China Laws

PROVISIONS ON SEVERAL ISSUES CONCERNING REGISTRATION ADMINISTRATION OF COMPANIES

The State Administration for Industry and Commerce

Provisions on Several Issues Concerning Registration Administration of Companies

Decree [1998] No.83 of the State Administration for Industry and Commerce

January 7, 1998

Article 1

These Provisions are formulated in accordance with the Company Law of the people’s Republic of China (hereinafter referred to as the
Company Law) and the Regulations of the People’s Republic of China Governing the Registration of Companies (hereinafter referred
to as the Regulations Governing the Registration of Companies) for the purpose of standardizing the registration administration of
companies.

Article 2

The establishment of a company shall conform to the requirements and procedures as stipulated in the Company Law and the Regulations
Governing the Registration of Companies. Where the establishment does not conform to the requirements and procedures as stipulated
in the Company Law and the Regulations Governing the Registration of Companies, it cannot be registered as a limited liability company
or a joint stock limited company, nor may it be named as a “company”.

The registration of enterprises other than companies (hereinafter referred to as non-company enterprises) shall be administered in
accordance with the Regulations of the People’s Republic of China on Administration of the Registration of Enterprise Legal Persons
(hereinafter referred to as the Regulations on Administration of the Registration of Enterprise Legal Persons).

Article 3

Company registration authorities shall be the State Administration for Industry and Commerce and administrative departments for industry
and commerce of provinces (including autonomous regions and municipalities directly under the Central Government, the same below),
cities (including autonomous prefectures, the same below) and counties. The administrative departments for industry and commerce
of prefectures, leagues and districts under the jurisdiction of large or medium-sized cities, and the administrative departments
(sub-departments) for industry and commerce of bonded areas or development zones established with the approval of the people’s governments
at various levels shall have no authorities in company registration and shall not have a company registered.

A company that has its domicile located in a district under the jurisdiction of a municipality directly under the Central Government
shall, except that which shall be registered by the State Administration for Industry and Commerce, be registered by the administrative
departments for industry and commerce of the municipality directly under the Central Government.

The jurisdiction of company registration of the administrative departments for industry and commerce of cities and counties shall,
by referring to the principles of dividing the jurisdiction of company registration between the State Administration for Industry
and Commerce and the administrative departments for industry and commerce of provinces as stipulated in the Regulations Governing
the Registration of Companies, be formulated in details by the administrative departments for industry and commerce of provinces
based on the actual circumstances of these provinces.

Article 4

An administrative department for industry and commerce of a bonded area or a development zone, as well as a sub-department that is
reorganized from an administrative department for industry and commerce of a district under the jurisdiction of a city in accordance
with the Document No.[1994] 67 issued by the General Office of the State Council, may be authorized in writing by an administrative
department for industry and commerce of a city to verify and approve the registration of a limited liability company, and to verify
and issue a business license of enterprise legal person affixed with the stamp of the administrative department for industry and
commerce of the city.

Article 5

To establish a company, except as otherwise provided by the laws and administrative regulations of the State, the shareholders shall
directly make an application for registration to a company registration authority.

As stipulated in the Interim Regulations on Procedures for Formulation of Administrative Regulations promulgated by the State Council,
administrative regulation is a general term for various types of regulations on politics, economy, education, science and technology,
culture and foreign affairs, etc. that are formulated, on the basis of the Constitution and laws, by the State Council in accordance
with the provisions of these Regulations for the purpose of directing and administering administrative work of the State. The tide
for an administrative regulation may be regulations, provisions or measures.

Special examination and approval by the competent departments in charge of the relevant industries as stipulated in local regulations,
departmental rules, local rules and other normative documents shall not be taken as prerequisite requirements for company registration.

Article 6

Where laws or administrative regulations stipulate that the establishment of a company shall be examined and approved or where any
of the items of an company’s business scopes must, as stipulated by laws or administrative regulations, be examined and approved,
except those that shall be examined and approved by the State Council or the relevant departments of the State Council, the approval
shall be obtained according to law from the examination and approval organ of the place where the company is located. For a joint
stock limited company established with the approval of the people’s government of a province, its establishment approval document
thereof shall be affixed with the stamp of the people’s government of the province.

Article 7

To apply to establish a wholly State-owned company, approval documents of an authorized investment institution or a department authorized
by the State Council or the people’s government of a province shall be submitted to the company registration authority. An authorized
investment institution or a department authorized by the people’s government below the province level shall handle the matter in
accordance with the provisions of the State Council.

Article 8

To establish a company, the applicant shall apply for pre-approval of a company name to a registration authority that has the jurisdiction
over verification of name.

