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China Laws

AUDIT REGULATIONS

Audit Regulations of the People’s Republic of China

(Promulgated 21 October 1988 by the State Council)

CONTENTS

CHAPTER I GENERAL PRINCIPLES

CHAPTER II AUDIT OFFICES AND AUDITORS

CHAPTER III PRINCIPAL TASKS OF AN AUDIT OFFICE

CHAPTER IV PRINCIPAL POWERS AND FUNCTIONS OF AN AUDIT OFFICE

CHAPTER V AUDIT WORK PROCEDURE

CHAPTER VI INTERNAL AUDITING

CHAPTER VII SOCIAL AUDITING

CHAPTER VIII LEGAL LIABILITY

CHAPTER IX SUPPLEMENTARY PRINCIPLES

CHAPTER I GENERAL PRINCIPLES

Article 1. These Regulations are formulated to improve the audit supervision of financial income and expenditure and
related economic activities, to enforce financial and economic law and discipline, to increase economic
performance, to strengthen overall control and administration and to ensure the smooth implementation of the socialist
modernisation programme.

Article 2. The State shall establish audit offices to implement an audit supervisory system.

An audit office shall undertake audit supervision of the various people’s government departments at an equivalent level
to itself, lower level people’s government authorities, State finance organs, State-owned enterprises and
institutional units and other State-funded units to ascertain the authenticity, legality and performance of their
financial income and expenditure.

Article 3. An audit office shall undertake audit supervision in accordance with the provisions of State laws, statutory
regulations and policies.

An audit office shall exercise independent supervisory rights in accordance with the law and no other administrative
organ, social group or individual shall be permitted to interfere.

The audit conclusions and decisions of an audit office must be implemented by the units under audit and the relevant
personnel. If an audit conclusion or decision involves another related unit, this unit shall assist in the implementation
process.

Article 4. An audit office shall operate under a dual leadership system. It shall be responsible to and shall submit work
reports to its equivalent level people’s government authority and superior level audit office. Priority shall be given
to audit work assigned by the leaders of its superior level audit office.

Article 5. An area under State audit jurisdiction where an audit office has yet to establish an agency may, in accordance with
requirements, establish an internal audit body or provide auditors to implement an internal audit system.

Article 6. Social audit organisations established in accordance with the law may accept commissions to develop account auditing
and to provide consultancy services.

CHAPTER II AUDIT OFFICES AND AUDITORS

Article 7. The State Council shall establish an Audit Administration. The Audit Administration shall be the State’s supreme
audit office and, under the leadership of the Premier of the State Council, shall organise the leadership of the
entire State’s audit work and shall be responsible for audit mattes which come within its audit scope.

Article 8. The various levels of people’s governments at county level and above shall establish audit offices. Under the
leadership of the provincial head, autonomous region chairman, mayor, prefecture head, county head or district head respectively,
and its superior level audit office, a local audit office at any of the various levels shall organise the leadership
of its own administrative district’s audit work and shall be responsible for all audit matters which come within
the audit scope of its own audit office level.

Article 9. An audit office may, in line with work requirements, establish an agency in a key district or department to
undertake audit supervision.

Article 10. The leaders of audit offices at the various levels shall be appointed or dismissed in accordance with the provisions governing
cadre administrative jurisdiction. The appointment or dismissal of persons in charge of local audit offices at the
various levels (including the leader and deputy leader) shall be subject to prior approval by their superior level audit
office.

Article 11. Auditors shall conduct their auditing work in accordance with the law and shall be dedicated to their work, adhere to
principles, be objective and impartial, honest when performing their official duty and maintain confidentiality.

Auditors shall exercise their functions and powers in accordance with the law and shall receive the protection of the
law. Retaliation by any person is not allowed.

CHAPTER III PRINCIPAL TASKS OF AN AUDIT OFFICE

Article 12. An audit office shall conduct audit supervision of the financial income and expenditure of the following units:

(1) the various people’s government departments at its equivalent level and lower level people’s government authorities;

(2) State financial institutions;

(3) State-owned enterprises, institutional units and capital construction units;

(4) other units which receive State fund allocations or allowances;

(5) Sino-foreign joint equity enterprises, Sino-foreign cooperative enterprises, domestic affiliated enterprises
and other enterprises with State assets;

(6) other units which the provisions of State laws and statutory regulations stipulate as requiring audit supervision.

Article 13. An audit office shall conduct audit supervision of the aforesaid units in the following areas:

(1) financial budget implementation and final financial accounts;

(2) credit plan implementation and the results;

(3) financial plan implementation and final accounts;

(4) financial income and expenditure relating to capital construction and transformation projects;

(5) administration of State assets;

(6) non-budgetary fund income and expenditure;

(7) financial income and expenditure relating to projects which are funded through foreign capital loans or which are the
recipients of international assistance;

(8) various economic activities and other areas of economic performance which are income and expenditure related;

(9) acts which seriously infringe upon State assets or which, through serious damage, waste, etc., adversely harm
the economic interests of the State;

(10) auditing matters relating to the contract liabilities of State-owned enterprises;

(11) other matters which require auditing in accordance with the provisions of State laws and statutory regulations.

Article 14. Audit scope shall be determined by audit offices at the various levels in accordance with the State’s financial system
and the jurisdictional framework pertaining to the financial affairs of the units under audit.

A superior level audit office may empower a matter which comes within its audit scope to a lower level audit
office and may directly undertake the auditing of a matter of major importance which comes within the audit scope of a lower
level audit office.

An audit office may commission an internal audit body or social audit organisation to audit matters which come
within the audit scope of the office.

CHAPTER IV PRINCIPAL POWERS AND FUNCTIONS OF AN AUDIT OFFICE

Article 15. During the audit process an audit office shall have the following supervisory and investigative powers:

(1) power to request a unit under audit to submit its financial budget, finance plans, final accounts, accounting
statements and other relevant information;

(2) power to inspect the relevant accounts and assets of a unit under audit, to consult relevant documents and information
and to attend any relevant meeting held by the unit under audit;

(3) power to investigate the relevant organs, groups, enterprises, institutional units or personnel involved
with matters relating to an audit, with the aforesaid units or personnel being required to provide the audit office with
all relevant information and testimonial material;

(4) power to request the relevant department in charge to enact an interim stay ruling in a case where an act that
is seriously damaging State interests or violating financial or economic legislation is currently occurring
and, if the stay proves ineffectual, power to notify the relevant financial department or bank to temporarily suspend
access to the relevant funds.

(5) power to adopt interim measures, such as sealing up or confiscation accounts, assets, etc., should the
unit under audit obstruct or disrupt auditing work.

Article 16. An audit office may handle a violation of financial or economic legislation by a unit under audit in accordance with
the following provisions:

(1) issue a warning or circulate a notice of criticism;

(2) order any income or expenditure related matters involved with a violation of State regulations to be rectified;

(3) order the return or confiscation of any illegal earnings;

(4) recover misappropriated State assets;

(5) issue a direction to temporarily suspend access to funds or suspend bank loans in a case where the unit
under audit violates regulations through the use of funds or a bank loan, resulting in serious damage to State interests;

(6) issue a fine in accordance with the provisions of the relevant statutory regulations.

If a unit under audit refuses to return illegal funds or to pay fines, etc., the audit office may notify the bank
to withhold the relevant amount of money.

Article 17. If, in the case of a unit under audit which has violated the law as described in the previous Article, the audit office
thinks that the persons directly responsible or the persons in charge of the unit should be issued
with an administrative penalty, it may hand over the matter for investigation or to the relevant departments
for handling. If the circumstances are serious enough to constitute a crime, a judicial organ may be requested to
pursue criminal liability in accordance with the law.

CHAPTER V AUDIT WORK PROCEDURE

Article 18. Audit offices at the various levels shall determine the focal point of their audit work and shall formulate audit
project plans, in accordance with State policies and the requirements of their superior level audit offices and equivalent
level government authorities.

Article 19. After an audit office has clarified an audit matter, it shall notify the unit under audit.

A unit under audit shall co-operate with the work of the audit office and shall provide the necessary conveniences
to facilitate the work of the audit office.

Article 20. An auditor shall conduct an audit based on such means as inspection of credentials and accounts, consultation of documents
and information, examination of cash and material goods and investigation of the relevant units and personnel and shall
acquire testimonial material.

Testimonial material shall bear the signature or seal of the person providing it.

Article 21. After an auditor has conducted an audit, an auditor’s report shall be presented to affiliated audit offices.

The opinion of the unit under audit shall be sought regarding an auditor’s report. The unit under audit shall submit a
written response within 10 days of receipt of the report.

Article 22. After an audit office has examined and approved an auditor’s report and made audit conclusions and decisions,
it shall notify the unit under audit and any other relevant units to implement its rulings.

An audit office shall seek the opinion of the relevant departments when making audit conclusions and decisions
on an important matter.

The finance department or another relevant competent department shall ratify final accounts or handle them in the
following year, based on the audit conclusions and decisions given on these final accounts.

Article 23. If a audit under audit disagrees with the audit office’s audit conclusions or decisions, it may, within 15 days of receipt
of notice of the said conclusions and decisions, apply to the superior level audit office for a review of the
case. The superior level audit office shall issue a reassessed audit conclusion and decision within 30 days of receipt of
the review application. In special circumstances the time limit for reviewing audit conclusions and decisions may
be extended appropriately.

The original audit conclusions and decisions shall be implemented as usual during an audit review.

Article 24. The reassessed audit conclusions and decisions of a superior level audit office or the audit conclusions and decisions
of the Arbitration Administration shall be regarded as final judgements.

If an audited unit disagrees with a final audit conclusion or decision, it may submit a complaint to the audit office
which made the final judgement or to its superior level audit office.

Article 25. Audit offices shall investigate the implementation of audit conclusions and decisions.

Article 26. Audit offices at the various levels shall establish audit records of all audit items they handle and shall carry out
administration in accordance with regulations.

CHAPTER VI INTERNAL AUDITING

Article 27. State financial institutions, large and medium scale State-owned enterprises, construction units which undertake large
scale capital construction projects and State institutional units which handle relatively large amounts of
income and expenditure, as well as government departments, etc., within which audit offices have yet to establish
agencies, may establish internal audit bodies or provide auditors.

Article 28. Internal audit bodies and auditors shall, under the leadership of their own unit leaders, conduct internal audit
supervision of the financial income and expenditure and economic performance of their own unit and subordinate
units, in accordance with the provisions of State laws, statutory regulations and policies.

Internal audit bodies and auditors shall accept professional guidance from audit offices.

Article 29. An internal audit body or auditor shall carry out internal audit supervision within its own unit and subordinate units
on the following matters:

(1) implementation of and final accounts relating to financial plans or a unit’s budget;

(2) economic activities relating to financial income and expenditure and related economic performance;

(3) administration of the assets of the State and units;

(4) acts in violation of State financial and economic legislation.

(5) other audit matters which its unit leader has assigned for handling.

Internal audit bodies and auditors shall be responsible for directing the internal audit work of subordinate units.

CHAPTER VII SOCIAL AUDITING

Article 30. Social audit organisations shall be institutional units which independently undertake audit investigations and
consultancy pursuant to the law, receive payment for their services, are themselves responsible for their own income
and expenditure, conduct independent accounting and pay tax in accordance with the law.

Article 31. The establishment of a social audit organisation shall be subject to approval by the Audit Administration or an audit
office at provincial, autonomous region or directly administered municipality level.

A social audit organisation which has had its establishment approved shall begin operation only after registering
with the local administration for industry and commerce and obtaining a business licence.

Article 32. A social audit organisation may accept commissions from State organs, enterprises, institutional units or individuals
to undertake the following types of work:

(1) financial income and expenditure related audit investigations;

(2) authentication of economic cases;

(3) verification and annual examinations of registered funds;

(4) establishment of accounts and financial accounting system and providing consultancy in such areas as finance,
accounting, tax and economic management;

(5) training of audit, finance and accounting personnel.

If a social audit organisation accepts a commission from a foreign investment enterprise to undertake investigative
services, the matter shall be handled in accordance with the provisions of the Regulations of the People’s Republic
of China on Certified Public Accountants.

A social audit organisation shall maintain strict confidentiality in respect of information and knowledge
acquired in the process of its professional work.

Article 33. A social audit organisation shall accept administrative and professional guidance form audit office.

