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AGREEMENT ON ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENTS BETWEEN THE GOVERNMENT OF THE PEOPLE’S REPUBLIC OF CHINA AND THE GOVERNMENT OF THE KINGDOM OF THE NETHERLANDS

AGREEMENT ON ENCOURAGEMENT AND RECIPROCAL PROTECTION OF INVESTMENTS BETWEEN THE GOVERNMENT OF THE PEOPLE’S REPUBLIC OF CHINA AND THE
GOVERNMENT OF THE KINGDOM OF THE NETHERLANDS

The Government of the People’s Republic of China and the Government of the Kingdom of the Netherlands (hereinafter referred to as
the “Contracting Parties”),

Desiring to strengthen their traditional ties of friendship and to extend and intensify the economic relations between them, particularly
with respect to investments by the investors of one Contracting Party in the territory of the other Contracting Party,

Recognising that agreement upon the treatment to be accorded to such investments will stimulate the flow of capital and technology
and the economic development of the Contracting Parties and that fair and equitable treatment of investment is desirable,

Have agreed as follows:

Article 1

DEFINITIONS

For the purpose of this Agreement,

1.

The term “investment” means every kind of asset invested by investors of one Contracting Party in the territory of the other Contracting
Party, and in particular, though not exclusively, includes:

(a)

movable and immovable property and other property rights such as mortgages and pledges;

(b)

shares, debentures, stock and any other kind of participation in companies;

(c)

claims to money or to any other performance having an economic value associated with an investment;

(d)

intellectual property rights, in particular copyrights, patents, trade-marks, trade-names, technological process, know-how and goodwill;

(e)

business concessions conferred by law or under contract permitted by law, including concessions to search for, cultivate, extract
or exploit natural resources.

Any change in the form in which assets are invested does not affect their character as investments.

2.

The term “investor” means,

(a)

natural persons who have the nationality of either Contracting Party in accordance with the laws of that Contracting Party;

(b)

economic entities, including companies, corporations, associations, partnerships and other organizations, incorporated and constituted
under the laws and regulations of either Contracting Party and have their seats in that Contracting Party, irrespective of whether
or not for profit and whether their liabilities are limited or not.

3.

The term “returns” means the amounts yielded from investments, including profits, dividends, interests, capital gains, royalties and
other legitimate income.

4.

For the purposes of this Agreement, the term “territory” means respectively:

– for the People’s Republic of China, the territory of the People’s Republic of China (including the territorial sea and air space
above it)as well as any area beyond its territorial sea within which the People’s Republic of China has sovereign rights of exploration
for and exploitation of resources of the seabed and its sub-soil and superjacent water resources in accordance with Chinese law and
international law;

– for the Kingdom of the Netherlands, the territory of the Kingdom of the Netherlands and any area adjacent to the territorial sea
which, under the laws applicable in the Kingdom of the Netherlands, and in accordance with international law, is the exclusive economic
zone or continental shelf of the Kingdom of the Netherlands, in which the Kingdom of the Netherlands exercises jurisdiction or sovereign
rights.

Article 2

PROMOTION AND ADMISSION OF INVESTMENTS

Each Contracting Party shall encourage investors of the other Contracting Party to make investments in its territory and admit such
investments in accordance with its laws and regulations.

Article 3

TREATMENT OF INVESTMENT

1.

Investments of investors of each Contracting Party shall all the time be accorded fair and equitable treatment in the territory of
the other Contracting Party. Investments of the investors of either Contracting Party shall enjoy the constant protection and security
in the territory of the other Contracting Party.

2.

Neither Contracting Party shall take any unreasonable or discriminatory measures against the management, maintenance, use, enjoyment
and disposal of the investments by the investors of the other Contracting Party.

3.

Each Contracting Party shall accord to investments and activities associated with such investments by the investors of the other Contracting
Party treatment no less favourable than that accorded to investments and activities by its own investors or investors of any third
State.

4.

Each Contracting Party shall observe any commitments it may have entered into with the investors of the other Contracting Party with
regard to their investments.

5.

If the provisions of law of either Contracting Party or obligations under international law existing at present or established hereafter
between the Contracting Parties in addition to the present Agreement contain a regulation, whether general or specific, entitling
investments by investors of the other Contracting Party to a treatment more favourable than is provided for the present Agreement,
such regulation shall, to the extent that it is more favourable, prevail over the present Agreement.

6.

The provisions of paragraphs 1 to 5 of this Article shall not be construed so as to oblige one Contracting Party to extend to the
investors of the other Contracting Party the benefit of any treatment, preference or privilege by virtue of:

(a)

agreements establishing customs unions, economic unions, monetary unions or similar institutions, or on the basis of interim agreements
leading to such unions or institutions:

(b)

any international agreement or international arrangement relating wholly or mainly to taxation;

(c)

any international agreement or arrangement for facilitating small scale investments in border areas.

Article 4

ENTRY AND SOJOURN OF PERSONNEL

Each Contracting Party shall, with in the framework of its legislation, give sympathetic consideration to application for visas and
working permits to investors of the other Contracting Party engaging in activities associated with investments made in the territory
of that Contracting Party.

Article 5

EXPROPRIATION

1.

Neither Contracting Party shall expropriate, nationalise or take other similar measures (hereinafter referred to as “expropriation”)
against the investments of the investors of the other Contracting Party in its territory, unless the following conditions are met:

a)the expropriation is done in the public interest and under domestic legal procedures;

b)the expropriation is not discriminatory or contrary to any undertaking which the Contracting Party, which takes such measures, may
have given;

c)the expropriation is done against compensation.

2.

The compensation referred to in paragraph 1 c) shall be equivalent to the fair market value of the expropriated investment immediately
before the expropriation measures were taken. The fair market value shall not reflect any change in value because the expropriation
had become publicly known earlier. It shall include interest at the prevailing commercial rate from the date the expropriation was
done until the date of payment and shall, in order to be effective for the affected investors, be paid and made transferable, without
delay to the country designated by the investor concerned and in the currency of the country of the affected investor, or in any
freely convertible currency accepted by the affected investor.

Article 6

COMPENSATION FOR DAMAGES AND LOSSES

Investors of one Contracting Party whose investments in the territory of the other Contracting Party suffer losses owing to war, a
state of national emergency, insurrection, riot or other similar events in the territory of the latter Contracting Party, shall be
accorded by the latter Contracting Party treatment, as regards restitution, indemnification, compensation and other settlements no
less favourable than that accorded to the investors of its own or any third State, whichever is more favourable to the investor concerned.

Article 7

REPATRIATION OF INVESTMENTS AND RETURNS

1.

Each Contracting Party shall, guarantee to the investors of the other Contracting Party the transfer of their investments and returns
held in its territory, including though not exclusively:

(a)

profits, dividends, interests and other legitimate income;

(b)

proceeds obtained from the total or partial sale or liquidation of investments;

(c)

payments pursuant to a loan agreement in connection with investments;

(d)

royalties in relation to the matters in paragraph 1 (d) of Article1;

(e)

payments of technical assistance or technical service fee, management fee;

(f)

payments in connection with contracting projects;

(g)

earnings of investors of the other Contracting Party who work in connection with an investment in its territory.

