittings and Spare Parts or Registration Certificate for Confirmation of Technology Reform Projects, and contracts, import
license and other material related.

Article 2

Importation, within their total amount of investment, by research and development centres established by using foreign investment,
of self-using equipment and technology, fittings and spare parts forming a complete set which can not be produced at home or their
capacities can not meet the demands, shall be exempt from Customs duties and import tax in accordance with the Provisions of Circular
of the State Council On the Adjustment of Taxation Policy On Imported Equipment (Guofa [1999] No. 37).

Those enjoying taxation incentives specified in this Article should meet the following conditions:

(1)

The enjoying units should be research institutions set up within the enterprises with foreign investment or separately established,
specially engaged in the development of products or technology that are approved by the State Planning Commission, State Economic
and Trade Commission, the Ministry of Foreign Trade and Economic Cooperation as well as the departments or bureaus of planning commissions,
economic and trade commissions and foreign trade and economic cooperation of the various provinces, autonomous regions, municipalitie
directly under the Central Government and municipalities separately listed on the State plan;

(2)

The source of funds is confined within the total amount of investment;

(3)

Import commodities scope: self-using equipment can not be produced at home or their capacities can not meet the demands (referred
to commodities outside the List of Import Commodities by Foreign Investment Projects Not to Be Exempt from Tax) and technology, fittings
and spare parts forming complete set which do not constitute laboratories with production size or medium experiment norm, and do
not include ships, airplanes, special types of vehicles and construction machinery.

Procedures to go through for levy and exemption from Tax:

(1)

Project confirmation paper to be produced: Project confirmation paper for research and development centres with foreign investment
shall be produced, according to the examination and approval power over the above mentioned research institutions, and the provisions
of sub-sections one and two, Paragraph 1 of this Article, by the State Planning Commission, the State Economic and Trade Commission,
Ministry of Foreign Trade and Economic Cooperation and the departments or bureaus of planning commissions, economic and trade commissions
and foreign trade and economic cooperation of the various provinces, autonomous regions, municipalitie directly under the Central
Government and municipalities separately listed on the State plan. The form and contents of the project confirmation paper are the
same with those of Confirmation Papers for Home and Foreign Investment Projects Encouraged for Development by the State attached
to Document ShuShui [1999] No. 1062.

(2)

Handling of the certificate for levy or exemption from tax: Customs directly under the General Administration of Customs in the places
where the enterprises are located shall handle the certificate by the above mentioned projects for confirmation paper and the relevant
material and on the analogy of the provisions of Document ShuShui [1999] No. 1062.

Article 3

For those projects conforming to the list of the advantageous industries and advantageous projects for utilizing foreign investment
of the central and west provinces, autonomous regions and municipalities directly under the State Council (the list will separately
be issued after approval by the State Council, same below), their import within their total amount of investment, of self-using equipment
which can not be produced at home or their capacities can not meet the demands, and technology, fittings and spare parts forming
a complete set, shall be exempt from import duties and import tax, except those prescribed in Document GuoFa [1999] No.37 enpost_titled
the List of Import Commodities by Foreign Investment Projects Not to Be Exempt from Tax. The relevant procedures shall be handled
on the analogy of the regulations on foreign investment projects described in Document ShuShui [1999] No.1062.

Article 4

For those projects conforming to the list of the advantageous industries and advantageous projects for utilizing foreign investment
in the central and west provinces, autonomous regions and municipalities directly under the State Council, the scope of commodities
imported with their own funds outside their total amount of investment which enjoy preferential taxation policy and the procedures
for tax exemption shall be handled on the analogy of the relevant provisions on the five categories of enterprises described in Article
l of the present Circular.

Article 5

Where the goods imported with tax exemption in accordance with the regulations of this Circular are goods under the Customs’ supervision
and control, they shall not be sold and transferred freely by the enterprises themselves. Equipment replaced owing to equipment renewal
or technology reform, if continually to be used within the enterprises, shall be managed over according to the period for supervision
and control by the Customs, and shall be exempt from additional tax payment in case the equipment is sold or transferred within the
period for supervision and control to enterprises enjoying preferential taxation policy for imported equipment. In other cases, tax
shall be levied according to the laws and regulations related.

Article 6

Customs directly under the General Administration of Customs where the enterprises are located should strengthen contact and coordination
with the Customs where the goods are imported and should raise up working efficiency. Customs directly under the Customs General
Administration should inform as soon as possible the Customs where the goods are imported for handling the procedures for check and
approval of tax exemption after verifying without error the Certificate for Levy or Exemption from Tax for Imported Goods presented.
In case the Customs where the enterprises are located are not the seating places of the Customs directly under the General Administration
of Customs, applications can be accepted and examined by the Customs at lower level in the seating place, be reported to the Customs
directly under the Customs General Administration for verification and for producing certificate for levy or exemption from tax.
The General Administration of Customs will organize forces to supplement and readjust as soon as possible the Management System for
Tax Reduction and Exemption and to computerize the management of this preferential taxation policy.