An audit report produced by a social audit organisation as the result of audit work commissioned by an audit
office shall be submitted to the audit office for examination and approval.

CHAPTER VIII LEGAL LIABILITY

Article 34. An audit office may issue a warning, circulate a notice of criticism and, depending on the circumstances, may also impose
a fine on a unit or persons directly responsible, the persons in charge of a unit or other related persons
if these Regulations are violated in any of the following ways:

(1) refusing to provide the relevant documents, books of account, certificates, accounting statements,
information or testimonial material;

(2) obstructing an auditor from performing his duty or resisting or disrupting supervisory or investigative work;

(3) practising fraud or concealing the truth;

(4) refusing to implement audit conclusions or decisions;

(5) retaliating against audit or inspection personnel.

Article 35. An audit office may impose fines at its discretion and, in accordance with provisions on cadre administrative jurisdiction,
may also issue an administrative penalty or recommend that an administrative penalty be imposed, if an auditor violates
these Regulations in any of the following ways:

(1) using his powers of office to seek personal gain;

(2) practising fraud, favouritism or other irregularities;

(3) neglecting his duties, thereby causing the State or the unit under audit to incur significant losses;

(4) revealing State secrets;

Article 36. If a unit or individual who has been penalised under the provisions of Article 34 or 35 disagrees with the penalty decision,
it may appeal to the body above the decision issuing organ.

Article 37. If any act as outlined in Article 34 or 35 is serious enough to constitute a crime, the audit office shall request
that the judicial organ pursue the criminal liability of the persons directly responsible, the people in charge of
the unit, the auditor or other related people in accordance with the law.

CHAPTER IX SUPPLEMENTARY PRINCIPLES

Article 38. Detailed provisions for audit work relating to the Chinese People’s Liberation Army shall be formulated elsewhere by the
Military Commission of the Central Committee of the Communist Party of China.

Article 39. The Audit Administration shall be responsible for interpreting these Regulations and shall formulate detailed
implementing rules.

Article 40. These Regulations shall take effect from 1 January 1989. The Provisional Regulations of the State Council on Auditing,
promulgated 29 August 1985, shall be annulled simultaneously.

Source:Ministry of Foreign Trade and Economic Cooperation

CHINESE-FOREIGN CONTRACTUAL JOINT VENTURES

Law of the PRC on Chinese-Foreign Contractual Joint Ventures

(Adopted at the First Session of the Seventh National People’s Congress and promulgated by Order No. 4 of the
President of the People’s Republic of China on April 13, 1988, and effective as of the date of promulgation)

Article 1. This Law is formulated to expand economic cooperation and technological exchange with foreign countries and to
promote the joint establishment, on the principle of equality and mutual benefit, by foreign enterprises and other
economic organizations or individuals (hereinafter referred to as the foreign party) and Chinese enterprises or other
economic organizations (hereinafter referred to as the Chinese party) of Chinese-foreign contractual
joint ventures (hereinafter referred to as contractual joint ventures) within the territory of the People’s Republic
of China.

Article 2. In establishing a contractual joint venture, the Chinese and foreign parties shall, in accordance with the provisions
of this Law, prescribe in their contractual joint venture contract such matters as the investment or conditions
for cooperation, the distribution of earnings or products, the sharing of risks and losses, the manners of operation
and management and the ownership of the property at the time of the termination of the contractual joint venture.

A contractual joint venture which meets the conditions for being considered a legal person under Chinese law, shall
acquire the status of a Chinese legal person in accordance with law.

Article 3. The state shall, according to law, protect the lawful rights and interests of the contractual joint ventures and of the
Chinese and foreign parties.

A contractual joint venture must abide by Chinese laws and regulations and must not injure the public interests of
China.

The relevant state authorities shall exercise supervision over the contractual joint ventures according to law.

Article 4. The state shall encourage the establishment of productive contractual joint ventures that are export-oriented or technologically
advanced.

Article 5. For the purpose of applying for the establishment of a contractual joint venture, such documents as the agreement,
the contract and the articles of association signed by the Chinese and foreign parties shall be submitted for examination
and approval to the department in charge of foreign economic relations and trade under the State Council or to the
department or local government authorized by the State Council (hereinafter referred to as the examination and approval authority).
The examination and approval authority shall, within 45 days of receiving the application, decide whether or not to
grant approval.

Article 6. When the application for the establishment of a contractual joint venture is approved, the parties shall, within 30 days
of receiving the certificate of approval, apply to the administrative authorities for industry and commerce
for registration and obtain a business license. The date of issuance of the business license of a contractual joint
venture shall be the date of its establishment.

A contractual joint venture shall, within 30 days of its establishment, carry out tax registration with the tax authorities.

Article 7. If the Chinese and foreign parties, during the period of operation of their contractual joint venture, agree through consultation
to make major modifications to the contractual joint venture contract, they shall report to the examination and approval
authority for approval, if the modifications include items involving statutory industry and commerce registration or
tax registration, they shall register the modifications with the administrative authorities for industry and commerce
and with the tax authorities.

Article 8. The investment or conditions for cooperation contributed by the Chinese and foreign parties may be provided in cash
or in kind, or may include the right to the use of land, industrial property rights, non-patent technology or other
property rights.

Article 9. The Chinese and foreign parties shall, in accordance with the provisions of the laws and regulations and the
agreements in the contractual joint venture contract, duly fulfil their obligations of contributing full investment
and providing the conditions for cooperation. In case of failure to do so within the prescribed time, the administrative
authorities for industry and commerce shall set another time limit for the fulfilment of such obligations; if such obligations
are still not fulfilled by the new time limit, the matter shall be handled by the examination and approval authority and
the administrative authorities for industry and commerce according to relevant state provisions.

The investments or conditions for cooperation provided by the Chinese and foreign parties shall be verified
by an accountant registered in China or the relevant authorities, who shall provide a certificate after verification.

Article 10. If a Chinese or foreign party wishes to make an assignment of all or part of its rights and obligations prescribed in the
contractual joint venture contract, it must obtain the consent of the other party or parties and report to the examination
and approval authority for approval.

Article 11. A contractual joint venture shall conduct its operational and managerial activities in accordance with the approved
contract and articles of association for the contractual joint venture. The right of a contractual joint venture
to make its own operational and managerial decisions shall not be interfered with.

Article 12. A contractual joint venture shall establish a board of directors or a joint managerial institution which shall, according
to the contract or the articles of association for the contractual joint venture, decide on the major issues concerning
the venture. If the Chinese or foreign party assumes the chairmanship of the board of directors or the directorship
of the joint managerial institution, the other party shall assume the vice-chairmanship of the board or the deputy
directorship of the joint managerial institution. The board of directors or the joint managerial institution may
decide on the appointment or employment of a general manager, who shall take charge of the daily operation
and management of the contractual joint venture. The general manager shall be accountable to the board of directors
or the joint managerial institution.

If a contractual joint venture, after its establishment, chooses to entrust a third party with its operation and
management, it must obtain the unanimous consent of the board of directors or the joint managerial institution,
report to the examination and approval authority for approval, and register the change with the administrative authorities
for industry and commerce.

Article 13. The employment, dismissal, remuneration, welfare, labour protection and labour insurance, etc. of the staff members and workers
of a contractual joint venture shall be specified in contracts concluded in accordance with law.

Article 14. The staff and workers of a contractual joint venture shall, in accordance with law, establish their trade union organization
to carry out trade union activities and protect their lawful rights and interests.

A contractual joint venture shall provide the necessary conditions for the venture’s trade union to carry out its activities.

Article 15. A contractual joint venture must establish its account books within the territory of China, file its accounting
statements according to relevant provisions and accept supervision by the financial and tax authorities.

If a contractual joint venture, in violation of the provisions prescribed in the preceding paragraph, does not establish
its account books within the territory of China, the financial and tax authorities may impose a fine on it,
and the administrative authorities for industry and commerce may order it to suspend its business operations or may
revoke its business license.

Article 16. A contractual joint venture shall, by presenting its business license, open a foreign exchange account with a bank
or any other financial institution which is permitted by the exchange control authorities of the state to
conduct transactions in foreign exchange.

A contractual joint venture shall handle its foreign exchange transactions in accordance with the provisions of the
state on foreign exchange control.

Article 17. A contractual joint venture may obtain loans from financial institutions within the territory of China and may also
obtain loans outside the territory of China.

Loans to be used by the Chinese and foreign parties as investment or conditions for cooperation, and their guarantees,
shall be provided by each party on its own.

Article 18. The various kinds of insurance coverage of a contractual joint venture shall be furnished by insurance institutions
within the territory of China.

Article 19. A contractual joint venture may, within its approved scope of operation, import materials it needs and export products it
produces. A contractual joint venture may purchase, on both the domestic market and the world market, the raw
and processed materials, fuels, etc. within its approved scope of operation.

Article 20. A contractual joint venture shall achieve on its own the balance of its foreign exchange receipts and expenditures. If a
contractual joint venture is unable to achieve the balance of its foreign exchange receipts and expenditures on its
own, it may, in accordance with state provisions, apply to the relevant authorities for assistance.

Article 21. A contractual joint venture shall, in accordance with state provisions on tax, pay taxes and may enjoy the preferential
treatment of tax reduction or exemption.

Article 22. The Chinese and foreign parties shall share earnings or products, undertake risks and losses in accordance with
the agreements prescribed in the contractual joint venture contract.

If, upon the expiration of the period of a venture’s operation, all the fixed assets of the contractual joint
venture, as agreed upon by the Chinese and foreign parties in the contractual joint venture contract, are to belong
to the Chinese party, the Chinese and foreign parties may prescribe in the contractual joint venture contract
the ways for the foreign party to recover its investment ahead of time during the period of the venture’s operation.
If the foreign party, as agreed upon in the contractual joint venture contract, is to recover its investment
prior to the payment of income tax, it must apply to the financial and tax authorities, which shall examine
and approve the application in accordance with state provisions concerning taxes.

If, according to the provisions of the preceding paragraph, the foreign party is to recover its investment ahead of
time during the period of the venture’s operation, the Chinese and foreign parties shall, as stipulated by the relevant
laws and agreed in the contractual joint venture contract, be liable for the debts of the venture.

Article 23. After the foreign party has fulfilled its obligations under the law and the contractual joint venture contract, the profits
it receives as its share, its other legitimate income and the funds it receives as its share upon the termination of the
venture, may be remitted abroad according to law.

The wages, salaries or other legitimate income earned by the foreign staff and workers of contractual joint ventures,
after the payment of the individual income tax according to law, may be remitted abroad.

Article 24. Upon the expiration or termination in advance of the term of a contractual joint venture, its assets, claims and debts
shall be liquidated according to legal procedures. The Chinese and foreign parties shall, in accordance with the agreement
specified in the contractual joint venture contract, determine the ownership of the venture’s property.

A contractual joint venture shall, upon the expiration or termination in advance of its term, cancel its registration
with the administrative authorities for industry and commerce and the tax authorities.

Article 25. The period of operation of a contractual joint venture shall be determined through consultation by the Chinese and foreign
parties and shall be clearly specified in the contractual joint venture contract. If the Chinese and foreign parties
agree to extend the period of operation, they shall apply to the examination and approval authority 180 days prior to
the expiration of the venture’s term. The examination and approval authority shall decide whether or not to grant
approval within 30 days of receiving the application.

Article 26. Any dispute between the Chinese and foreign parties arising from the execution of the contract or the articles of association
for a contractual joint venture shall be settled through consultation or mediation. In case of a dispute which
the Chinese or the foreign party is unwilling to settle through consultation or mediation, or of a dispute which
they have failed to settle through consultation or mediation, the Chinese and foreign parties may submit it to a Chinese
arbitration agency or any other arbitration agency for arbitration in accordance with the arbitration clause
in the contractual joint venture contract or a written agreement on arbitration concluded afterwards.

The Chinese or foreign party may bring a suit in a Chinese court, if no arbitration clause is provided in the contractual
joint venture contract and if no written agreement is concluded afterwards.

Article 27. The detailed rules for the implementation of this Law shall be formulated by the department in charge of foreign economic
relations and trade under the State Council and reported to the State Council for approval before implementation.

Article 28. This Law shall come into force as of the date of its promulgation.