2.

Nothing in paragraph 1 of this Article shall affect the free transfer of compensation paid under Article 5 and 6 of this Agreement.

3.

The transfer mentioned above shall be made in a freely convertible currency and at the prevailing market rate of exchange applicable
within the Contracting Party accepting the investments on the date of transfer.

Article 8

SUBROGATION

If one Contracting Party or its designated agency makes a payment to its investor under an indemnity given in respect of an investment
made in the territory of the other Contracting Party, the latter Contracting Party shall recognize the assignment of all the rights
and claims of the indemnified investor to the former Contracting Party or its designated agency, by law or by legal transactions,
and the right of the former Contracting Party or its designated agency to exercise by virtue of subrogation any such right to the
same extent as the investor.

Article 9

SETTLEMENT OF DISPUTES BETWEEN CONTRACTING PARTIES

1.

Any dispute between the Contracting Parties concerning the interpretation or application of this Agreement shall, as far as possible,
be settled with consultation through diplomatic channel.

2.

If a dispute cannot thus be settled within six months, it shall, upon the request of either Contracting Party, be submitted to an
ad hoc arbitral tribunal.

3.

Such tribunal comprises of three arbitrators. Within two months of the receipt of the written notice requesting arbitration, each
Contracting Party shall appoint one arbitrator. Those two arbitrators shall, within a further two months, together select a national
of a third State having diplomatic relations with both Contracting Parties as Chairman of the arbitral tribunal.

4.

If the arbitral tribunal has not been constituted within four months from the receipt of the written notice requesting arbitration,
either Contracting party may, in the absence of any other agreement, invite the President of the International Court of Justice to
make any necessary appointments. If the President is a national of either Contracting Party or is otherwise prevented from discharging
the said functions, the Member of the International Court of Justice next in seniority who is not a national of either Contracting
Party, or is not prevented from discharging the said functions, shall be invited to make such necessary appointments.

5.

The arbitral tribunal shall determine its own procedure. The arbitral tribunal shall reach its award in accordance with the provisions
of this Agreement and the applicable principles of international law.

6.

The arbitral tribunal shall reach its award by a majority of votes. Such award shall be final and binding upon both Contracting Parties.
The arbitral tribunal shall, upon the request of either Contracting Party, explain the reasons of its award.

7.

Each Contracting Party shall bear the costs of its appointed arbitrator and of its representation in arbitral proceedings. The relevant
costs of the Chairman and tribunal shall be borne in equal parts by the Contracting Parties.

Article 10

SETTLEMENT OF DISPUTES BETWEEN AN INVESTOR AND A CONTRACTING PARTY

1.

Disputes which might arise between one of the Contracting Parties and an investor of the other Contracting Party concerning an investment
of that investor in the territory of the former Contracting Party shall, whenever possible, be settled amicably between the Parties
concerned.

2.

An investor may decide to submit a dispute to a competent domestic court. In case a legal dispute concerning an investment in the
territory of the People’s Republic of China has been submitted to a competent domestic court, this dispute may be submitted to international
dispute settlement, on the condition that the investor concerned has withdrawn its case from the domestic court. If a dispute concerns
an investment in the territory of the Kingdom of the Netherlands an investor may choose to submit a dispute to international dispute
settlement at any time.

3.

If the dispute has not been settled amicably within a period of six months, from the date either party to the dispute requested amicable
settlement, each Contracting Party gives its unconditional consent to submit the dispute at the request of the investor concerned
to:

(a)

the International Center for Settlement of Investment Disputes, for settlement by arbitration or conciliation under the Convention
on the Settlement of Investment Disputes between States and Nationals of Other States, opened for signature at Washington on 18 March
1963;or

(b)

an ad hoc arbitral tribunal, unless otherwise agreed upon by the parties to the dispute, to be established under the Arbitration Rules
of the United Nations Commission on International Trade Law (UNCITRAL)

4.

The ad hoc tribunal shall decide a dispute in accordance with such rules of law as may be agreed by the parties. In absence of such
agreement the tribunal shall apply the law of the Contracting Party to the dispute (including its rules on the conflict of laws),
the provisions of this Agreement and such rules of international law as may be applicable.

5.

The arbitral awards shall be final and binding on both parties to the dispute.

Article 11

CONSULTATIONS

Either Contracting Party may propose to the other Party that consultations be held on any matter concerning interpretation, application
and implementation of the Agreement. The other Party shall accord sympathetic consideration to the proposal and shall afford adequate
opportunity for such consultations.

Article 12

APPLICATION

This present Agreement shall also apply to investments which have been made prior to its entry into force by investors of the one
Contracting Party in the territory of the other Contracting Party in accordance with the laws and regulations of the Contracting
Party concerned, which were in force at the time the investment was made. The provisions of the present Agreement shall apply irrespective
of the existence of diplomatic or consular relations between the Contracting Parties.

Article 13

TRANSITION

1.

This Agreement substitutes and replaces the Agreement on reciprocal encouragement and protection of investments between the Government
of the People’s Republic of China and the Government of the Kingdom of the Netherlands, signed June 17th, 1985 in Hague.

2.

The present Agreement shall apply to all investments made by investors of either Contracting Party in the territory of the other Contracting
Party, whether made before or after the entry into force of this Agreement, but shall not apply to any dispute or any claim concerning
an investment which was already under judicial or arbitral process before its entry into force. Such disputes and claims shall continue
to be settled according to the provisions of the Agreement of 1985 mentioned in paragraph 1 of this Article.

Article 14

APPLICATION AND TERMINATION OF THE AGREEMENT CONCERNING THE KINGDOM OF THE NETHERLANDS

As regards the Kingdom of the Netherlands, the present Agreement shall apply to the part of the Kingdom of the Netherlands in Europe
and shall also apply to the Netherlands Antilles and to Aruba, unless the notification provided for in Article 15 , paragraph (1)
states otherwise.

Subject to the provisions of Article 15 , the Kingdom of the Netherlands shall be enpost_titled to terminate the application of the present
Agreement separately in respect of the Kingdom of the Netherlands in Europe, of the Netherlands Antilles and of Aruba.

Article 15

ENTRY INTO FORCE, DURATION AND TERMINATION

1.

This Agreement shall enter into force on the first day of the following month after the date on which both Contracting Parties have
notified each other in writing that their respective internal legal procedures necessary therefore have been fulfilled and remain
in force for a period of fifteen years.

2.

Unless notice of termination has been given by either Contracting Party at least six months before the date of the expiry of its validity,
the present Agreement shall be extended tacitly for periods of five years.

3.

With respect to investments made prior to the date of termination of this Agreement, the preceding provisions of Article 1 to 14
shall continue to be effective for a further period of fifteen years from such date of termination.

In Witness Whereof the undersigned, duly authorized thereto by their respective Governments, have signed this Agreement.

Done in two originals at BEIJING on 26 NOVEMBER 2001,in Chinese, Netherlands and English languages, all texts being equally authoritative.
In case of difference of interpretation the English text will prevail.