Where the industry shown in the pre-approved company name is not approved by the department concerned, the company name shall be re-verified
by the original name verification authority, or the applicant shall reapply for pre-approval of a company name.

Article 9

A “limited liability company” may be referred to as a “limited company” for short.

A company shall not be referred to as a “corporation” or a “group company”. Where a company meets the requirements for an enterprise
group, its core enterprise may be registered as a “group limited company”, “group limited liability company” or “group joint stock
limited company”.

Article 10

A statutory capital verification institution that has the right to produce a capital verification certificate shall be a public accounting
firm or an audit firm registered by an administrative department for industry and commerce. For a company into which State-owned
assets are contributed as shares, the property registration of State-owned assets shall not be a document that must be submitted
for company registration.

Article 11

Where the amount of capital contributions in the form of high and new technology achievements exceeds 20 per cent of the registered
capital of a limited company, they shall be confirmed by a State or provincial administrative department of science and technology,
and appraised and evaluated by a legally registered appraisal institution.

Where a shareholder makes its capital contributions in the form of land-use right, he shall obtain the approval from an approving
department concerned, and shall undertake the procedures for property transfer in accordance with the relevant provisions of the
State.

Article 12

Where the contents of the articles of association of a company violate the provisions of the laws or administrative regulations of
the State, the company registration authority shall require the applicant to make amends. Where the applicant refuses to make such
amends, the application for company registration shall be rejected.

Article 13

The enterprise type of companies shall be classified into limited liability company and joint stock limited company. Wholly State-owned
companies shall belong to limited liability company, and the enterprise type thereof shall be “limited liability company (wholly
State-owned) “. The enterprise type of listed joint stock limited company shall be “joint stock limited company (listed)”.

Article 14

The establishment of a subsidiary shall conform to the requirements and procedures as stipulated in the Company Law and the Regulations
Governing the Registration of Companies. Except that a State-authorized investment company may invest to establish a sole-investor
subsidiary (i.e. wholly State-owned subsidiary), no company may establish a sole-investor subsidiary.

A company shall not establish any non-company enterprise legal persons, and shall not make investments as shares to any non-company
enterprises, except for those companies restructured from non-company enterprises or those companies that merger non-company enterprises
and standardize them as branches or subsidiaries in accordance with the Company Law.

Article 15

For an operating unit established by a company but not qualified as an enterprise legal person, the word “branch” may not be include
in its name, but it shall undertake registration according to the procedures for branch registration.

The business scope of a branch shall not go beyond that of a company. Where a branch engages in any items that shall be subject to
approval as stipulated by laws or administrative regulations, the matter shall be reported to the relevant departments of the State
for approval.

Article 16

A company shall be issued with a Business License for Enterprise Legal Person and a Business License in 1994 version and a non-company
enterprise shall be issued with a Business License for Enterprise Legal Person and a Business License in 1989 version. The stamp
affixed to the business license shall be the official stamp of the registration authority, and shall not be replaced by the stamp
specially used for registration.

Article 17

Where a State organ legal person, an association legal person, or an institution legal person acts as a shareholder or sponsor of
a company, the matter shall be governed in accordance with the relevant provisions of the State.

An institution operated as an enterprise shall undertake enterprise legal person registration, and then it may make investments as
shares in the name of enterprise legal person.

A “share-holding meeting of staff members” or any other similar organization that has already undertaken registration for association
legal person may become a shareholder of a company.

Article 18

Where, in rural areas, a collective economic organization performs the functions of collective economic administration, the rural
collective economic organization shall be act as an investing entity; Where there in no a collective economic organization, the functions
of collective economic administration are performed by a villagers committee as a substitute, the villagers committee, as an investing
entity, may make investments to establish a company. Where a villagers committee intends to make investments to establish a company,
the villagers committee shall make a resolution on this matter.

Article 19

A urban residents committee with investing capability may invest to establish a company.

Article 20

Where an enterprise with foreign investment becomes a shareholder, it shall conform to the relevant laws, administrative regulations
and policies. The relevant specific provisions shall refer to the Several Provisions of the State Administration for Industry and
Commerce on Registration Administration of Enterprises with Foreign Investment Becoming Company Shareholders or Sponsors.

Where the Chinese investor obtains the whole share ownership of an enterprise as a result of a change of share ownership of an enterprise
with foreign investment, when applying for modification of registration, the enterprise shall submit the relevant documents to the
registration authority in accordance with the requirements of establishment registration for the type of enterprise to which it intends
to change. After the verification of the registration authority, the Business License for Enterprise Legal Persons of the People’s
Republic of China shall be handed in for cancellation, and a Business License for Enterprise Legal Persons shall be issued as a replacement.