WATER LAW

Water Law of the People’s Republic of China

(Adopted at the 24th Meeting of the Standing Committee of the Sixth National People’s Congress and promulgated by Order No. 61 of
the President of the People’s Republic of China on January 21, 1988, and effective as of July 1, 1988)

CONTENTS

CHAPTER I GENERAL PROVISIONS

CHAPTER II DEVELOPMENT AND UTILIZATION

CHAPTER III PROTECTION OF WATER, WATER AREAS AND WATER PROJECTS

CHAPTER IV MANAGEMENT OF THE USE OF WATER

CHAPTER V FLOOD PREVENTION AND FLOOD FIGHTING

CHAPTER VI LEGAL LIABILITY

CHAPTER VII SUPPLEMENTARY PROVISIONS

CHAPTER I GENERAL PROVISIONS

Article 1. This Law is formulated for the rational development and utilization of water resources and the protection of such resources, for
the prevention and control of water disasters, and for the full derivation of comprehensive benefits from water resources in order
to meet the needs in national economic development and in the livelihood of the people.

Article 2. The ” water resources ” referred to in this Law includes surface water and groundwater. This Law must be observed in the development,
utilization, protection and management of water resources and in the prevention and control of water disasters within the territory
of the People’s Republic of China.

Provisions for the development, utilization, protection and management of sea water shall be stipulated separately.

Article 3. Water resources shall be owned by the state, that is, by the whole people.

The waters of ponds and reservoirs belonging to agricultural collective economic organizations shall be owned by the collectives.

The state shall protect the lawful rights and interests of units and individuals engaged in the development and utilization of water
resources in accordance with law.

Article 4. The state shall encourage and support various undertakings for the development and utilization of water resources and for the prevention
and control of water disasters.

The development and utilization of water resources and the prevention and control of water disasters shall be carried out by comprehensive
planning with all factors taken into consideration, and with emphasis on multipurpose use and on achieving maximum benefits so as
to give full play to the multiple functions of water resources.

Article 5. The state shall protect water resources and adopt effective measures to preserve natural flora, plant trees and grow grass, conserve
water sources, prevent and control soil erosion and improve the ecological environment.

Article 6. All units shall strengthen the prevention and control of water pollution so as to protect and improve water quality. People’s governments
at various levels shall, in accordance with the provisions of the Law on the Prevention and Control of Water Pollution, strengthen
supervision over, and management of, the prevention and control of water pollution.

Article 7. The state shall carry out planning and require strict economy in the use of water.

People’s governments at various levels shall strengthen the management of the economical use of water. All units shall adopt advanced
technology for the economical use of water, reduce water consumption and raise the frequency of the reuse of water.

Article 8. Units and individuals that have made outstanding achievements in the development, utilization, protection and management of water
resources, in the prevention and control of water disasters, in the economical use of water and in related scientific and technological
research shall be awarded by the people’s governments at the corresponding level.

Article 9. The state shall, with respect to water resources, adopt a system which combines unified administration with administration at various
levels and by various departments.

The department of water administration under the State Council shall be in charge of the unified administration of water resources
throughout the country.

Other relevant departments under the State Council shall, in accordance with the duties assigned to them by the State Council, be
in charge of the administration of water resources related to them in coordination with the department of water administration under
the State Council.

The departments of water administration and other relevant departments of the local people’s governments at or above the county level
shall be in charge of the administration of water resources related to them in accordance with the duties assigned to them by the
people’s governments at the corresponding level.

CHAPTER II DEVELOPMENT AND UTILIZATION

Article 10. In order to develop and utilize water resources, a comprehensive scientific survey and an investigation and assessment must be undertaken.
The comprehensive scientific survey and the investigation and assessment of water resources throughout the country shall be carried
out by the department of water administration under the State Council jointly with other departments concerned.

Article 11. The development and utilization of water resources as well as the prevention and control of water disasters shall be planned in
a unified way on the basis of river basins or regions. The plans are divided into comprehensive plans and special plans.

Comprehensive plans for major river basins designated by the state shall be formulated by the department of water administration under
the State Council jointly with the relevant departments and with the people’s governments of the relevant provinces, autonomous regions
or municipalities directly under the Central Government, and shall be submitted to the State Council for approval. Comprehensive
plans for other river basins or regions shall be formulated by the departments of water administration of local people’s governments
at or above the county level jointly with the relevant departments and local authorities, and shall be submitted to the people’s
governments at the corresponding level for approval and to the departments of water administration at the next higher level for the
record. Comprehensive plans shall be coordinated with the National Land Plan and take into consideration the needs in various regions
and trades.

Special plans for the prevention of floods, the control of water-logging, irrigation, navigation, urban and industrial water supply,
hydro-electric power generation, bamboo or log rafting, fishery, water quality protection, hydrologic surveys, the general prospecting
and dynamic monitoring of groundwater, etc., shall be formulated respectively by the competent departments of the people’s governments
at or above the county level and shall be submitted to the people’s governments at the corresponding level for approval.

The approved plans shall serve as the bases for the development and utilization of water resources as well as the prevention and control
of water disasters. Any amendment to an approved plan must be examined and approved by the organ that originally approved the plan.

Article 12. No unit or individual shall, while channeling, storing or discharging water, infringe upon public interests or the lawful rights
and interests of other people.

Article 13. The development and utilization of water resources shall conform to the overall arrangement for the prevention of floods, follow
the principle of promoting benefits while eliminating disasters, and take into consideration the interests of upstream and downstream
areas, of the left and right banks and of all regions concerned, so as to give full play to the comprehensive benefits of water resources.

Article 14. The development and utilization of water resources shall first satisfy the need of the urban and rural inhabitants in their domestic
use of water and give overall consideration to the agricultural and industrial need for water as well as to the need of navigation.
In areas where the water sources are insufficient, the scale of the urban area and the development of industrial and agricultural
undertakings which use a large amount of water shall be restricted.

Article 15. All areas shall, according to their respective water and soil resources, develop irrigation, drainage and water and soil conservation
to bring in stable and high agricultural yields.

In areas where the water sources are insufficient, any irrigation method which makes for an economical use of water shall be adopted.

In areas which are prone to salinization-alkalization and water-logging, measures shall be taken to control and lower the groundwater
level.

Article 16. The state shall encourage the development and utilization of hydraulic power potentials. On rivers rich with hydraulic power potentials,
multipurpose cascade development shall be effected in a planned way.

In the development of hydropower stations, the ecological environment shall be protected, and the needs for flood control, water supply,
irrigation, navigation, bamboo and log rafting, fishery, etc. shall be taken into account.

Article 17. The state shall protect and encourage the development of water transport resources. When permanent dams and sluice-gates are built
on rivers which are navigable or suitable for bamboo and log rafting, the construction unit must at the same time build facilities
for the passage of ships and for bamboo and log rafting or, after approval by a department authorized by the State Council, take
other remedial measures. The construction unit must also make adequate arrangements for navigation and bamboo and log rafting during
the construction period and the initial water-filling period, and bear the expenses incurred thereby.

Where a non-navigable river or man-made waterway becomes navigable after a dam or sluice-gate is built, the construction unit shall
at the same time build facilities for the passage of ships or reserve sites for such facilities. The expenses needed for such facilities
shall, except as otherwise provided for by the state, be borne by the transport department concerned.

Where any existing dam or sluice gate hinders navigation, the people’s government at or above the county level shall order the original
construction unit to take remedial measures within a prescribed time limit.

Article 18. Where the building of a dam or sluice gate on the migration route of fish, shrimp or crabs has a serious impact on fishery resources,
the construction unit shall build facilities for their passage or adopt other remedial measures.

Article 19. The building of any dam and sluice gate, bridge, wharf or any structure which blocks, crosses or borders a river channel, and the
laying of a pipeline or a cable which crosses a river, must be in conformity with the standards for the prevention of floods and
navigation and other related technical requirements set by the state.

Where the building of any of the structures or facilities referred to in the preceding paragraph requires the extension, modification,
removal or destruction of the original structures or facilities, the unit constructing the new project shall bear the expenses for
extension or modification and the expenses for the compensation of losses, unless the original structures or facilities were built
in violation of the relevant regulations.

Article 20. Where the building of any water project or any other construction project has an adverse effect on the current use of water for
irrigation, the existing source of water supply or the present flow of the navigation channel, the unit constructing the project
shall adopt remedial measures or otherwise make compensation.

Article 21. Where an interbasin diversion project is to be built, an overall plan and a scientific justification must be provided, and consideration
given to the demand for water in the basin which supplies the water and in the basin which receives it, while adverse effects on
the ecological environment shall be avoided.

Article 22. The building of any water project must conform with the capital construction procedures and the other relevant provisions stipulated
by the state. Where a project involves the interests of other regions and trades, the construction unit must first solicit opinions
from the regions and departments concerned and, in accordance with the relevant provisions, report the project to the people’s government
at the higher level or the competent department concerned for approval.

Article 23. Where a water project to be built by the state requires the resettlement of inhabitants, the local people’s government shall be
responsible for making proper arrangements for the livelihood and production of the inhabitants to be resettled. The funds needed
for the resettlement of inhabitants shall be included in the investment plan for the project, and the resettlement shall be completed
within the construction stage on schedule.

CHAPTER III PROTECTION OF WATER, WATER AREAS AND WATER PROJECTS

Article 24. In any river, lake, reservoir or canal, no person may abandon or pile objects which block navigation or the passage of flood water,
or plant trees or grow crops of a long-stalk variety which block the passage of flood water.

In any navigable channel, no person may abandon any sunken boat, lay any fishing gear which blocks navigation, or grow aquatic plants.

No person may erect any building in a riverbed or in flood land without the approval of the competent department concerned.

Anyone who wishes to mine for sand and gravel or placer gold within the extent of a river course through which flood water passes
or into which water from water-logged areas is drained, or within the extent of a navigable river, must apply to the department of
river administration for approval, and must conduct his mining within the approved confines and in conformity with the approved operation
procedures. Where the mining relates to a navigable river, it shall be subject to approval by the department of river administration
and the department of navigation.

Article 25. The drawing of groundwater must be carried out by a unified plan based on the findings of a survey and assessment of water resources,
and the supervision and management of the drawing must be strengthened. In areas where too much groundwater has been drawn, a strict
control shall be imposed on the drawing and effective measures taken to protect the groundwater resources and to prevent the subsidence
of the ground.

Article 26. Where mining or the construction of underground projects, because of water drainage, results in a lowering of the groundwater level,
the depletion of groundwater or the subsidence of the ground and causes losses to the livelihood and production of units or individuals,
the mining unit or the construction unit shall take remedial measures and compensate for the losses.

Article 27. Reclaiming parts of a lake for use as farmland shall be prohibied. Reclaiming parts of a river for use as farmland shall also be
prohibited. Where reclamation is necessary, a scientific justification must be provided and approval obtained from a people’s government
at or above the provincial level.

Article 28. The state shall protect water projects and related facilities such as dikes and bank revetments, and shall protect flood prevention
facilities, hydrologic monitoring facilities, hydrogeologic monitoring facilities, and navigation facilities and aids. No unit or
individual may seize or destroy these facilities.

Article 29. Any state-owned water project shall have a zone for its management and protection, to be delimited by a people’s government at or
above the county level in accordance with the approved design and state provisions.

Any collectively-owned water project shall have a zone for its protection, to be delimited in accordance with stipulations made by
the people’s government of the relevant province, autonomous region or municipality directly under the Central Government.

Within the protection zone for a water project, any act of blasting, sinking a well, quarrying rock, and collecting earth, which endangers
the safety of the water project, shall be prohibited.

CHAPTER IV MANAGEMENT OF THE USE OF WATER

Article 30. The long-term plan for the demand for and supply of water of the entire country and those of regions covering different provinces,
autonomous regions and municipalities directly under the Central Government shall be formulated by the department of water administration
jointly with the other relevant departments under the State Council and submitted to the planning department under the State Council
for approval. A local long-term plan for the demand for and supply of water shall, on the basis of the long-term plan for the demand
for and supply of water made by the department of water administration of the people’s government at the next higher level and the
actual local conditions, be formulated by the department of water administration jointly with the other relevant departments of a
local people’s government at or above the county level, and shall be submitted to the planning department of the people’s government
at the corresponding level for approval.