FOR THE￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿_￿FOR THE

GOVERNMENT OF￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿ GOVERNMENT OF

THE PEOPLE’S REPUBLIC OF￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿ THE KINGDOM OF

CHINA￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿THE NETHERLANDS

Protocol to the Agreement on encouragement and reciprocal protection of investments between the People’s Republic of China and the
Kingdom of the Netherlands

On the signing of the Agreement on encouragement and reciprocal protection of investments between the People’s Republic of China and
the Kingdom of the Netherlands, the undersigned representatives have agreed on the following provisions which constitute an integral
part of the Agreement:

Ad Article 1

The term “investments” mentioned in Article 1 (1) includes investments of legal persons of third State which are owned or controlled
by investors of one Contracting Party in accordance with the laws and regulations of the latter. The relevant provisions of this
Agreement shall apply to such investments only when such third State has no right or abandons the right to claim compensation after
the investments have been expropriated by the other Contracting Party.

The Agreement shall also apply to reinvestments made by investors of one Contracting Party in the territory of the other Contracting
Party and in accordance with the laws and regulations of that Party.

Ad Article 3 , paragraphs 2 and 3

In respect of the People’s Republic of China, paragraphs 2 and 3 of Article 3 do not apply to:

(a)

any existing non-conforming measures maintained within its territory;

(b)

the continuation of any non-conforming measure referred to in subparagraph a);

(c)

an amendment to any non-conforming measure referred to in subparagraph a) to the extent that the amendment does not increase the non-conformity
of the measure, as it existed immediately before the amendment, with those obligations.

It will be endeavored to progressively remove the non-conforming measures.

Ad Article 7

1.

With regard to the People’s Republic of China, the transfer referred to in Article 7 of this Agreement shall comply with relevant
formalities stipulated by the present Chinese laws and regulations relating to exchange control.

2.

In this respect the People’s Republic of China shall accord to the investors of the Kingdom of the Netherlands treatment not less
favourable than that accorded to the investors of any third State.

3.

These formalities shall not be used as a means of avoiding the Contracting Party’s commitments or obligations under this Agreement.

4.

The provisions of Article 7 of this Agreement shall not affect the rights and obligations with respect to exchange restrictions that
either Contracting Party has or may have as a member to the International Monetary Fund.

Ad Article 10

The Kingdom of the Netherlands takes note of the statement that the People’s Republic of China requires that the investor concerned
exhausts the domestic administrative review procedure specified by the laws and regulations of the People’s Republic of China, before
submission of the dispute to international arbitration under Article 10 , paragraph 3. The People’s Republic of China declares that
such a procedure will take a maximum period of three months.

FOR THE￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿FOR THE

GOVERNMENT OF￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿GOVERNMENT OF

THE PEOPLE’S REPUBLIC OF￿￿￿￿￿￿ ￿￿ ￿￿￿￿￿￿￿￿￿￿￿￿THE KINGDOM OF

CHINA￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿￿THE NETHERLANDS



 
The Government of the People’s Republic of China
2001-11-26

 






ANNOUNCEMENT OF THE STATE ADMINISTRATION FOR QUALITY SUPERVISION, INSPECTION AND QUARANTINE ON THE CATALOG OF THE FIRST SET OF ABOLISHED DEPARTMENTAL REGULATIONS






The State Administration for Quality Supervision, Inspection and Quarantine

Order of the State Administration for Quality Supervision, Inspection and Quarantine

No.11

In order to accelerate the transformation of the government functions and improve the administrative level according to law, the State
Administration for Quality Supervision, Inspection and Quarantine has cleaned up the present departmental rules and is now issuing
the First Set of Abolished Departmental Regulations(4 pieces,see attachment) which are abolished at the same date of promulgation.

Director general of the State Administration for Quality Supervision, Inspection and Quarantine Li Changjiang

December 11,2001

Announcement of the State Administration for Quality Supervision, Inspection and Quarantine on the Catalog of the First Set of Abolished
Departmental Regulations htm/e02831.htmAppendix

￿￿

￿￿

Attachment:

Catalog of the State Administration for Quality Supervision, Inspection and Quarantine of the First Set of Abolished Departmental
Regulations

￿￿

Order number 

Name of the departmental regulation 

Promulgating departments 

Promulgation date 

Reason for abolishment

1 

Regulations on the License Administration of Export Mechanical and Electrical Products (for trial implementation) 

Former State Administration for Commodity Inspection, Former State Economic Commission, Office of Mechanical and Electrical
Product Export under the State Council 

Feb.20. 1986 

New regulations have been promulgated

2 

Measures for the Administration of Export Mechanical and Electrical Products and Accreditation of Inspection Laboratories Thereof 

Former State Administration for Commodity Inspection, Office of Mechanical and Electrical Product Export under the State Council 

May 21, 1987 

New regulations have been promulgated

3 

Measures for the Implementation of Accreditation of Export Mechanical and Electrical Product Inspection Laboratories 

Former State Administration for Commodity Inspection, Office of Mechanical and Electrical Product Export under the State Council 

May 25, 1987 

New regulations have been promulgated

4 

Opinions on Strengthening the International Accreditation of Mechanical and Electrical Product Export 

Former State Administration for Commodity Inspection, Office of Mechanical and Electrical Product Export under the State Council 

Feb.10, 1993 

New regulations have been promulgated



RULES FOR THE IMPLEMENTATION OF THE ADMINISTRATION OF IMPORT QUOTAS FOR MACHINERY AND ELECTRONIC PRODUCTS

e00514

The Ministry of Foreign Trade and Economic Cooperation, the General Administration of Customs

Order of the Ministry of Foreign Trade and Economic Cooperation and the General Administration of Customs

No.23

The “Rules for the Implementation of the Administration of Import Quotas for Machinery and Electronic Products”, which were, in accordance
with the “Foreign Trade Law of the People’s Republic of China”, the “Regulations of the People’s Republic of China on the Administration
of Import and Export of Goods” and the “Measures on the Administration of Import of Machinery and Electronic Products”, discussed
and adopted at the 10th minister’s working meeting of the Ministry of Foreign Trade and Economic Cooperation in 2001, and which have
been consented by the General Administration of Customs with whom these Detailed Rules were negotiated, are hereby promulgated, and
shall come into force on January 1, 2002. The “Import Quota Attestations” issued by the Ministry of Foreign Trade and Economic Cooperation
before January 1, 2002 shall continue to be valid within the validity period, and shall be invalidated after the expiry as the validity
period shall not be extended.

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

December 20, 2001

Rules for the Implementation of the Administration of Import Quotas for Machinery and Electronic Products

Article 1

These Detailed Rules are enacted in accordance with the “Regulations of the People’s Republic of China on the Administration of Import
and Export of Goods” and the “Measures on the Administration of Import of Machinery and Electronic Products” in order to regulate
the administration of the import quotas for machinery and electronic products.

Article 2

These Detailed Rules shall be applicable to the import by importing entities of machinery and electronic products under quotas inside
the customs territory of the People’s Republic of China.