Article 21

No public accounting firms, audit firms, law firms and assets assessment authorities shall, as investing entities, invest into other
industries to establish companies.

Article 22

Legal persons may jointly invest to establish companies and shall not be subject to the restrictions of existence or inexistence of
property rights.

Article 23

Where family members jointly invest to establish a limited liability company, they shall take their self-owned properties as registered
capital, and shall respectively bear their corresponding liabilities, and when undertaking registration, a written certification
or agreement on partition of properties shall be submitted.

Article 24

A legal representative of an enterprise legal person shall not become a shareholder of the limited liability company established with
the investment made by the enterprise in which he holds a post.

Article 25

Except as otherwise provided by laws or administrative regulations, the investment ratio of a shareholder of a limited liability company
shall, in principle, not be subject to any restrictions; however, where laws are obviously sidestepped with the result of establishing
a sole-investor company in a disguised form, the company registration authority shall not grant the registration.

Article 26

The director or manager of a company shall not concurrently serve as the director or manager of a company in the same industry that
has no investment relationship with the company in which he holds a post.

Article 27

A person other than a shareholder may be elected or engaged as the director or manager.

Article 28

A limited liability company with a small number of shareholders or in a small size shall not have a board of directors, which shall
be stipulated by the articles of association of the company.

Article 29

When a joint stock limited company is to be established, the “Financial Auditing Report on Preparing for the Establishment of a Company”
submitted to the company registration authority shall be the auditing report on the expenditures for the establishment of the company
submitted by the sponsor and adopted upon deliberation by the inaugural meeting of the company.

Article 30

When an announcement concerning the registration of establishment, modification or cancellation of a company is to be published, it
shall be clearly stated that the basis on which the company is registered is the Company Law and the Regulations Governing the Registration
of Companies.

Article 31

After the term of business of a company has expired, where the term needs to be extended or the business needs to be terminated, modification
of registration or cancellation of registration shall be undertaken. Where the term of business is exceeded but no modification of
registration or cancellation of registration is undertaken, the company shall be punished in accordance with Article 63 and Article
66 of the Regulations Governing the Registration of Companies respectively.

Article 32

Where a company establishes a branch without authorization, it shall be ordered to make corrections; where there any illegal earnings,
a fine of not more than three times the illegal earnings shall be imposed, but the maximum of the fine shall not exceed 30,000 yuan;
where there are no illegal earnings, a fine of not more than 10,000 yuan shall be imposed.

Article 33

Where a branch violates the regulations on administration of company registration, if there are any illegal earnings, a fine of not
more than three times the illegal earnings shall be imposed, but the maximum of the fine shall not exceed 30,000 yuan; where there
are no illegal earnings, a fine of not more than 10,000 yuan shall be imposed. Where the business license of a branch is forged,
altered, leased, lent or transferred, or the business license of a branch is not placed in an eye-catching position at its domicile,
it shall be punished in accordance with the provisions of Article 69 and Article 70 of the Regulations Governing the Registration
of Companies respectively.

Article 34

Where the registration is cancelled or the business license is revoked in accordance with the provisions of Articles 58 and 59 of
the Regulations Governing the Registration of Companies, the company shall have no qualifications for a legal person from the beginning.

Article 35

These Provisions shall enter into force as of February 1, 1998. The Opinions on Certain Issues Concerning the Implementation of the
Regulations of the People’s Republic of China Governing the Registration of Companies (Gongshangqizi [1994] No. 185) and the Reply
and Opinions on Several Specific Issues Concerning Administration of the Registration of Companies (Gongshangqizi [1995] No.303)
promulgated by the State Administration for Industry and Commerce shall be nullified simultaneously.

The State Administration for Industry and Commerce
1998-01-07

MEASURES FOR SECURITY PROTECTION ADMINISTRATION OF THE INTERNATIONAL NETWORKING OF COMPUTER INFORMATION NETWORKS

Category	PUBLIC SECURITY	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1997-12-16	Effective Date	1997-12-30

Measures for Security Protection Administration of the International Networking of Computer Information Networks

Chapter I  General Provisions
Chapter II  Security Protection Liability
Chapter III  Security Supervision
Chapter IV  Legal Liability
Chapter V  Supplementary Provisions

(Approved by the State Council on December 11, 1997 and promulgated by

Decree No. 33 of the Ministry of Public Security on December 16, 1997)
Chapter I  General Provisions

Article 1 These Measures are formulated in accordance with the provisions
of the Regulations of the People’s Republic of China for the Security
Protection of Computer Information Systems, Interim Provisions of the
People’s Republic of China on the Administration of the Internattional
Networking of Computer Information Networks and other laws and administrative
regulations with a view to strengthening the security protection of the
Internattional networking of computer information networks and maintaining
public order and social stability.