Article 31. The regulation and storage of the run-off and the allocation of water shall take into account the demand for water in upstream and
downstream areas and on both banks of a river and also the need for navigation, bamboo and log rafting and fishery and for the protection
of the ecological environment.

A plan for the allocation of water covering different administrative divisions shall be formulated by the department of water administration
of the people’s government at the next higher level after soliciting the opinions of the local people’s governments concerned, and
shall be executed after approval by the people’s government at the corresponding level.

Article 32. The state shall put into practice a license system for drawing water directly from subterranean streams, rivers or lakes. However,
it shall not be necessary to apply for a license if water is drawn for household use or for livestock and poultry to drink, or if
a small amount of water is drawn for other purposes.

The steps, the scope and the measures for implementing a system of water-drawing licenses shall be stipulated by the State Council.

Article 33. Where it is necessary to apply for a water-drawing license for a new construction project, an extension project or a reconstruction
project, the construction unit shall, while submitting the design for the project, enclose written comments from the organ in charge
of examining applications for the drawing of water.

Article 34. Anyone who uses water provided by a water-supply project shall pay a water fee to the supplying unit in accordance with the relevant
provisions.

Any unit which directly draws groundwater in an urban area shall be charged a water resources fee. The collection of such fees from
other units or individuals drawing water directly from subterranean streams, rivers or lakes shall be decided by the people’s governments
of provinces, autonomous regions or municipalities directly under the Central Government.

Measures for the collection of water fees and water resources fees shall be stipulated by the State Council.

Article 35. Any dispute concerning water between different districts shall be handled through consultation in the spirit of mutual understanding
and mutual accommodation as well as the spirit of solidarity and cooperation. Where consultations are unsuccessful, the dispute
shall be handled by the people’s government at the next higher level. Pending a settlement of the dispute, no party may build any
project to drain, block, divert or store water within a certain area on either side of the common boundary defined by the state,
and no party may unilaterally alter the existing water regime, unless an agreement is reached between the parties concerned or an
approval is granted by the people’s government at the next higher level.

Article 36. Any dispute concerning water between units, between individuals or between units and individuals shall be resolved through consultation
or mediation. Where a party is unwilling to have the dispute resolved through consultation or mediation, or the consultation or
mediation is unsuccessful, he may request the people’s government at or above the county level or the competent department authorized
by such a government to handle the dispute, or may directly institute legal proceedings in the people’s court. Where a party is
dissatisfied with the decision made by the people’s government concerned or the competent department authorized by such a government,
he may institute legal proceedings in the people’s court within fifteen days of receiving the notification on the decision. Pending
a settlement of the dispute, no party may unilaterally alter the existing water regime.

Article 37. When handling any dispute concerning water, the people’s government at or above the county level, or the competent department authorized
by such a government, shall have the power to take temporary measures with which the parties must comply.

CHAPTER V FLOOD PREVENTION AND FLOOD FIGHTING

Article 38. The people’s governments at all levels shall strengthen their leadership and take effective measures to prevent and fight floods.
It is the duty of every unit and individual to participate in the prevention of and the fight against floods.

Article 39. The flood prevention headquarters under the people’s governments at or above the county level shall exercise unified command over
the work of preventing and fighting floods.

In case of a flood emergency, the flood prevention headquarters shall have the power to requisition materials and equipment and employ
personnel within their jurisdiction, which shall be returned or adequately compensated for without delay after the flood subsides.

Article 40. The people’s governments at or above the county level shall, on the basis of river basin plans and in accordance with the principle
of ensuring defence at the major points and giving consideration to ordinary ones, formulate schemes for the prevention of floods,
in which the standards and measures for the prevention of floods shall be specified. The schemes for the prevention of floods along
major rivers throughout the country shall be formulated by the Central Flood Prevention Headquarters and submitted to the State Council
for approval.

After a scheme for the prevention of floods is approved or formulated, the people’s governments concerned must execute it.

Article 41. Along floodways and in flood detention basins and flood storage basins, the utilization of land and the various construction projects
must meet the requirements for the prevention of floods.

Article 42. People in a downstream area may not hinder by blocking the flow of the flood water or excess water discharged according to the natural
flow trend or the design standards of flood prevention or flood drainage projects, or an approved flood fighting plan, or reduce
the carrying capacity of the river, while people in an upstream area may not increase without authorization the flow discharged downstream.

Article 43. In case of a flood emergency, flood prevention headquarters at different levels may, within their jurisdiction, take measures to
divert or detain the flood pursuant to the approved plans. Where these measures are detrimental to the adjoining districts, the
adoption of such measures must be reported to the flood prevention headquarters at the next higher level for approval, and the districts
concerned shall be notified in advance.

The State Council and the people’s governments of provinces, autonomous regions and municipalities directly under the Central Government
shall separately formulate special administrative measures for the safety, evacuation, livelihood, production, rehabilitation, compensation
for losses, etc. for the inhabitants in the flood detention basins and the flood storage basins within their respective jurisdiction.

CHAPTER VI LEGAL LIABILITY

Article 44. Whoever, in violation of this Law, draws, intercepts, blocks or discharges water and thereby causes obstruction or losses to others
shall stop his acts of infringement, remove the obstruction and compensate for the losses.

Article 45. Whoever, in violation of this Law, commits any of the following acts shall be ordered, by the department of water administration
or another competent department concerned of the relevant local people’s government at or above the county level, to stop his illegal
act and clear away the obstacles or take other remedial measures within the specified time limit, and may be concurrently fined;
the person who is responsible may be given administrative sanctions by the unit to which he belongs or by the competent authority
at a higher level:

(1) abandoning or piling objects which obstruct navigation or the passage of flood, or planting trees and growing crops of a long-stalk
variety which obstruct the passage of flood in any river, lake, reservoir or canal, or abandoning sunken vessels, laying fishing
gear which obstructs navigation, or growing aquatic plants in any navigable river;

(2) erecting buildings in any riverbed or flood land without approval;

(3) mining for sand and gravel or placer gold in any river course or navigable river without approval or not in conformity with the
approved scope and operation procedures; or

(4) reclaiming parts of any lake or river for use as farmland in violation of the provisions of Article 27 of this Law.

Article 46. Whoever, in violation of this Law, commits any of the following acts shall be ordered, by the department of water administration
or another competent department concerned of the relevant local people’s government at or above the county level, to stop his illegal
act and take remedial measures and may be concurrently fined; the person who is responsible may be given administrative sanctions
by the unit to which he belongs or by the competent authority at a higher level and, where a crime is constituted, he shall be prosecuted
for criminal responsibility in accordance with the Criminal Law:

(1) constructing any water project or realigning any river or course of navigation without authorization; or

(2) in violation of the provisions of Article 42 of this Law, increasing the discharge of flood or drainage of excess water downstream
or hindering the discharge of flood or drainage of excess water from upstream without authorization.

Article 47. Whoever, in violation of this Law, commits any of the following acts shall be ordered, by the department of water administration
or another competent department concerned of the relevant local people’s government at or above the county level, to stop his illegal
act, compensate for the losses caused and take remedial measures, and may be concurrently fined; where a penalty for violation of
public security should be given, the person shall be given a penalty in accordance with the Regulations on Administrative Penalties
for Public Security; where a crime is constituted, the person shall be prosecuted for criminal responsibility in accordance with
the Criminal Law:

(1) damaging any water project or related facilities such as dikes and bank revetments, damaging any flood prevention facilities,
hydrologic monitoring facilities, hydrogeologic monitoring facilities, or navigation facilities or aids; or

(2) carrying out, within the protection zone for a water project, any act of blasting, sinking a well, quarrying rock, or collecting
earth, etc., which endangers the safety of the project.

Article 48. If any party is not satisfied with the decision on an administrative penalty, he may, within fifteen days of receiving the notification
on the penalty, file an application for reconsideration with the department at the level next higher to the department that made
the decision on the penalty. If the party is not satisfied with the decision made after such reconsideration, he may institute legal
proceedings in the people’s court within fifteen days of receiving the decision on the reconsideration. The party may also directly
institute legal proceedings in the people’s court within fifteen days of receiving the notification on the penalty. If the said
party neither applies for reconsideration nor institutes legal proceedings in the people’s court within the time limit nor complies
with the decision on the penalty, the department that made the decision on the penalty shall apply to the people’s court for compulsory
execution.

If any party is not satisfied with a penalty for violation of public security, the case shall be handled according to the Regulations
on Administrative Penalties for Public Security.

Article 49. Whoever steals or forcibly seizes the supplies for the prevention of floods or materials and equipment for the building of water
projects, or whoever embezzles or misappropriates state funds and materials for the relief of disasters, for use in flood emergencies,
for the prevention of floods or for the resettlement of inhabitants, shall be prosecuted for criminal responsibility in accordance
with the Criminal Law.

Article 50. Any functionary of a department of water administration, of another competent department or of a unit managing a water project,
who neglects his duty, abuses his power, engages in malpractices for personal gains or commits fraudulent acts, shall be given administrative
sanctions by the unit to which he belongs or by the competent department at a higher level; whoever causes heavy losses to public
property or to the interests of the state and the people shall be prosecuted for criminal responsibility in accordance with the Criminal
Law.

CHAPTER VII SUPPLEMENTARY PROVISIONS

Article 51. Where any international treaty or agreement relating to international or border rivers or lakes, concluded or acceded to by the
People ‘s Republic of China, contains provisions differing from those in the laws of the People’s Republic of China, the provisions
of the international treaty or agreement shall apply, unless the provisions are ones on which the People’s Republic of China has
made reservations.

Article 52. The State Council may, in accordance with this Law, formulate rules for its implementation.

The standing committees of the people’s congresses of provinces, autonomous regions and municipalities directly under the Central
Government may, in accordance with this Law, formulate measures for its implementation.

Article 53.

DECISIONS ON PERSONNEL MANAGEMENT OF FOREIGN INVESTMENT ENTERPRISES

REGULATIONS ON THE COMPOSITION OF GROSS WAGES

Regulations on the composition of gross wages

(Ratified by the State Council on September 30th, 1989 and promulgated as the No. 1 Instruction of the National Bureau of Statistics
on January 1st, 1990)

Chapter 1 General Rules

Article 1 The regulations are formulated in order to unify the coverage of gross wages, to guarantee unified statistical and fiscal accounting
of wages by the state, to be in favor of compilation and examination of plans and wage administration and to reflect wage income
of employees correctly.

Article 2 As to enterprises and institutions owned by the whole people or by collectives, different kinds of jointly-operated units and all
levels of state organs, party organs and social organizations, these regulations must be observed for computation related to the
scope of gross wages in planning, statistics and accounting.

Article 3 Gross wages refer to the total labor rewards paid directly to the total work force by each unit during a given period.

The computation of gross wages should be based on the total labor rewards paid directly to employees.

Chapter 2 the Composition of Gross Wages

Article 4 Gross wages are composed of the following six parts:

(1) Hourly wages;

(2) Piece wages;

(3) Bonuses;

(4) Allowances and subsidies;

(5) Overtime wages;

(6) Wages paid in particular cases.

Article 5 Hourly wages refers to labor rewards paid to individuals according to the time rate (regional subsistence allowance included) and
working hours, which include:

(1) Wages paid for finished works according to the time rate;

(2) Basic wages and job (post) classification wages paid to employees by units that exercise the composite wage system;

(3) The probation wages of employees who join work newly ( living expenses of apprentices);

(4) Physical allowances of athletes.

Article 6 Piece wages refer to labor rewards paid to finished works by the unit price of piecework, which include

(1) Wages paid to individuals by exercising excess progression piece-rate system, direct infinite piece-rate system, norm piece-rate
system or over standard piece-rate system according to the ration and unit price of piecework approved by labor departments or competent
authorities;

(2) Wages paid to individuals in the way of assignments’ contracts;

(3) Wages paid to individuals in the way of turnover drawing or profit drawing.

Article 7 Bonuses refer to labor rewards paid to employees for their excess works or their increased profits and saved spending, which include

(1) Production awards;

(2) Saving awards;

(3) Labor emulation incentives

(4) Incentive wages of government units and institutions;

(5) Other bonuses.

Article 8 Allowances and subsidies refer to allowances paid to employees to compensate their particular or extra labor expenditure or due
to other specific reasons and price subsidies paid to employees to guarantee that their wage level is not affected by the general
price.