Article 3

The Ministry of Foreign Trade and Economic Cooperation of the People’s Republic of China (hereinafter referred to as “the MOFTEC”)
shall be responsible for enacting, adjusting and promulgating jointly with the General Administration of Customs the catalogue of
import quotas for machinery and electronic products, as well as working out the annual plans on national import quotas for machinery
and electronic products and organizing the implementation.

Article 4

The MOFTEC shall, through electronic network system or by other means, carry out exchanges, checks and feedbacks of data with the
customs and other relevant administrative departments, and shall be responsible for inspecting and supervising the implementation
of the import quotas for the machinery and electronic products all over the country.

The institution in charge of foreign trade and economic cooperation of each province, autonomous region, municipality directly under
the Central Government, municipality separately listed on the State plan, coastal city open to the world and special economic zone,
as well as the office for the import and export of machinery and electronic products of each relevant department under the State
Council (hereinafter respectively referred to as “the local institution in charge of foreign trade and economic cooperation” and
“the departmental office of machinery and electronic products”), shall be responsible for inspecting and supervising the implementation
of the import quotas for the machinery and electronic products in its own area or department, and shall report the situation to the
MOFTEC.

Article 5

The MOFTEC shall, before July 31 of each year, promulgate the total quantity of the import quotas of the next year for the machinery
and electronic products all over the country.

The MOFTEC may, on the basis of its needs, adjust the total quantity of the annual quotas for machinery and electronic products, and
shall promulgate such adjustment 21 days before its enforcement.

Article 6

The qualifications and conditions for applying for import quotas for machinery and electronic products are as follows:

(1)

The entity applying for import shall have no such acts in violation of laws or regulations within the latest three years as evasion
of exchange, arbitrage of exchange, fraudulently obtaining tax refund for exports, smuggling, etc.;

(2)

The entity applying for import shall be enpost_titled to operate the products under the quotas in application;

(3)

The entity applying for import shall have the actual effective performance of importing and selling the products under the quotas
in application for a consecutive period of three years;

(4)

The entity applying for import shall have the capabilities of manufacture, sale, maintenance, provision of services and supply of
fittings, which are suitable for the quantity of the quotas in application;

(5)

The entity applying for import shall be in a good financial status;

(6)

Newly increased entities applying for import do not have to fulfill the conditions provided for in Item (3) of this Article;

(7)

An applicant who applies for import quotas for its own use does not have to fulfill the qualifications and conditions provided for
in Items (2), (3), (4) and (5) of this Article, provided that it shall submit a justifiable reason for application and appropriate
quantity of quotas in application.

Article 7

The time for applying for and distributing the import quotas is as follows:

(1)

The entity applying for import shall, during the period from August 1 to August 31 of each year, submit to the MOFTEC the application
for import quotas of the next year for machinery and electronic products, which shall not be accepted after the expiry;

(2)

The MOFTEC shall, before October 31 of each year, distribute the quotas, and issue the “Attestations on Import Quotas for Machinery
and Electronic Products” to the entities applying for import who have obtained the quotas.

Article 8

The time for re-distributing the import quotas is as follows:

(1)

The importing entities holding quotas shall, no later than September 1 of each year, return the quota licenses which cannot be used
up in the present year to the MOFTEC;

(2)

The MOFTEC shall, within 10 working days as of September 1 of each year, re-distribute the quotas stated in the returned quota licenses.

Article 9

The principles for distributing the import quotas are as follows:

(1)

To guarantee the needs in scientific research, education, culture, hygiene and other commonweal careers if the goods are imported
for the importer’s own use;

(2)

To give priority to considering the applications of the importing entities with strong capability of manufacture, sale and provision
of services;

(3)

To consider the actual effective performance of the entities applying for import in respect of the import of products under the quotas
in the latest three years;

(4)

To consider distributing a certain proportion of the total quantity of annual quotas to the newly increased entities applying for
import;

(5)

To properly increase the quantity of quotas of the next year upon request if the quotas of the last year have been used up; or

To deduct the quantity of quotas of the next year if the quotas of the last year have not been used up and the remaining quotas are
not returned within the provided time limit;

(6)

Some certain import quotas shall be distributed in a method of bidding, and the specific measures for administration shall be enacted
and promulgated by the MOFTEC.

Article 10

The procedures for applying for the “Attestation on Import Quotas for Machinery and Electronic Products” are as follows: An entity
applying for import shall, when importing machinery and electronic products subject to quota administration, truthfully fill out
the “Application Form for Import of Machinery and Electronic Products” in duplicate, and provide the application report and other
relevant documents, as well as go through the verification formalities in the relevant local institution in charge of foreign trade
and economic cooperation and the departmental office of machinery and electronic products. If no office of machinery and electronic
products is established in the department, the entity applying for import shall go through the verification formalities in the institution
in charge of foreign trade and economic cooperation located in the place of its industrial and commercial registration or legal person
registration.

Upon verification by the relevant local institution in charge of foreign trade and economic cooperation and the departmental office
of machinery and electronic products, an entity applying for import shall, within the provided time limit for applying for quotas,
apply for and obtain the “Attestation on Import Quotas for Machinery and Electronic Products” from the MOFTEC with the relevant documents
and the “Application Form for Import of Machinery and Electronic Products”.

Article 11

The importing entity shall apply for and obtain the “Import Quota License” with the “Attestation on Import Quotas for Machinery and
Electronic Products” issued by the MOFTEC. The validity period for the application and obtaining shall be the year when the “Attestation
on Import Quotas for Machinery and Electronic Products” is issued. Where the “Import Quota License” is not applied for or obtained
within the validity period, the “Attestation on Import Quotas for Machinery and Electronic Products” shall be invalidated.

Article 12

The “Attestation on Import Quotas for Machinery and Electronic Products” shall be in quintuplicate with five sheets. The first sheet
(blue, with anti-counterfeiting shading) shall be the document for applying for and obtaining the “Import Quota License”; the second
sheet (green, with white shading) shall be the document for order of goods; the third sheet (red, with anti-counterfeiting shading)
shall be the document kept in the customs for record; the fourth sheet (red, with white shading) shall be the banking document for
the purchase of and payment in foreign exchange; and the fifth sheet (black, with white shading) shall be kept in the quota administration
organ for file.

Article 13

Where, after obtaining the “Attestation on Import Quotas for Machinery and Electronic Products”, the importing entity needs to modify
any content in such items in the “Attestation on Import Quotas for Machinery and Electronic Products” as the importing entity, mode
of trade, uses of products, name, quantity or amount of products (with the range of change exceeding 10%) and performance of equipment,
etc. within the validity period due to a particular reason, it shall go through the formalities of modifying or changing the attestation
in the original organ which issued the attestation with the original “Attestation on Import Quotas for Machinery and Electronic Products”;
the original organ which issued the attestation shall take back the old attestation, and shall print the characters of “(change of
certificates)” in the remark column of the newly issued attestation. Where the amount of actually used exchange does not exceed 10
% of the planned amount, the “Attestation on Import Quotas for Machinery and Electronic Products” does not need to be modified, and
the importing entity shall not, when applying for and obtaining the “Import Quotas License” with the “Attestation on Import Quotas
for Machinery and Electronic Products”, modify any content in such items in the “Attestation on Import Quotas for Machinery and Electronic
Products” as the importing entity, mode of trade, uses of products, name, quantity or amount of products (with the range of change
exceeding 10%) and performance of equipment, etc..