Article 7

This preferential taxation policy involves multi-departments and multi-policies, and the various Customs should learn and grasp in
real earnest the spirit of the document, and should strictly carry it out and should not expand at their will tax exemption scope.
The Customs should actively contact local governments and the responsible departments concerned to do well propaganda work.

Article 8

The present Circular shall be enforced from September 1, 1999, but the tax payment already collected shall not be returned. Those
declared and imported after this date but without going through tax levy procedures, Customs clearance shall be made for them with
tax exemption, and their securities already charged shall be returned to them.

For any question and situation that may arise in implementation, please report in time to the Department for Customs Duties Collection
and Control of the General Administration of Customs.

Attachment 1: Certificate for Importation of Renewal Equipment, Technology, Fittings and Spare Parts by Enterprises with Foreign
Investment (omitted)

Attachment 2: Certificate Registered for Confirmation for Technology Reform Projects (omitted)

Attachment 3: Certificate for Importation of the Same Kind of Equipment Needed by Enterprises with Foreign Investment for Equipment
Renewal or Technology Reform that Can Not Be Produced at Home (omitted)

The Customs General Adiministration
1999-11-22

CIRCULAR OF THE MINISTRY OF FOREIGN TRADE AND ECONOMIC COOPERATION (MOFTEC) ON CANCELLATION OF THE EXAMINATION AND APPROVAL FOR THE ESTABLISHMENT OF BRANCHES OF INTERNATIONAL FORWARDERS IN ALREADY APPROVED OPERATING AREAS

The Ministry of Foreign Trade and Economic Cooperation

Circular of the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) on Cancellation of the Examination and Approval for the
Establishment of Branches of International Forwarders in already Approved Operating Areas

WaiJingMaoFaZhanYunHanZi [2000] No.3303

November 21, 2000

Commissions (departments, bureaus) of foreign trade and economic cooperation of various provinces, autonomous regions, municipalities
directly under the Central Government and municipalities separately listed on the State plan; Shenzhen Bureau of Transportation:

To simplify the procedures of examination and approval and to accelerate the network building of international forwarders, MOFTEC
decides to replace the examination and approval system for the establishment of branches of international forwarders (hereinafter
referred to as forwarders) in already approved operating areas with a registration system as of today. It is hereby noticed as follows:

Forwarders should fully comply with the provisions in Article 10 and 18 of the Rules for the Implementation of the People’s Republic
of China for the Administration of International Forwarders (Interim) when establishing their branches in already approved operating
areas.

Enterprises establishing their branches in already approved operating areas without any increase in their registered capital may claim
their Approval Certificate of the People’s Republic of China for the Establishment of Branches of International Forwarders at MOFTEC
against the following documents.

(1)

registration form for the establishment of branches of international forwarders (with official seals of international forwarders)
(Attachment I);

(2)

original approval certificate (original and a copy);

(3)

business license (photocopy);

(4)

decision of the board of directors or the shareholders’ meeting;

(5)

resumes of the leader and key employees of the branch

(6)

testimonial of fixed place operation

Such additional documents should be provided in case there is an increase in registered capital and all investors increase their capital
contribution by the original proportion:

(1)

capital verification report

(2)

agreement on amendments to the corporate statute

The forwarders should also renew their Approval Certificate of the People’s Republic of China for the Establishment of International
Forwarders.

In case there is an increase in registered capital and the increase is not based on the original investment proportion, the forwarder
should first apply for alteration of stock equity.

The forwarder should register with competent local foreign trade and economic authorities with its Approval Certificate of the People’s
Republic of China for the Establishment of Branches of International Forwarders.

Forwarders establishing branches outside the approved operating areas should still be handled in compliance with related existing
provisions.

Forwarders referred to in this circular do not include international forwarders with foreign investment .

Attachment IRelated Articles of the Rules for the Implementation of the People’s Republic of China for the Administration of International Forwarders
(Interim)

Article 10 : Each international forwarder should increase its registered capital by 500,000 RMB accordingly when applying for the
establishment of a branch. If the registered capital already exceeds the minimum requirement in the Regulations (5 million RMB for
ocean transportation, 3 million RMB for air transportation and 2 million RMB for land transportation and express delivery), the surplus
part may be regarded as an extra capital contributed for the establishment of the branch.

Article 18 : The forwarder may apply for the establishment of a subsidiary or a branch after one year of operation since the establishment
of the forwarder. The scope of business of the subsidiary or branch should not go beyond that of its parent company or head company.

Appendix I: Registration Form for the Establishment of Branches of International Forwarders in already Approved Operating Areas (omitted)

The Ministry of Foreign Trade and Economic Cooperation
2000-12-21

1...188189190...212 Page 189 of 212

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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