(1) Allowances that include allowances for compensating particular or extra labor expenditure, allowances for health protection,
technical allowances, allowances as annual awards or other allowances.

(2) Price subsidies that include different kinds of subsidies paid to guarantee that the wage level of employees is not affected
by the inflation of prices or fluctuations.

Article 9 Overtime job wages refers to wages paid for extra works as required.

Article 10 Wages paid in particular cases, which include

(1) Wages paid in the light of the time rate or piece rate for reasons of sick leave, work injury leave, maternity leave, family
planning leave, wedding leave, leave for arranging funeral, private affair leave, home leave, regular leave, out-of-service study,
implementation of state or social duties according to regulations of the state laws, rules and policies.

(2) Supplementary wages and retained wages

Chapter 3 Items not Included in Gross Wages

Article 11 The following is not included in gross wages:

(1) Invention-innovation awards, natural science awards, technological progress awards, rationalized proposal and technical advance
awards and bonuses paid to athletes and coaches;

(2) General expenses related to labor insurance and employees’ benefits;

(3) Expenditures related to the treatment of retired personnel;

(4) Expenditures related to labor protection;

(5) Copy money, lecture money and other specific business considerations;

(6) Food allowances and food delay allowances on business trips, traveling expenses for work transfers and family steadied allowances;

(7) Compensation cost paid for instrument or livestock brought by employees to enterprises;

(8) Risk offsetting receipts of leaseholders of units that exercise business operations under lease;

(9) Dividends (profit sharing of share capital) and interests paid to employees who purchase stocks or bonds of principal enterprises;

(10) Medical allowances and living allowances paid by enterprises to employees under the system of labor contract when labor
contracts are released;

(11) Commission charges or overhead cost besides wages paid to units that offer work force as seasonal workers;

(12) Processing charges paid to household workers and contract award expenses paid to contracting agencies according to the processing
ordering method;

(13) Allowances paid to students who take part in works in enterprises;

(14) Single child allowances required by family planning.

Article 12 Items listed in the last article are accounted separately according to state regulations.

Chapter 4 Additional Rules

Article 13 Calculations related to the scope of gross wages of privately operated units, units operated by overseas Chinese or industrialists
and businessmen from Hong Kong, Macao and Taiwan and units operated by foreign businessmen shall follow these regulations.

Article 14 These regulations shall be interpreted by the State Statistical Bureau.

Article 15 Regulations on specific scope of gross wages compositions shall be established by each region and each department based on these
regulations.

Article 16 These regulations go into effect since the date of issuance and the ” Provisional Rules on Gross Wages Composition” issued by the
State Council on May 21st, 1955 shall be abolished at the same time.

National Bureau of Statistics of China

PROCEDURES FOR THE ADMINISTRATION OF THE FOREIGN EXCHANGE INVOLVED IN INVESTMENT ABROAD

Category	BANKING	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1989-03-06	Effective Date	1989-03-06

Procedures for the Administration of the Foreign Exchange Involved in Investment Abroad

(Approved by the State Council of the People’s Republic of China on

February 5, 1989 and promulgated by the State Administration of Foreign
Exchange Control on March 6, 1989)

Article 1 These Procedures are formulated for the purpose of promoting
economic and technological co-operation with foreign countries, strengthening
the administration of the foreign exchange involved in investment abroad and
facilitating the achievement of a balance of international payments.

Article 2 The terms “investment abroad” referred to in these Procedures
means the establishment of various kinds of enterprises abroad or the purchase
of and holding shares abroad (hereinafter collectively referred to as
“Chinese-invested enterprises abroad”) by corporations, enterprises and other
economic organizations registered inside China (not including enterprises
with foreign investment) to engage in production and business activities.
Matters related to the foreign exchange involved in investment abroad shall
be governed by these Procedures.

Article 3 Corporations, enterprises or other economic organizations that
intend to make investment abroad shall, prior to going through the procedures
of application, examination and approval of investment abroad with the
competent State authorities, provide the department for control of foreign
exchange with the information on the administration exercised by the countries
(or regions) where their investment is to be over the foreign exchange
involved in investigated by foreign countries and the relevant data, and
submit to the department the certifying documents on the source(s) of the
funds in foreign exchange earmarked for investment abroad. The department for
control of foreign exchange shall be responsible for the risk examination of
the foreign exchange earmarked for investment abroad and for the examination
of the source(s) of the funds in foreign exchange and shall present within 30
days the conclusions in writing drawn from the examinations.

Article 4 Corporations, enterprises or other economic organizations
(hereinafter referred to as “domestic investors”) that have been permitted to
make investment abroad shall handle with the department for control of
foreign exchange the procedures of registration and of remitting abroad the
funds in foreign exchange earmarked for investment abroad by presenting the
following materials:

1. the documents of approval issued by the competent State authorities;

2. the conclusions in writing drawn by the department for control of
foreign exchange from the risk examination of the foreign exchange earmarked
for investment abroad and the examination of the source(s) of the funds in
foreign exchange; and

3. the contract of the investment project or other document(s)that may
serve to certify the amount of the funds in foreign exchange that the domestic
investors shall remit abroad.

In handling the procedures of registration and of remitting abroad the
funds in foreign exchange earmarked for investment abroad as prescribed in
the first paragraph of this Article, the department for control of foreign
exchange shall re-examine the source(s) of the funds in foreign exchange of
the domestic investors.

Article 5 In going through the procedures of registration, the domestic
investors shall place a deposit as a guarantee that they shall remit the profit
back to China (hereinafter referred to as “guarantee deposit”) which is equal
to 5 percent of the amount of funds in foreign exchange to be sent abroad.
The guarantee deposit shall be placed in a special account in a bank
designated by the department for control of foreign exchange. The guarantee
deposit shall be refunded when the total amount of profit remitted back to
China is equal to the amount of funds in foreign exchange sent abroad. The
interest on the guarantee deposit shall be paid to the domestic investors in
accordance with the standard rate prescribed by the State.

If the domestic investors experience real difficulty in placing the
guarantee deposit, they may give a written commitment to the department for
control of foreign exchange that the enterprise abroad in which they invest
shall remit regularly the profit or other incomes in foreign exchange back to
China.

Article 6 The profit or other incomes in foreign exchange derived by
domestic investors from their investment abroad shall be repatriated within
6 months as of the end of the local accounting year and settled as foreign
exchange or retained as spot exchange in accordance with the pertinent
provisions of the State. Without the approval by the department for control of
foreign exchange, they may not be diverted to other uses or kept abroad.

Article 7 The share of profit or other incomes in foreign exchange that
domestic investors receive from the enterprise abroad in which they invest
shall be retained in full in the first five years as of the date of the
establishment of the enterprise and shall be retained at a percentage
calculated in accordance with the pertinent provisions of the State as of the
end of the first five years.

Article 8 A Chinese-invested enterprise abroad may, on the basis of the
need of its business operations, raise funds on its own. But without approval
by the State Administration of Foreign Exchange Control, its domestic investors
may not provide guarantee for it by any means.

Article 9 The annual accounting statements of a Chinese-invested
enterprise abroad, including the statement of assets and liabilities and the
statement of loss and profit, shall, within 6 months as of the end of the
local accounting year, be submitted by its domestic investors to the
department for control of foreign exchange.

Article 10 If a Chinese-invested enterprise abroad is to make changes in
its capital, its domestic investors shall apply in advance to the original
examining and approving authorities for approval and the changes shall be
reported to the department for control of foreign exchange for the record.

Article 11 If domestic investors are to transfer the shares of stock
of the enterprise abroad in which they invest, they shall submit to the local
department for control of foreign exchange, a report for the transfer thereof
and shall repatriate the incomes in foreign exchange thus obtained within 30
days after the completion of the transfer.

Article 12 If a Chinese-invested enterprise abroad terminates its
business operations or is dissolved in accordance with the laws of the country
(or region) in which it is located, its domestic investors shall repatriate
the assets in foreign exchange that they are enpost_titled to obtain and may not
divert them to other uses or keep them abroad without authorization.

Article 13 If a Chinese-invested enterprise abroad fails to remit back
to China their profit or other incomes in foreign exchange in accordance with
their profit plan, its domestic investors shall submit to the department for
control of foreign exchange a report on their failure to fulfil their profit
plan on schedule or on the losses sustained in business operations. If they
fail to offer sufficient justification, the department for control of foreign
exchange may deduct from their guarantee deposit a corresponding proportion
of foreign exchange and sell it to the State. If the domestic investors have
not opened a guarantee deposit account, the department for control of foreign
exchange shall deduct from their retained foreign exchange a corresponding
amount and turn it over to the State, but the total amount deducted shall not
exceed 20 percent of the amount of the funds in foreign exchange that has
been remitted abroad.

Article 14 If domestic investors violate the provisions in Articles 6,11
and 12, the department for control of foreign exchange shall order them to
repatriate the foreign exchange involved within a prescribed period of time
and may impose a fine amounting from 10 percent up to 20 percent of the amount
that should be repatriated.

If domestic investors violate the provisions in Articles 9 and 10 to a
serious extent, the department for control of foreign exchange may impose
on them a fine of Renminbi 100,000 yuan or less.

Violators of the other provisions of these Procedures shall be dealt with
in accordance with the provisions of the Rules for the Implementation of
Penalties on Violations of Foreign Exchange Control.

Article 15 The domestic investors of the Chinese-invested enterprise
abroad established before these Procedures go into effect shall, within 60
days starting from the day on which these Procedures go into effect and in
accordance with the relevant provisions of these Procedures, approach the
department for control of foreign exchange to make up for the submission of
the relevant materials and go through the procedures of registration and
shall repatriate their incomes in foreign exchange in accordance with the
relevant provisions.

Article 16 The State Administration of Foreign Exchange Control shall be
responsible for the interpretation of these Procedures.

Article 17 These Procedures shall go into effect as of the date of
promulgation.

MEASURES OF THE CUSTOMS CONCERNING THE ADMINISTRATION OF THE GOODS, MEANS OF TRANSPORT, AND ARTICLES CARRIED BY INDIVIDUALS TO BE BROUGHT INTO OR OUT OF THE BONDED AREA OF OUTER GAOQIAO IN SHANGHAI

Category	CUSTOMS	Organ of Promulgation	The State Council	Status of Effect	Invalidated
Date of Promulgation	1990-09-09	Effective Date	1990-09-09	Date of Invalidation	1997-08-01

Measures of the Customs of the People’s Republic of China Concerning the Administration of the Goods, Means of Transport, and Articles Carried by Individuals to Be Brought Into or out of the Bonded Area of Outer Gaoqiao in Shanghai (Note 1)

Chapter I  General Provisions
Chapter II The Basis for the Inspection and Clearance of Imported and
Chapter III  The Administration of the Import and Export Commodities of
Chapter IV  Administration of Commodities Imported and Exported by Foreign
Chapter V  Administration of Warehousing and Storing Enterprises for
Chapter VI Administration of Means of Transport and Articles Carried
Chapter VII  Supplementary Provisions
Note:

(Approved by the State Council on September 8, 1990 and promulgated by

Decree No. 13 of the General Customs Administration on September 9, 1990)
(Editor’s Note: This Measures has been annulled by Measures for Customs
Supervision and Control of the Bonded Areas promulgated on August 1, 1997,
and effective as of the same date)
Chapter I  General Provisions

Article 1 The Measures are formulated in accordance with the Customs
Law of the People’s Republic of China and the provisions of other pertinent
laws and regulation promulgated by the State in order to promote the
construction in the bonded area of Outer Gaoqiao in Shanghai and develop the
export-oriented economy.

Article 2 The bonded area of Outer Gaoqiao in Shanghai (hereinafter
referred to as “the bonded area”) is under the supervision and administration
of the Customs, and the Customs shall carry out the task of supervision and
administration in the bonded area according to Law. On the demarcation line
between the bonded area and the non-bonded areas (i.e., the other areas within
the territory of China, the same below shall be established well equipped
separation installation.

Article 3 Goods, means of transport, or articles carried by individuals
entering or leaving the bonded area must go through the entrance and exit of
the Customs establishments. They shall be declared at the Customs truthfully
and accept the inspection of the Customs. Enterprises engaged in import and
export business and enterprises engaged in production and storage business in
the bonded area, shall present document of approval, issued by the Shanghai
People’s Government or by the competent authorities designated by it, to the
Customs for registration.