Article 14

Where the “Attestation on Import Quotas for Machinery and Electronic Products” is lost, the importing entity shall immediately report
the loss to the original import quota administration organ, the original license administration organ and the customs at the port
of declaration. If no bad consequence occurs, the importing entity may apply to the MOFTEC for re-issuance.

Article 15

For any entity who concludes contracts with foreign parties before applying for the “Attestation on Import Quotas for Machinery and
Electronic Products” and the “Import Quotas License” in accordance with the provisions in these Detailed Rules, the MOFTEC shall
not re-issue the import quota attestation, and the customs and other administrative department shall deal with the matter in accordance
with the relevant laws and administrative regulations.

Article 16

These Detailed Rules shall also be applicable in any of the following circumstances:

(1)

The imported parts of the products under quotas constitute the feature of a whole machine;

(2)

The products under quotas are imported in processing trade for manufacturing products of domestic sale or for the importer’s own use;

(3)

The products under quotas are imported by enterprises with foreign investment for manufacturing products of domestic sale or for their
own use;

(4)

The products under quotas are imported in such modes of trade as leasing trade, compensation trade, etc.;

(5)

The products under quotas are imported in such manners as gratis aid, donation or present in economic exchanges, etc.;

(6)

The products under quotas, which are purchased outside the territory by Chinese institutions abroad or Chinese enterprises carrying
out construction projects outside the territory, need to be moved back to China for their own use;

(7)

Other circumstances separately provided for in laws and administrative regulations.

Article 17

These Detailed Rules shall not be applicable in any of the following circumstances:

(1)

The products imported in processing trade are re-exported;

(2)

The products under quotas are imported into China’s bonded zones or export processing zones for re-export;

(3)

The products under quotas are temporarily imported under the supervision and administration of the customs;

(4)

The products under quotas are imported by enterprises with foreign investment for investment or for their own use;

(5)

Other circumstances separately provided for in laws and administrative regulations.

Article 18

The power to interpret the present Detailed Rules shall remain with the MOFTEC. In case of any previous relevant provision inconsistent
with these Detailed Rules, these Detailed Rules shall prevail.

Article 19

These Detailed Rules shall enter into force on January 1, 2002.

 
The Ministry of Foreign Trade and Economic Cooperation, the General Administration of Customs
2001-12-20

 



THE TRADE UNION LAW OF THE PEOPLE’S REPUBLIC OF CHINA

PROVISIONAL RULES OF PROCEDURE OF THE FOREIGN TRADE ARBITRATION COMMISSION OF THE CHINA COUNCIL FOR THE PROMOTION OF INTERNATIONAL TRADE

CIRCULAR OF THE STATE COUNCIL ON STARTING LEVY OF IMPORT REGULATORY TAXES ON CERTAIN IMPORT GOODS

CHINESE-FOREIGN JOINT VENTURES

The Law of the PRC on Chinese-Foreign Joint Ventures

    

(Adopted by the Second Session of the Fifth National People’s Congress on July 1, 1979 and Promulgated on and Effective as of July
8, 1979)

   Article 1.

With a view to expanding international economic co-operation and technical exchange, the People’s Republic of China permits foreign
companies, enterprises, other economic organizations or individuals (hereafter referred to as “foreign joint venturers” ) to join
with Chinese companies, enterprises or other economic organizations (hereafter referred to as “Chinese joint venturers”) in establishing
joint ventures in the People’s Republic of China in accordance with the principle of equality and mutual benefit and subject to approval
by the Chinese Government.

   Article 2.

The Chinese Government protects, in accordance with the law, the investment of foreign joint venturers, the profits due them and their
other lawful rights and interests in a joint venture, pursuant to the agreement, contract and articles of association approved by
the Chinese Government.

All the activities of a joint venture shall comply with the provisions of the laws, decrees and pertinent regulations of the People’s
Republic of China.

   Article 3.

The joint venture agreement, contract and articles of association signed by the parties to the venture shall be submitted to the Foreign
Investment Commission of the People’s Republic of China, and the Commission shall, within three months, decide whether to approve
or disapprove them. After approval, the joint venture shall register with the General Administration for Industry and Commerce of
the People’s Republic of China, obtain a license to do business and start operations.

   Article 4.

A joint venture shall take the form of a limited liability company.

The proportion of the investment contributed by the foreign joint venturer(s) shall generally not be less than 25 per cent of the
registered capital of a joint venture.

The parties to the venture shall share the profits, risks and losses in proportion to their respective contributions to the registered
capital.

No assignment of the registered capital of a joint venturer shall be made without the consent of the other parties to the venture.

   Article 5.

Each party to a joint venture may make its investment in cash, in kind or in industrial property rights, etc.

The technology and the equipment that serve as a foreign joint venturer’s investment must be advanced technology and equipment that
actually suit our country’s needs. If the foreign joint venturer causes losses by deception through the intentional use of backward
technology and equipment, it shall pay compensation for the losses.

The investment of a Chinese joint venture may include the right to the use of a site provided for the joint venture during the period
of its operation. If the right to the use of the site does not constitute a part of a Chinese joint venturer’s investment, the joint
venture shall pay the Chinese Government a fee for its use.

The various investments referred to above shall be specified in the joint venture contract and articles of association, and the value
of each (excluding that of the site) shall be jointly assessed by the parties to the venture.

   Article 6.

A joint venture shall have a board of directors, which shall have its size and composition stipulated in the contract and the articles
of association after consultation between the parties to the venture, and the directors shall be appointed and replaced by the parties
to the venture. The board of directors shall have a chairman, whose office shall be assumed by the Chinese joint venture(s), and
one or two vice-chairmen, whose office(s) shall be assumed by the foreign joint venture(s). In handing major problems, the board
of directors shall reach a decision through consultation by the parties to the venture, in accordance with the principle of equality
and mutual benefit.

The board of directors is empowered, pursuant to the provisions of the articles of association of the joint venture, to discuss and
decide all major problems of the venture: expansion programs, proposals for production and operating activities, the budget for revenues
and expenditures, distribution of profits, plans concerning manpower and pay scales, the termination of business and the appointment
or employment of the president, the vice-president(s), the chief engineer, the treasurer and the auditors, as well as their powers
and terms of employment, etc.

The offices of president and vice-president(s) (or factory manager and deputy manager(s)) shall be assumed by the respective parties
to the venture.

The employment and dismissal of the staff and workers of a joint venture shall be provided for in accordance with the law in the agreement
and contract of the parties to the venture.

   Article 7.