Article 4 With respect to import and export commodities in the bonded
area, the consignee, the consignor, or their agent shall fill in the
declaration form for import and export commodities, and present the relevant
documents in accordance with provisions.

Article 5 Within the confines of the bonded area, only the competent
administrative organs and relevant enterprises are to be established.

With the exception of the security personnel, no other personnel shall
be permitted to reside in the bonded area.

Article 6 Within the confines of the bonded area, goods imported by the
competent administrative organs or enterprises for their own use shall be
used only in the bonded are; these goods are strictly forbidden to be
transferred or sold in the non-bonded areas without approval. The bonded
goods must be re-transported out of the territory, or be re-transported
after being processed out of the territory.

If, under special circumstances, the aforesaid goods must be transferred
to, or sold in non-bonded areas, they shall be regarded as imported goods,
and the persons concerned shall present import licence as prescribed by the
State, and pay import duty and product tax in the link of import (i.e. tax on
added value) or consolidated industrial and commercial tax.

Article 7 The establishment of production of projects, in the bonded
area, which are restricted and controlled by the State, shall be approved by
the competent authorities prescribed by the State.

Article 8 Goods and articles, whose import and export are forbidden
by the State, shall not be brought into or out of the bonded area.

Goods intended to be sold in the non-bonded areas shall not be transported
into the bonded area.

Article 9 The Customs has the right to inspect, according to the
provisions of the Customs Law of the People’s Republic of China, goods
imported into or exported from the bonded area and the sites connected with
them.
Chapter II The Basis for the Inspection and Clearance of Imported and
Exported Goods and the Preferential Treatment in Taxation

Article 10 Import or export licence shall be exempted in the following
cases; the importation into the bonded area of machinery, equipment, goods
and materials for capital construction, motor vehicles for production, means
of transport, and articles for office use, which are to be used within the
bonded area; the importation of raw and processed materials, spare and
component parts, primacy parts, fuels, and packaging supplies needed to
processing export products; the transit goods for storage; and the products
processed in the bonded areas and destined for export.

Article 11 Goods (including raw materials, spare parts and components,
primary parts, and packaging supplies for the production of export products),
transported from the non-bonded areas into the bonded area, shall be regarded
as export goods, and the Customs procedures shall be completed in accordance
with the pertinent provisions promulgated by the State.

Article 12 With respect to the domestically manufactured machinery,
equipment and articles for daily use, which are transported into the bonded
area from the non-bonded areas and are for the use by administrative
departments, enterprises and their personnel in the area, the interested
units shall declare at the Customs, which shall give clearance after
inspection. As regards those imported goods and articles transported into
the bonded area from the non-bonded areas and which have been cleared after
going through import procedures, the Customs duties already paid shall not
be refunded.

Article 13 Customs duty and consolidated industrial and commercial tax
(tax on products, or tax on added value) on the import and export goods of
the bonded area shall be handled in accordance with the following provisions:

(1) the machinery, equipment, and other goods and materials for capital
construction needed for the construction of basic installations and facilities
in the bonded area shall be exempted from duty;

(2) the building materials, the equipment for production and administration,
the fuels for production, motor vehicles within reasonable quantities for
production, means of transport, articles for office use, and the spare parts
and fittings needed for the maintenance of the aforesaid machinery, equipment
and motor vehicles, which are imported by enterprises in the bonded area for
their own use, shall be exempted from duty;

(3) the means of transport within reasonable quantities, articles for
office use, equipment for administration, imported by administrative
departments in the bonded are for their own use, shall be handled by applying
mutatis mutandis the provisions of Item (2) of this Article;

(4) the raw and processed materials, spare and components parts, primary
parts, and packaging supplies, imported by the enterprises in the bonded
area to be used for production of export products, shall be held in bond;

(5) transit goods shall be treated as bonded goods, and shall be exempted
from duty if they are to be re-exported;

(6) the importation of articles other than those within the scope as
prescribed in Items (1) through (5) of this Article, shall be taxed in
accordance with relevant regulations;

(7) the exportation of products processed by enterprises in the bonded
area shall be exempted from export duty and consolidated industrial and
commercial tax in the production link (tax on products, or tax on added
value).
Chapter III The Administration of the Import and Export Commodities of
Production Enterprises

Article 14 Enterprises destined for production in the bonded area shall
register at the Customs for the record, and obtain a “registration handbook”.

The aforesaid enterprises shall set up specialized account books to keep
separate records of the importation, storage, exportation, and marketing
conditions of raw and processed materials, spare and component parts, primary
parts and finished goods; and submit periodical statements to the Customs for
future reference and for verification and cancellation.

Article 15 The finished products manufactured with imported raw materials
and spare parts by production enterprises shall all be sold abroad. If, under
special circumstances, it is necessary to sell finished products, substandard
products, and leftover bits and pieces of raw materials in the non-bonded
areas, such products shall be regarded as imported products, the procedures
for importation shall be completed in accordance with the pertinent provisions
of the State and duties be paid according to regulations. The Customs shall,
in accordance with the quantities of the imported raw materials and spare and
component parts of which the finished products consist, levy duties on them.
In the event that the consignors or their agents cannot submit an accurate
report on the names, quantities and value of such raw materials and spare and
component parts, the Customs shall take the finished products as imported and
levy duties as such.

Article 16 The imported raw materials and spare and component parts
shall, within the period of one year after their importation, be processed into
finished products and sold outside the Chinese territory; and the enterprise
concerned shall, within the period of one month after the completion of the
execution of the contract, approach the Customs for verification and
cancellation be presenting the “registration handbook” and the declaration
form for export commodities endorsed by the Customs.

In case the imported raw materials and spare and component parts are not
processed into finished products within one year, with the exception of
special approval for an extension, due procedures for obtaining a licence and
paying the duty as import goods shall be completed.
Chapter IV Administration of Commodities Imported and Exported by Foreign
Trade Enterprises

Article 17 A foreign trade enterprise in the bonded area, which is
approved by the State competent authorities to conduct import and export
business, may transact transit trade and act as an agent for other enterprises
in the bonded area to import raw and processed material and spare and
component parts for production, or to export products. However, it may not
purchase goods manufactured by enterprises in the non-bonded area; nor may it
act as an agent for enterprises in the non-bonded area to import goods.

Article 18 When a foreign trade enterprise in the bonded area conducts
import and export of goods, the Customs shall give clearance after verifying
the import and export agency contract signed between the foreign trade
enterprise and the interested production enterprise, and other relevant
documents.

Article 19 Goods imported by a foreign trade enterprise in the bonded
area shall be stored in the warehouses and sites designated by the Customs
within the bonded area, and the aforesaid enterprise shall keep specialized
account books, and submit periodical statements to the Customs for
verification.

Article 20 When a foreign trade enterprise delivers goods, imported by
it as an agent, to a production enterprise for processing, or exports goods
as an agent for the production enterprise, both buying and selling parties
shall, by presenting the import and export agency contract to the Customs,
go through the procedures for Customs declaration, carrying-over of accounts,
and verification and cancellation.

With respect to the aforesaid goods carried over by the production
enterprise the Customs shall handle the matter in accordance with the
provisions in Chapter III of these Measures.

Article 21 Goods imported through the agency of a foreign trade
enterprise shall not be transferred or sold to the non-bonded areas without
authorization.
Chapter V Administration of Warehousing and Storing Enterprises for
Transit Goods

Article 22 Transit goods imported from abroad into the bonded area shall
be stored in warehouses and sites, designated by the Customs, in the bonded
area. Without the approval of the Customs, the aforesaid goods shall not be
transferred or sold.

Article 23 Transit goods, with the approval of the Customs, may undergo
simple processing in warehouses, such as grading, selecting, pasting trademark
tags, and changing the packing. The warehousing and storing enterprises
shall keep specialized account books for import, storage, transit, and
marketing, and submit periodical statements to the Customs for verification.

Article 24 The time limit for the storage of transit goods in the bonded
area shall be one year. If, under special circumstances, there is a need to
extend the time limit, an application shall be filed with the Customs for
an extension, which shall in no way exceed one year. In the event that the
transit goods are not transported out of the bonded area within the time
limit, the Customs shall handle the case in accordance with the provisions of
Article 21 of The Customs Law of the People’s Republic of China.
Chapter VI Administration of Means of Transport and Articles Carried
Along by Individuals

Article 25 The persons in charge or the owners of the means of transport
entering or leaving the bonded area, or their agents, shall present the
certification, approved by Shanghai People’s Government or the competent
organs designated by it, for going through the procedures of registration for
the record.

Article 26 Means of transport, on entering or leaving the bonded area,
shall declare at the Customs, and accept the inspection by the Customs.

Article 27 Means of transport and personnel, while going from the
bonded area to a non-bonded area, shall not, without approval, transport or
carry out of the bonded area bonded goods or products made from bonded raw
and processed materials and spare and component parts.
Chapter VII Supplementary Provisions

Article 28 Cases concerning the supervision charges for goods with
Customs duties reduced or exempted, or for bonded goods imported into the
bonded area, shall be handled in accordance with Measures of the Customs of
the People’s Republic of China Concerning the Collection of Customs
Supervision Charges for Goods Imported with Reduction of or Exemption from
Customs Duty, and for Bonded Goods.

Article 29 It is strictly prohibited to engage in illegal activities of
smuggling by taking advantage of the preferential treatment and conveniences
granted by the State to the bonded area. The Customs shall handle the
smuggling activities which occur in the bonded area in accordance with the
provisions of The Customs Law of the People’s Republic of China.

Article 30 The right to interpret these Measures resides in the General
Customs Administration. Rules for the implementation of these Measures may be
formulated by the Shanghai Customs in accordance with these Measures. The
implementation rules shall be put into effect after its approval by the
General Customs Administration.

Article 31 These Measures shall be promulgated and put into effect by
the General Customs Administration.
Note:

Note 1 In the Reply to the Measures of the Customs of the People’s
Republic of China Concerning the Administration of the Goods, Means of
Transport, and Articles Carried by Individuals to be Brought into or out
of the Bonded Area of Outer Gaoqiao in Shanghai, The State Council gave
the following instruction: “A special, colsed channel shall be constructed
in between the bonded area of Outer Gaoquao in Shanghai and the wharf. The
Measures shall be put into effect after the separation installations in the
bonded area have been completed, and checked strictly and accepted by the
Customs.” –The Editor

ADMINISTRATIVE RULES ON ESTABLISHMENT OF PERMANENT REPRESENTATIVE OFFICES OF FOREIGN WATERWAY AND HIGHWAY TRANSPORT ENTERPRISES

Administrative Rules on Establishment of Permanent Representative Offices of Foreign Waterway and Highway Transport Enterprises

(Effective Date:1991.03.01–Ineffective Date:)

Article 1. To strengthen the administration over the permanent representative offices set up by foreign waterway and highway transport enterprises
and other organizations in China, the rules hereof are formulated in accordance with “the Provisional Regulations of the State Council
of the People’s Republic of China Concerning the Administration over Permanent Representative Offices of Foreign Enterprises” and
in the light of the concrete situation in the waterway and highway transport.

Article 2. When foreign waterway and highway transport enterprises, including those engaged in harbor business, harbor and navigational channel
construction, highway construction, transport agencies and other transport-related organizations and enterprises (hereinafter referred
to as foreign transport enterprises) need to apply for establishment of permanent offices in China because of business needs, the
applications have to be approved by the Chinese Ministry of Communications and Transport (MCT).

Article 3. When the foreign transport enterprises apply for establishing permanent representative offices in China, they should present the
following documents and materials:

a. An application signed by the enterprise’s chairman of board of directors or general manager, covering the name of the permanent
representative office to be set up, its responsible members, line of business, period for resident operation and location;

b. Legal business license or duplicate copy of business registration issued by the governing authorities of the foreign country or
region the enterprise is domiciled;

c. Capital credibility certificate issued by financial organizations that have business relations with the enterprise;

d. Letters from the enterprise appointing the office bearers of the permanent representative office and their resumes and photos (two
copies).

Article 4. When the application is ratified by MCT, “the Document of Ratification for Establishment of Permanent Representative Office of Foreign
Transport Enterprises in China” will be issued.

Article 5. After the foreign transport enterprise’s application for establishment of permanent representative office in China is ratified, the
enterprise must, within 30 days as of the date of ratification, take the document of ratification to go through the procedures for
registration and residence at the provincial, autonomous regional or municipal administration of industry and commerce and local
public security organs and obtain the registration certificate for permanent representative offices of foreign enterprises and certificates
of residence before they start business. If they fail to go through the necessary procedures within the specified period, the document
of ratification is automatically cancelled.

Article 6. The number of representatives of the permanent representative offices is to be examined and decided by MCT in the light of the need
of their business. In each ratification of the establishment of a permanent representative office, the longest resident period given
will be three years. If the representative office needs to continue the resident operation after the expiry of the period, it must,
within 30 days before the expiry of the period, present to MCT an application signed by the chairman of the board of directors or
the general manger of the foreign transport enterprise. When the application is approved by MCT, it will be granted “the Document
of Ratification for Prolonging Resident Period of Permanent Representative Offices of Foreign Transport Enterprises.” Each prolonging
period shall not exceed three years.

Article 7. If a foreign transport enterprise wants to change the name of its permanent representative office, responsible members or representatives,
line of business, resident period and location, it must apply to MCT for such a change. The application for such a change must be
signed by the chairman of the board of directors or general manager of the foreign transport enterprise. Upon approval by MCT, it
is granted “the Document of Approval for Change”. If the application involves the change of responsible members or representatives
of the permanent representative office, the letters of appointment, resumes and photos (two copies) of the new persons representing
the office must be attached.

Article 8. When a permanent representative office of a foreign transport enterprise intends to employ a Chinese citizen to work for it, it must
entrust the department appointed by the local government to manage the employment and report in time to MCT about such employment
and/or change of such employment.

Article 9. The proper business activities of the permanent representative offices and their representatives of the foreign transport enterprises
are protected by the laws of the People’s Republic of China. The permanent offices and their staff must abide by Chinese laws and
decrees and the rules hereof and carry out proper business activities within their business scope.

Article 10. The permanent representative offices of foreign transport enterprises can only engage in indirect business activities. Should there
be agreements between the Chinese and foreign governments in this regard, things should be done according to governmental agreements.

Without the ratification by MCT, foreign transport enterprises are not allowed to establish permanent representative offices in China,
nor use the name of permanent representative offices, their business cards and seals; nor to engage in any of the business activities
of a permanent representative office.

Article 11. MCT has the authority to supervise and control the work of the permanent representative offices of foreign transport enterprises
and may ask them to report their annual business activities.

Article 12. When permanent representative offices of foreign transport enterprises intend to terminate their business upon or before the expiry
of their resident period, they should report to MCT in written form within 30 days before such a termination.

Article 13. When permanent representative offices of foreign transport enterprises violate the rules hereof, MCT may warn, fine or punish them
according to the seriousness of the cases and may, if it is of a serious nature, cancel the Document of Ratification for Establishment
of Permanent Representative Offices and notify the administration of industry and commerce.

Article 14. When transport enterprises invested by overseas Chinese, Hong Kong and Macao compatriots or Sino-foreign transport joint ventures
set up outside the Chinese boundary apply to establish permanent representative offices in China, the case is handled in the light
of the rules hereof.

Article 15. The right to interpret the rules hereof rests with MCT.

Article 16. The rules hereof comes into effect as of March 1, 1990.

RULES FOR IMPLEMENTATION OF THE THE PREVENTION AND CONTROL OF ATMOSPHERIC POLLUTION

Category	ENVIRONMENTAL PROTECTION	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1991-05-24	Effective Date	1991-07-01

Rules for Implementation of the Law of the People’s Republic of China on the Prevention and Control of Atmospheric Pollution

Chapter I  General Provisions
Chapter II  Supervision and Management of the Prevention and Control of
Chapter III  Prevention and Control of Soot Pollution
Chapter IV  Prevention and Control of Pollution by Waste Gas, Dust and
Chapter V  Legal Liability
Chapter VI  Supplementary Provisions

(Approved by the State Council on May 8, 1991 promulgated by Decree No.5

of the National Office for Environment  Protection on May 24, 1991)
Chapter I  General Provisions

Article 1 These Rules for Implementation are formulated in accordance
with the provisions of Article 40 of the Law of the People’s Republic of
China on the Prevention and Control of Atmospheric Pollution.

Article 2 The local people’s governments at various levels shall be
responsible for the quality of the atmospheric environment within their
administrative areas and take the measures to prevent and control the
atmospheric pollution, and to protect and improve the atmospheric environment.

Article 3 The economic construction departments of the people’s
governments at various levels shall, according to the atmospheric environment
protection requirements by the people’s government at the same level,
incorporate the protection of the atmospheric environment into the production
and construction plans of their own departments and organize to implement it.

Article 4 Enterprises that discharge atmospheric pollutants must
incorporate the protection of the atmospheric environment into the production
and construction plans and the technology innovation plans of their own
enterprises. The competent authority for enterprises shall strengthen the
supervision and administration on the protection of the atmospheric
environment of the enterprises.

Article 5 The capital, material and equipment for the protection of the
atmospheric environment in a construction project shall be arranged together
with the master engineering on the basis of over-all view.
Chapter II Supervision and Management of the Prevention and Control of
Atmospheric Pollution

Article 6 Before a construction project that discharge atmospheric
pollutants is put into operation or used, its facility for the prevention and
control of atmospheric pollution shall, through the inspection and
examination by the environment protection departments that examine and
approve the environmental impact statement of the said project, be satisfied
with the following requirements:

(1) the processing result of the facility for the prevention and control
of atmospheric pollution has reached the designed standard;

(2) the managerial regulations and rules for the facility for the
prevention and control of atmospheric pollution are sound;

(3) the concerning technical information for the facility for the
prevention and control of atmospheric pollution is complete.

Only when the facilities for the prevention and control of atmospheric
pollution are qualified through check and acceptance, the construction
project may be put into operation and used.

Article 7 The units that discharge atmospheric pollutants shall, with
regard to the facility for the prevention and control of atmospheric
pollution, strengthen the management, periodically inspect or renew the
facility and assure the normal functioning of the facility.

Article 8 The units that discharge atmospheric pollutants must, in
accordance with the provisions, submit the registration form for discharging
pollutants report to the local environment protection department. After the
registration of report, if the categories, quantities and concentrations of
pollutants discharged are needed to be substantially changed, a new
registration form for discharging pollutants report shall be submitted 15 days
before the change; for those sudden substantial changes, a new registration
form for discharging pollutants report must be submitted within 3 days after
the change.

Article 9 If the pollutant treatment facilities are to be dismantled or
left idle, a report must be submitted to the local environment protection
department to explain the reason. The environment protection department shall,
after receipt of the report, give an official reply within 1 month. It shall
be deemed as agreed if an official reply is not given by the end of the
period.

Article 10 The units that are ordered to eliminate or control the
pollution by a deadline shall report periodically to the environment
protection department about the process of elimination or control.

The environment protection department shall inspect the situation of
elimination or control of the units that are ordered to eliminate or control
the pollution by a deadline and check and accept the project on which the
elimination or control is completed, and report the check and acceptance
results to the people’s government at the same level.

Article 11 The units that cause an accident of atmospheric pollution
must, within 48 hours after the accident is taken place, give an initial
report to the local environment protection department on the situation such
as the time, place and type of the accident taken place, the quantities of
the pollutant discharged, economic loss and people’s injury. After the
accident is checked up a detailed written report shall be given on the
situation such as the reason, process and damage of the accident, measures
taken, settlement decision, questions left over and measures of prevention,
and together with the concerning documents for evidence.

Article 12 The personnel for supervision and administration from the
environment protection department and other supervision and administration
departments shall, while conducting an on-the-spot inspection on the units
that discharge pollutants within their administrative area, present their
certificates of inspection or be dressed with the signs.

The certificate of inspection hold by the personnel for supervision and
administration from the environment protection department shall be issued by
the environment protection department of the people’s government at or above
the level of the municipality directly under the province government.

Article 13 When conducting an on-the-spot inspection the environment
protection department and other supervision and administration departments
may require the inspected units to provide the following information and
material:

(1) the situation of pollutants discharging;

(2) the operation, function and management situation of the discharge and
treatment facilities;

(3) the types, norms and calibration situation of the monitoring
instrument and equipment;

(4) the monitoring analysis method taken and monitoring record;

(5) the enforcement situation of elimination or control by a deadline;

(6) the information of the accidents and the concerning record;

(7) the information of production technology and use of raw material
concerning the pollution;

(8) other information and situation concerning the prevention and control
of atmospheric pollution.
Chapter III Prevention and Control of Soot Pollution

Article 14 The competent department concerned under the State Council
shall, pursuant to the standards for boiler soot discharge prescribed by the
state, stipulate the concentrations of boiler soot discharged initially and
the standards for blackness of mist in the boiler quality standard.

Before the design of a new boiler production is finalized, the
concentrations of boiler soot discharged initially, the standards for
blackness of mist and their testing data material shall be submitted to the
environment protection department of the people’s government at or above the
level of the municipality directly under the province government for a record.

The boiler manufacture factories must mark the concentrations of boiler
soot discharged initially and the standards for blackness of mist on the
nameplates or directions of the boiler products.

Any boiler dissatisfied with the concentrations of boiler soot discharged
initially and the standards for blackness of mist described in paragraph 1 of
this Article shall not be manufactured, sold or imported.

Article 15 Before put into operation or use the newly-built industrial
kilns and newly-installed boilers shall be checked and accepted by the
environment protection department according to the described procedures; if
the standard for discharging atmospheric pollutants is not met, they shall
not be put into operation or used.

Article 16 When an industry district or residence area is newly built in
the city or an outdated city area is transformed in batches, the heating and
electricity shall be supplied jointly; if the requirement of joint supply of
heating and electricity is not met, the central heating shall be supplied;
the facilities of joint supply of heating and electricity and supply of
central heating shall be designed, built or delivered to use together with
the construction project.

Article 17 The relevant departments under the State Council and the local
people’s governments at various levels shall adopt measures to popularize
shaped coal and the technology of combustion with low pollution, and to limit
the combustion of bulk coal gradually. The fuel supplying department shall
supply the coal with low pollution for civil use in priority.
Chapter IV Prevention and Control of Pollution by Waste Gas, Dust and
Malodorous Substances

Article 18 Any project that discharges toxic waste gas or dust shall not
be newly built in the residence area. The built project in operation or use
that exceeds the discharging standards shall undergo the purification
treatment; an enterprise or institution that causes serious atmospheric
pollution shall be ordered to eliminate or control the pollution by a deadline
by the people’s government according to its jurisdiction.

Article 19 The inflammable gas engendered during industrial production
such as the coking furnace gas, blast furnace gas, mining gas that is sent out
steadily or synsetic ammonia gas shall be recovered for utilization. Those
having the condition of recovery for utilization do not recover for
utilization shall be ordered to eliminate or control the pollution by a
deadline by the environment protection department of people’s government at
or above the county level with approval of the concerned people’s government
that the enterprise is subordinated to.

Article 20 The burning of asphalt, asphalt felt, rubber, plastics,
leather and other materials that may produce toxic or harmful smoke or dust or
malodorous gases in densely inhabited areas due to specific circumstance shall
be approved by the local environment protection department, and these
materials shall be centrally burned in the established burning furnace.

When a fixed smelting furnace is to be used in a building construction of
cities and towns, sealing measures shall be taken.

Article 21 In the transportation, loading and unloading, and storage of
substances that may diffuse toxic or harmful gases or dust, the protective
measures such as sealing or covering , spraying measures must be taken
according to the concerning provisions.

Article 22 Motorized vehicles and vessels shall not be permitted to
discharge atmospheric pollutants in excess of the prescribed discharge
standards; measures shall be taken to deal with motorized vehicles and vessels
that discharge atmospheric pollutants in excess of the prescribed discharge
standards.

Article 23 The environment protection department of the people’s
government at various levels shall conduct unified supervision and
administration on the prevention and control of atmospheric pollution caused
by the motorized vehicles and vessels.

The administrative departments of public security, transportation,
railways and fishery at various levels shall, by performing their respective
functions, conduct supervision and administration on the atmospheric pollution
caused by motorized vehicles and vessels.

Article 24 The administrative departments for manufacture and maintenance
of motorized vehicles and vessels shall incorporate the prevention and control
of atmospheric pollution caused by motorized vehicles and vessels into the
industrial quality management.