After payment out of the gross profit earned by the joint venture of the joint venture income tax, pursuant to the provisions of the
tax laws of the People’s Republic of China, and after deduction from the gross profit of a reserve fund, a bonus and welfare fund
for staff and workers, and a venture expansion fund, as provided in the articles of association of the joint venture, the net profit
shall be distributed to the parties to the joint venture in proportion to their respective contributions to the registered capital.

A joint venture that possesses advanced technology by world standards may apply for a reduction of or exemption from income tax for
the first two to three profit- making years.

A foreign joint venturer that reinvests in China its share of the net profit may apply for refund of a part of the income taxes already
paid.

   Article 8.

A joint venture shall open an account with the Bank of China or a bank approved by the Bank of China.

The pertinent foreign exchange transactions of a joint venture shall be conducted in accordance with the regulations on foreign exchange
control of the People’s Republic of China.

In its operating activities a joint venture may directly raise funds from foreign banks.

The various kinds of a insurance coverage of joint venture shall be furnished by Chinese insurance companies.

   Article 9.

The production and operating plans of a joint venture shall be filed with the departments in charge and shall be implemented through
economic contracts.

In its purchase of required raw and processed materials, fuels, parts and auxiliary equipment, etc., a joint venture should give first
priority to purchases in China. It may also purchase them directly from the international market with foreign exchange raised by
itself.

A joint venture is encouraged to market its products outside China. Export products may be distributed to foreign markets through
the joint venture directly or through associated agencies, and they may also be distributed through China’s foreign trade agencies.
Products of the joint venture may also be distributed in the Chinese market.

Whenever necessary, a joint venture may establish branches outside China.

   Article 10.

The net profit that a foreign joint venturer receives after fulfilling its obligations under the laws and the agreement and the contract,
the funds it receives at the time of the joint venture’s scheduled expiration or early termination, and its other funds may be remitted
abroad through the Bank of China in accordance with the foreign exchange regulations and in the currency specified in the joint venture
contract.

A foreign joint venturer shall be encouraged to deposit in the Bank of China foreign exchange that it is enpost_titled to remit abroad.

   Article 11.

The wages, salaries and other legitimate income earned by the foreign staff and workers of a joint venture, after payment of the individual
income tax under the tax laws of the People’s Republic of China, may be remitted abroad through the Bank of China in accordance with
the foreign exchange regulations.

   Article 12.

The contract period of a joint venture may be decided through consultation by the parties to the venture according to its particular
line of business and circumstances. Upon the expiration of the joint venture contract period, if the parties have agreed, the period
may be extended, subject to approval by the Foreign Investment Commission of the People’s Republic of China. An application for extension
of the contract shall be made six months before expiration of the contract.

   Article 13.

Before the expiration of the joint venture contract period, in case of heavy losses, failure of a party to fulfill the obligations
prescribed by the contract and the articles of association, force majeure, etc., the contract may be terminated before the date of
expiration through consultation and agreement by the parties to the venture, subject to approval by the Foreign Investment Commission
of the People’s Republic of China and to registration with the General Administration for Industry and Commerce. In cases of losses
caused by a breach of contract, the financial responsibility shall be borne by the party that has violated the contract.

   Article 14.

Disputes arising between the parties to a joint venture that the board of directors cannot settle through consultation may be settled
through mediation or arbitration by a Chinese arbitration agency or through arbitration by another arbitration agency agreed upon
by the parties to the venture.

   Article 15.

This Law shall come into force on the day of its promulgation. The power to amend this Law is vested in the National People’s Congress.

(The English translations are for reference only)

    





PROVISIONS ON LABOUR MANAGEMENT IN CHINESE-FOREIGN EQUITY JOINT VENTURES

Category  LABOUR ADMINISTRATION Organ of Promulgation  The State Council Status of Effect  In Force
Date of Promulgation  1980-07-26 Effective Date  1980-07-26  


Provisions on Labour Management in Chinese-foreign Equity Joint Ventures


Notes:

(Promulgated by the State Council on July 26, 1980)

    Article 1  Labour management problems concerning Chinese-foreign equity
joint ventures (hereinafter referred to as “joint ventures”) shall all be
handled in accordance with these Provisions, in addition to the pertinent
stipulations in Article 6 of the Law of the People’s Republic of China on
Chinese-Foreign Equity Joint Ventures.

    Article 2  Matters pertaining to employment, dismissal and resignation of
the workers and staff members, tasks of production and other work, wages and
awards and punishment, working time and vacation, labour insurance and
welfare, labour protection and labour discipline in joint ventures shall be
stipulated in the labour contracts signed.

    A labour contract is to be signed by a joint venture and the trade union
organization in the joint venture collectively. A relatively small joint
venture may sign contracts with the workers and staff members individually.

    A signed labour contract must be submitted to the labour management
department of the government of the province, autonomous region or
municipality directly under the Central Government for approval.

    Article 3 (Note (1))  The workers and staff members of a joint venture
either recommended by the authorities in the locality in charge of the joint
venture or the labour management department, or recruited by the joint venture
itself with the consent of the labour management department, shall all be
selected by the joint venture through rigorous examinations.

    Joint ventures may run workers’ schools and training courses to train
managerial personnel and skilled workers.

    Article 4  With regard to the workers and staff members who become
redundant as a result of changes in production and technical conditions of the
joint venture, those who fail to meet the requirements after training and are
not suitable for other jobs in the joint venture can be discharged. However,
this must be done in accordance with the stipulations in the labour contract
and the enterprise must give compensation to these workers.

    The dismissed workers and staff members will be assigned to other jobs by
the authorities in charge of the joint venture or the labour management
department.

    Article 5 (Note (2))  The joint venture may, according to the degree of
seriousness of the case, take action against those workers or staff members
whose violation of the rules and regulations of the enterprise has resulted in
certain bad consequences. Punishment by discharge must be reported to the
authorities in charge of the joint venture and the labour management
department for approval.

    Article 6 (Note (3))  With regard to the dismissal and punishment of
workers and staff members by the joint venture, the trade union has the right
to raise objections if it considers them unreasonable, and send
representatives to seek a solution through consultation with the board of
directors. Should the consultation fail to arrive at a solution, the matter
shall be handled in accordance with the procedures set forth in Article 14 of
these Provisions.

    Article 7  When workers and staff members of a joint venture, on account
of special circumstances, submit their resignation to the enterprise through
the trade union in accordance with the labour contract, the enterprise shall
give its consent.

    Article 8  The pay levels of workers and staff members in a joint venture
shall be determined at 120-150% of the real wages of workers and staff members
of state-owned enterprises of the same trade in the locality.

    Article 9  The wage standards, the forms of payment, and bonus and subsidy
systems are to be discussed and decided by the board of directors.

    Article 10  The rewards and welfare funds drawn by the joint venture from
the profits must be used as rewards and collective welfare and shall not be
diverted to other uses.

    Article 11  A joint venture must pay for the Chinese workers’ and staff
members’ labour insurance, cover their medical expenses and various kinds of
government subsidies in the line with the standards obtaining in state-owned
enterprises.

    Article 12  The employment of foreign workers and staff members and their
dismissal, resignation, pay, welfare and social insurance and other relevant
matters shall all be specified in the employment contracts.

    Article 13  Joint ventures must implement the relevant rules and
regulations of the Chinese Government on labour protection and ensure safety
in production and civilized production. The labour management department of
the Chinese Government has the right to supervise and inspect their
implementation.

    Article 14  Labour disputes occurring in a joint venture shall first of
all be solved through consultation by the two parties. If consultation fails
to arrive at a solution, either party or both parties may request arbitration
by the labour management department of the people’s government of the
province, autonomous region or municipality directly under the Central
Government where the joint venture is located. Either party that disagrees to
the arbitration award may file a suit at a people’s court.

    Article 15  The power of interpretation of these Provisions resides in the
State Bureau of Labour of the People’s Republic of China.

    Article 16  These Provisions shall come into force as of the date of
promulgation.

Notes:

    Note (1)  The provisions of this Article are no longer effective. The
relevant provisions now in force are those contained in Article 1 of the
Circular of the General Office of the State Council on the Approval and
Transmission of the Proposals Submitted by the Ministry of Labour and the
Ministry of Personel Concerning Further Implementation of the Policy of
Granting Decision-making Power to Enterprises with Foreign Investment for the
Employment of Working Personel, issued on May 5, 1988. – The Editor

    Note (2)  The provision “Punishment by discharge must be reported to the
authorities in charge of the joint venture and the labour management
department for approval” as stipulated in this Article is no longer effective.
The relevant provisions now in force are those contained in Article 10 of the
Measures for Implementation of the Regulations on Labour Management in
Chinese-Foreign Equity Joint Ventures, promulgated by the Ministry of Labour
and Personnel with the approval of the State Council on January 19, 1984.
– The Editor

    Note (3)  The provisions of this Article are no longer effective. The
relevant provisions now in force are those contained in Article 5 of the
Circular of General Office of the State Council on the Approval and
Transmission of the Proposals Submitted by the Ministry of Labour and the
Ministry of Personel Concerning Further Implementation of the Policy of
Granting Decision-making Power to Enterprises with Foreign Investment for the
Employment of Working Personel, issued on May 5, 1988. – The Editor





MEASURES FOR PROVIDING SHORT-TERM LOANS IN FOREIGN CURRENCY BY THE BANK OF CHINA

Category  BANKING Organ of Promulgation  The State Council Status of Effect  In Force
Date of Promulgation  1980-08-30 Effective Date  1980-08-30  


Measures for Providing Short-term Loans in Foreign Currency by the Bank of China


Chapter I  Eligible Borrowers and the Purposes for which Loans are to
Chapter II  Conditions for Borrowing
Chapter III  Applications for and Utilization of Loans, and Examination
Chapter VII  Loan Administration
Chapter VIII  Supplementary Provisions

(Approved and promulgated by the State Council on August 30, 1980)

    These Measures for providing short-term loans in foreign currency are
hereunder formulated with a view to speeding up the socialist modernization
programme and, on the basis of self-reliance and by using the foreign currency
funds absorbed by the Bank of China, developing production of exports and
other economic under-takings and increasing foreign exchange earnings as well.
Chapter I  Eligible Borrowers and the Purposes for which Loans are to
be Used

    Article 1  Loans are to be granted to export-oriented industries and
other enterprises earning foreign exchange income directly or indirectly
who can meet the conditions for borrowing. The loans are primarily for
encouraging export-oriented industries to tap production potential and to
support their renovations and retooling old plants and equipments.

    Article 2  The loans are to be used for:

    a. financing imports of advanced technology, equipment and materials
essential to upgrading the borrower’s productivity and the quality, variety
and packaging of export goods;

    b. financing imports of raw materials and components to be processed for
export;

    c. developing transportation and tourism and carrying out engineering
projects contracted in foreign countries;

    d. supporting the processing of raw materials and assembling of parts
supplied by foreign buyers, and supporting compensatory trade; and

    e. providing short-term working capital to production projects that
generate foreign exchange directly or indirectly.
Chapter II  Conditions for Borrowing

    Article 3  Applicants for loans must meet the following requirements:

    a. Marked economic results: Preference is given to borrowers who are able
to earn more foreign exchange in proportion to the money invested and repay
bank loans sooner. Borrowers should be able to run their enterprises
efficiently, make the most of the imported advanced technology, equipment
and raw materials, tap their production potential, renovate obsolete plants
and equipment, enhance the competitiveness of their export goods in the
international markets, thereby earning more foreign exchange and accumulate
more funds for the country.

    b. Assurance of repayment: Borrowers must give evidence of a reliable
source of foreign exchange income and the ability to repay loans plus
interest for which they are required to submit a schedule of repayment.

    Where loans are granted to the export-goods industry, the increased
output attributed to the loan should be primarily for export and not be
included in the state domestic marketing plan. The income from the increased
output and the export proceeds in foreign exchange should first be set aside
for repayment of the bank loan. In case the goods are to be turned over to
a foreign trade corporation for export, the borrower should sign a sales
contract with this corporation which commits the latter to repay the bank
loan in foreign exchange for the borrower.

    Enterprises not directly related to the export trade must submit a
document of approval signed by the competent department committing the
latter to repay the loan from its own foreign exchange income. When
necessary, the bank may demand that some organization that has a regular
foreign exchange income stands surety for the borrower.

    c. Availability of domestic factors of production to make imported
materials and equipment operational: Domestic factors of production refer
to factory buildings, equipment, steam, water, electricity and fuel, raw
materials, labour force, technological expertise and funds in Renminbi
requisite to making the imported equipment and materials operational. These
items must be duly arranged and approved by the Planning Commission or the
competent authorities who have to list them in their plans or sign contracts
with the borrower.

    d. With respect to the items mentioned above, borrowers should obtain
prior approval of higher authorities for those items that require allotment of
funds for capital construction or technological installations.
Chapter III  Applications for and Utilization of Loans, and Examination
and Approval of Applications

    Article 4  Applications for loans should be submitted to the Bank of
China (or People’s Bank of China where the Bank of China does not operate)
together with the following supporting documents: a document evidencing the
approval of the proposed project by the department in charge; a list of
imports the loan is to finance; a schedule proving the domestic factors of
production are available and a copy of the contract; a document approved by
the department in charge showing that counterpart funds in Renminbi have
been earmarked for repayment of the amount of Renminbi required for the
import of the equipment. In the case of a project where the producer needs
to repay the loan with earnings from the export of its products, the
producer should conclude with a foreign trade department a contract or an
agreement on production and sales, and on the repayment of the foreign
currency borrowed.

    Article 5  Applications for loans by the departments under the State
Council shall be examined item by item against the prerequisites for
borrowing by the head office of the Bank of China. Applications by local
departments and enterprises shall be reviewed by the Bank of China’s  regional
branches in the provinces, municipalities and autonomous regions within the
bounds of their respective loan quotas assigned by the head office. Cases
that need to be reviewed by the head office or ministries concerned should
be submitted to them for approval. In examining the applications, the Bank
should keep in touch with the departments in charge and work in close
cooperation with them.