Automobiles that discharge pollutants in excess of the national discharge
standards shall not permitted to be manufactured, sold or imported.
Chapter V Legal Liability

Article 25 A fine, which shall be imposed of according to the provisions
of Article 31 of the Law of the People’s Republic of China on the Prevention
and Control of Atmospheric Pollution, shall be executed pursuant to the
following provisions:

(1) those who refuse to report or submit a false report on items for which
registration is required by the environment protection department under the
State Council for the discharge of pollutants shall be imposed of a fine
ranging from 300 to 3000 yuan;

(2) those who dismantle or leave idle the installations for the prevention
and control of pollutants without prior approval by the environmental
protection department , or discharge pollutants in excess of the prescribed
discharge standards shall be imposed of a fine ranging from 500 to 30000 yuan;

(3) those who refuse an on-the-spot inspection by the competent
environmental protection department or other supervisory and management
departments, or resort to trickery and fraud during inspection shall be
imposed of a fine ranging from 300 to 3000 yuan;

(4) those who without authorization burn asphalt, asphalt felt, rubber,
plastics, leather and other material that may produce toxic or harmful smoke
or dust or malodorous gases in densely inhabited areas shall be imposed of a
fine ranging from 300 to 3000 yuan;

(5) those who fail to pay the fee for excessive discharge of pollutants
according to the state provisions shall be imposed of a fine ranging from
1000 to 10000 yuan.

Article 26 A fine, which shall be imposed of according to the provisions
of Article 32 of the Law of the People’s Republic of China on the Prevention
and Control of Atmospheric Pollution, shall be executed pursuant to the
following provisions:

(1) When a construction project is put into operation or used in
circumstances where its facilities for the prevention and control of
atmospheric pollution have not completed, the environment protection
department responsible for the examination and approval of the environment
impact statement on the construction project shall order the suspension of
its operation or use and may concurrently impose a fine ranging from 5000 to
50000 yuan;

(2) When a construction project is put into operation or used in
circumstances where its facilities for the prevention and control of
atmospheric pollution fail to meet the requirements specified in the state
provisions concerning environmental protection for such a construction
project, the environment protection department responsible for the examination
and approval of the environment impact statement on the construction project
shall order the suspension of its operation or use and may concurrently impose
a fine ranging from 2000 to 20000 yuan.

Article 27 According to the provisions of paragraph 1 in Article 33 of
the Law of the People’s Republic of China on the Prevention and Control of
Atmospheric Pollution an enterprise or institution that has failed to
eliminate or control pollution by the deadline as required shall be imposed
of a fine ranging from 10000 to 100000 yuan.

Article 28 A fine, which shall be imposed of according to the provisions
of Article 34 of the Law of the People’s Republic of China on the Prevention
and Control of Atmospheric Pollution, shall be executed pursuant to the
following provisions:

(1) those enterprises or institutions which cause an atmospheric pollution
accident shall be imposed of a fine ranging from 10000 to 50000 yuan;

(2) those which cause a substantial economic loss shall be fined on the
basis of 30 percent of the direct loss but not exceeding 200000 yuan.

Article 29 The environment protection department of the people’s
government at or above county level may impose a fine not more than 10000
yuan, but a fine more than 10000 yuan shall be reported to the environment
protection department of the people’s government at the higher level for
approval.

The environment protection department of the people’s government of
municipality directly under the province government may impose a fine not more
than 50000 yuan,but a fine more than 50000 yuan shall be reported to the
environment protection department of people’s government at the province
level for approval.

The environment protection department of the people’s government of
provinces, autonomous regions or municipalities directly under the Central
government may impose a fine not more than 200000 yuan.

All the fine amount shall be handed over to the state treasury, and no
unit or individual shall hold back.

Article 30 The units or individuals that pay the fee for excessive
discharge of pollutants or are warned or fined shall not be exempted from the
liability of eliminating the pollution, removing the hazard or of making
compensation to the losses.
Chapter VI Supplementary Provisions

Article 31 The relevant departments under the State Council and the
people’s governments of provinces, autonomous regions or municipalities
directly under the Central government may formulate implementing measures
according to the Law of the People’s Republic of China on the Prevention and
Control of Atmospheric Pollution and these Regulations.

Article 32 The environment protection department under the State Council
shall be responsible for explainations to these Rules.

Article 33 These Rules shall be implemented as of the date of July 1,
1991.

LAW OF THE PEOPLE’S REPUBLIC OF CHINA ON THE TERRITORIAL SEA AND THE CONTIGUOUS ZONE

The Standing Committee of the National People’s Congress

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

No.55

The Law of the People’s Republic of China on the Territorial Sea and the Contiguous Zone, adopted at the 24th Meeting of the Standing
Committee of the Seventh National People’s Congress on February 25, 1992, is promulgated now and shall enter into force as of the
date of promulgation.

President of the People’s Republic of China: Yang Shangkun

February 25, 1992

Law of the People’s Republic of China on the Territorial Sea and the Contiguous Zone

Article 1

This Law is enacted for the People’s Republic of China to exercise its sovereignty over its territorial sea and the control over its
contiguous zone, and to safeguard its national security and its maritime rights and interests.

Article 2

The territorial sea of the People’s Republic of China is the sea belt adjacent to the land territory and the internal waters of the
People’s Republic of China.

The land territory of the People’s Republic of China includes the mainland of the People’s Republic of China and its coastal islands;
Taiwan and all islands appertaining thereto including the Diaoyu Islands; the Penghu Islands; the Dongsha Islands; the Xisha Islands;
the Zhongsha Islands and the Nansha Islands; as well as all the other islands belonging to the People’s Republic of China.

The waters on the landward side of the baselines of the territorial sea of the People’s Republic of China constitute the internal
waters of the People’s Republic of China.

Article 3

The breadth of the territorial sea of the People’s Republic of China is twelve nautical miles, measured from the baselines of the
territorial sea.

The method of straight baselines composed of all the straight lines joining the adjacent base points shall be employed in drawing
the baselines of the territorial sea of the People’s Republic of China.

The outer limit of the territorial sea of the People’s Republic of China is the line every point of which is at a distance equal to
twelve nautical miles from the nearest point of the baseline of the territorial sea.

Article 4

The contiguous zone of the People’s Republic of China is the sea belt adjacent to and beyond the territorial sea. The breadth of the
contiguous zone is twelve nautical miles.

The outer limit of the contiguous zone of the People’s Republic of China is the line every point of which is at a distance equal to
twenty-four nautical miles from the nearest point of the baseline of the territorial sea.

Article 5

The sovereignty of the People’s Republic of China over its territorial sea extends to the air space over the territorial sea as well
as to the bed and subsoil of the territorial sea.

Article 6

Foreign ships for non-military purposes shall enjoy the right of innocent passage through the territorial sea of the People’s Republic
of China in accordance with the law.

Foreign ships for military purposes shall be subject to approval by the Government of the People’s Republic of China for entering
the territorial sea of the People’s Republic of China.

Article 7

Foreign submarines and other underwater vehicles, when passing through the territorial sea of the People’s Republic of China, shall
navigate on the surface and show their flag.

Article 8

Foreign ships passing through the territorial sea of the People’s Republic of China must comply with the laws and regulations of the
People’s Republic of China and shall not be prejudicial to the peace, security and good order of the People’s Republic of China.

Foreign nuclear-powered ships and ships carrying nuclear, noxious or other dangerous substances, when passing through the territorial
sea of the People’s Republic of China, must carry relevant documents and take special precautionary measures.

The Government of the People’s Republic of China has the right to take all necessary measures to prevent and stop non-innocent passage
through its territorial sea.

Cases of foreign ships violating the laws or regulations of the People’s Republic of China shall be handled by the relevant organs
of the People’s Republic of China in accordance with the law.

Article 9

The Government of the People’s Republic of China may, for maintaining the safety of navigation or for other special needs, request
foreign ships passing through the territorial sea of the People’s Republic of China to use the designated sea lanes or to navigate
according to the prescribed traffic separation schemes. The specific regulations to this effect shall be promulgated by the Government
of the People’s Republic of China or its competent authorities concerned.

Article 10

In the case of violation of the laws or regulations of the People’s Republic of China by a foreign ship for military purposes or a
foreign government ship for noncommercial purposes when passing through the territorial sea of the People’s Republic of China, the
competent authorities of the People’s Republic of China shall have the right to order it to leave the territorial sea immediately
and the flag State shall bear international responsibility for any loss or damage thus caused.

Article 11

All international organizations, foreign organizations or individuals shall obtain approval from the Government of the People’s Republic
of China for carrying out scientific research, marine operations or other activities in the territorial sea of the People’s Republic
of China, and shall comply with the laws and regulations of the People’s Republic of China.

All illegal entries into the territorial sea of the People’s Republic of China for carrying out scientific research, marine operations
or other activities in contravention of the provisions of the preceding paragraph of this Article, shall be dealt with by the relevant
organs of the People’s Republic of China in accordance with the law.

Article 12

No aircraft of a foreign State may enter the air space over the territorial sea of the People’s Republic of China unless there is
a relevant protocol or agreement between the Government of that State and the Government of the People’s Republic of China, or approval
or acceptance by the Government of the People’s Republic of China or the competent authorities authorized by it.

Article 13

The People’s Republic of China has the right to exercise control in the contiguous zone to prevent and impose penalties for activities
infringing the laws or regulations concerning security, the customs, finance, sanitation or entry and exit control within its land
territory, internal waters or territorial sea.

Article 14

The competent authorities concerned of the People’s Republic of China may, when they have good reasons to believe that a foreign ship
has violated the laws or regulations of the People’s Republic of China, exercise the right of hot pursuit against the foreign ship.

Such pursuit shall be commenced when the foreign ship or one of its boats or other craft engaged in activities by using the ship pursued
as a mother ship is within the internal waters, the territorial sea or the contiguous zone of the People’s Republic of China.

If the foreign ship is within the contiguous zone of the People’s Republic of China, the pursuit may be undertaken only when there
has been a violation of the rights as provided for in the relevant laws or regulations listed in Article 13 of this Law.

The pursuit, if not interrupted, may be continued outside the territorial sea or the contiguous zone until the ship pursued enters
the territorial sea of its own country or of a third State.

The right of hot pursuit provided for in this Article shall be exercised by ships or aircraft of the People’s Republic of China for
military purposes, or by ships or aircraft on government service authorized by the Government of the People’s Republic of China.

Article 15

The baselines of the territorial sea of the People’s Republic of China shall be promulgated by the Government of the People’s Republic
of China.

Article 16

The Government of the People’s Republic of China formulates the relevant regulations in accordance with this Law.

Article 17

This Law shall come into force on the date for promulgation.

The Standing Committee of the National People’s Congress
1992-02-25

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China Laws

DECISION OF THE STANDING COMMITTEE OF THE NATIONAL PEOPLE’S CONGRESS CONCERNING THE SUPPRESSION OF THE FALSIFICATION, COUNTERFEITING, AND ILLEGAL...

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AUDIT REGULATIONS

CHINESE-FOREIGN CONTRACTUAL JOINT VENTURES

WATER LAW

DECISIONS ON PERSONNEL MANAGEMENT OF FOREIGN INVESTMENT ENTERPRISES

REGULATIONS ON THE COMPOSITION OF GROSS WAGES

PROCEDURES FOR THE ADMINISTRATION OF THE FOREIGN EXCHANGE INVOLVED IN INVESTMENT ABROAD

MEASURES OF THE CUSTOMS CONCERNING THE ADMINISTRATION OF THE GOODS, MEANS OF TRANSPORT, AND ARTICLES CARRIED BY INDIVIDUALS TO BE BROUGHT INTO OR OUT OF THE BONDED AREA OF OUTER GAOQIAO IN SHANGHAI

ADMINISTRATIVE RULES ON ESTABLISHMENT OF PERMANENT REPRESENTATIVE OFFICES OF FOREIGN WATERWAY AND HIGHWAY TRANSPORT ENTERPRISES

RULES FOR IMPLEMENTATION OF THE THE PREVENTION AND CONTROL OF ATMOSPHERIC POLLUTION

LAW OF THE PEOPLE’S REPUBLIC OF CHINA ON THE TERRITORIAL SEA AND THE CONTIGUOUS ZONE

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