    Article 6  After the application is approved, the borrower should sign a
loan agreement, open a loan account with the Bank of China and place an order
for imports. If the borrower fails to sign the loan agreement or submit a
list of imports within the specified time, the Bank may revoke its approval
of the loan. The list of imports must be signed by the Bank before the
order is placed. Without the approval of the Bank, neither the purpose
for which the loan is to be used nor the descriptions and quantities of
imports should be changed. The borrower should submit to the Bank a copy of
the contract signed with a foreign trader who provides the goods. The Bank
should help the borrower to make the best use of the loan.

    Article 7  For a substantial loan, the borrower should submit a quarterly
withdrawal plan according to which the Bank will arrange the funds. In case
the plan needs to be adjusted because of poor planning or unexpected changes
of circumstances, the borrower should apply to the Bank for adjustment a
month before the end of the quarter. For failure to carry out the plan, the
borrower shall bear additional bank charges on the amount of the  withdrawal
falling short of, or in excess of, the planned amounts so as to compensate
the Bank for losses in raising funds from abroad.

    Chapter IV  Term of Loans and Rates of Interest

    Article 8  The term of the loan is to begin from the day of the
withdrawal to the day of repayment of the principal and interest. The term
of loans for importing raw materials and components to be processed for
export is normally 1 year. The term of loans for importing equipment or
materials to be used in making equipment, and that of loans for other
purposes shall not exceed 3 years. Where loans take the form of buyers’
credits, the maturity shall not exceed 5 years.

    Article 9  The interest rates for loans are to be determined and made
public by the head office of the Bank of China on the basis of the cost of
raising funds on the international money markets plus its handling charges.

    Chapter V  Repayment of Loans

    Article 10  The borrower shall, in keeping with the loan agreement,
repay the principal before the loan runs out, and pay the interest regularly
to the Bank. If the borrower fails to repay, the surety is responsible for
repayment. If necessary, the Bank of China or the People’s Bank of China
may force repayment by debiting the foreign currency deposit account of the
borrower or the surety (or by writing of the foreign exchange quota alloted
to the borrower and seizing his counterpart funds in Renminbi earmarked for
the purchase of the foreign exchange quota).

    Article 11  A borrower who has a regular foreign exchange income should
repay the loan from its foreign exchange earnings. A borrower who is not
directly involved in the export trade should repay the loan from export
proceeds received through a foreign trade corporation.

    This corporation or some other organization which stands surety for the
borrower should issue a certificate to “repay foreign exchange quota”
against which the borrower may purchase foreign exchange with Renminbi from
the Bank of China to repay the loan.

    Foreign exchange earnings from processing raw materials and assembling
parts provided by foreign buyers or earnings from compensatory trade must
first be set aside for repayment of the loan.

    Article 12  Loans made to finance a construction project by a state-owned
enterprise may be repaid out of profits derived from the increased output, out
of depreciation reserves for fixed assets, or out of changes payable to the
government for the use of fixed assets. Enterprises that are authorized to
retain a portion of their profits may make repayment from the retained profits
after deductions for the staff’s welfare fund and bonus fund. However,
deductions for the production development fund and for retention of increased
profits are not allowed. Loans to collectively owned township enterprises may
be repaid out of profits derived from the increased output (profits before tax)
or from depreciation reserves for fixed assets. The department in charge is
not allowed to collect profits or demand payment out of the project financed
by the bank loan before the loan is repaid. If the above-mentioned funds are
sufficient to repay the loan and a surplus remains, income tax shall be paid
on the surplus or a percentage of profits shall be turned over to the
government as required. If not, the deficit may, with the consent of the tax
authorities, be covered by the industrial and commercial tax on the increased
output which would otherwise be collected. When applying for the loan, the
borrower should send a copy of the application to the tax authorities for the
record.

    Chapter VI  Buyers’ Credits

    Article 13  When loans are provided in the form of the buyers’ credits,
the following rules shall apply, apart form other provisions in the Measures:

    a. The borrower must abide by the provisions in the buyer’s credit
agreement that the Bank of China has signed with a foreign bank and must
place orders for imports from the country in which the foreign bank is
located.

    b. The borrower must indicate in the order for imports that the buyer’s
credit is to be used for payment. The commercial contract signed between a
Chinese foreign trade corporation and the foreign seller should indicate
the name of the bank providing the buyer’s credit.

    c. At the time the commercial contract is signed, the Bank of China
shall negotiate with the foreign bank providing the buyer’s credit and sign
an agreement on the drawdown of the credit. The agreement shall be signed
by head office of the Bank of China or by one of its branches with its
authorization.
Chapter VII  Loan Administration

    Article 14  Choosing the best possible loanees. The Borrower must
maximize the effective productivity of the loan by relying on cost
accounting. Preference is given to the borrower who earns more foreign
exchange in proportion to the amount of the loan granted and makes repayment
sooner. The borrower who performs poorly or who is unable to repay his loan
upon maturity, will not receive further loans until he shows improvement in
management.

    Article 15  Clearly specifying the responsibilities. Both the Bank and
the borrower shall abide by the loan agreement: the Bank undertakes to
provide the loanable funds; the borrower undertakes to draw on the loan and
utilize its productive potential effectively. The Bank shall raise the
interest by 10-50% for overdue loans counting from the maturity date, and
by 100% for loans diverted to uses other than those authorized by the bank.

    Article 16  Exercising bank supervision. The Bank shall inquire into each
project before financing it, examine the borrower’s application before
approving it and oversee the performance of the borrower after the loan is
granted. The Bank has the duty to help the borrower achieve its economic
goals. In this way the bank shall fulfil its role of promoting, regulating
and supervising the economic activities of the borrower.

    For large loans, the Bank shall sit in on the negotiations between the
borrower and the foreign supplier and make suggestions as to the preferred
currency for making payment and the method of payment. The borrower must
provide the bank with all necessary information, documents, statistics and
a duplicate of the relevant contract.

    The borrower shall be held accountable for violation of government
decrees and policies; failure to abide by the regulations, the contract or
the agreement; dissipation of foreign exchange; or failure to repay the loan
when due. At the same time the Bank may take such disciplinary actions as
suspending or recalling the loan before maturity, raising the interest rate
or even suing the borrower in a court of law.
Chapter VIII  Supplementary Provisions

    Article 17  On the date these Measures come into force, Regulations for
Providing Short-term Loans in Foreign Currency, issued by the Ministry of
Finance on September 29, 1978, shall no longer be valid except for loans and
loan agreements previously approved and signed. Rules for the implementation
of these Measures shall be formulated separately by the Bank of China.





INTERIM PROVISIONS OF THE SPECIAL ECONOMIC ZONES IN GUANGDONG PROVINCE FOR THE CONTROL OF PERSONNEL ENTERING AND LEAVING CHINAA

CONSTITUTION ACT, 1982 – page 21

CONSTITUTION ACT, 1982 – page 20

CONSTITUTION ACT, 1982 – page 19

CONSTITUTION ACT, 1982 – page 18

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