Article 2 These Measures shall be applicable to the security protection
administration of the internattional networking of computer information
networks within the territory of the People’s Republic of China.

Article 3 The agency of computer administration and supervision under
the Ministry of Public Security shall be responsible for the work of security protection administration of the internattional networking
of computer information networks.

Agencies of computer administration and supervision of public security
organs should protect the public security of the internattional networking of computer information networks and safeguard the legitimate
rights and
interests of units and individuals engaging in international networking
businesses and public interest.

Article 4 No unit or individual shall use the international networking
to endanger state security, divulge state secrets, nor shall it/he/she
infringe on national, social and collective interests and the legitimate
rights and interests of citizens, nor shall it/he/she engage in illegal
criminal activities.

Article 5 No unit or individual shall use the international networking
to produce, duplicate, search and disseminate the following information:

(1)information that instigates the resistance and disruption of the
implementation of the Constitution, laws and administrative regulations;

(2)information that instigates the subversion of the state political
power and overthrow of the socialist system;

(3)information that instigates the splitting up of the country and
sabotage of national unity;

(4)information that instigates hatred and discrimination among
nationalities and sabotages solidarity among nationalities;

(5)information that fabricates or distorts facts, spreads rumours and
disrupts social order;

(6)information that propagates feudalistic superstitutions, obscenity,
pornorgraphy, gambling, violence, murder and terror and instigates crimes;

(7)information that openly insults others or fabricates facts to slander
others;

(8)information that damages the reputation of state organs; and

(9)other information that violates the Constitution, laws and
administrative regulations.

Article 6 No unit or individual shall engage in the following activities
endangering the security of computer information networks:

(1)access to computer information networks or use of computer information
network resources without permission;

(2)deletion, revision or addition of computer information network
functions without permission;

(3)deletion, revision or addition of the data and applied procedures in
memory, processing or transmission in computer information networks without
permission;

(4)deliberate production and spread of computer viruses and other
disruptive programs;

(5)other activities that endanger computer information network security.

Article 7 Users’ freedom of communication and communications secrecy
are protected by law. No unit or individual shall use the internattional
networking to infringe on users’ freedom of communication and communications
secrecy in violation of the provisions of law.
Chapter II Security Protection Liability

Article 8 Units and individuals engaging in the international networking
businesses should accept security supervision, inspection and guidance of
public security organs, truthfully provide relevant information, materials
and documents on data to public security organs, and assist public security
organs in investigating and handling illegal criminal acts through
international networking of computer information networks.

Article 9 Supply units of international exit and entry channels, the
competent departments or the competent units of internetworking units should,
in pursuance of the relevant provisions of law and the state, be responsible
for the work of security protection of international exit and entry channels
and the subordinate internetworking.

Article 10 Internetworking units, receiving units and legal persons
and other organizations that use the internattional networking of computer
information networks should fulfil the following security protection
responsibilities:

(1)to be responsible for the work of security protection administration
of the network and establish and perfect rules for security protection
administration.

(2)to implement technical measures for security protection to ensure the
operational security and information security of the network;

(3)to be responsible for the security education and training of the users
of the network;

(4)to register the units and individuals that entrust it to publish
information and carry out scrutiny of the contents of the information provided
in accordance with Article 5 of these Measures;

(5)to establish user registration and information management system of computer information network electronic
announcement system;

(6)to preserve the relevant original records upon discovery of any of the
circumstances listed in Articles 4, 5, 6 and 7 of these Measures and report
to the local public security organ within 24 hours; and

(7)to delete the addresses and contents in the network containing
contents of Article 5 of these Measures or close down the server in pursuance
of relevant provisions of the state.

Article 11 A user should fill in the user record form when going through
the formalities of access to the network at the receiving unit. The record
form shall be made under the supervision of the Ministry of Public Security.

Article 12 Internetworking units, receiving units, legal persons and
other organizations that use the internattional networking of computer
information networks(including cross-province, cross-autonomous region and
cross-municipality directly under the Central Government internetworking units
and their susbordinate branches) should, within 30 days starting from the date
of formal hooking up of the network, go through the formalities for the record
at the processing agencies designated by the public security organs of
people’s governments of the provinces, autonomous regions and municipalities
directly under the Central Government wherein the units are located.

The units listed in the preceding paragraph shall be responsible to
report the information on the receiving units and users hooked up to the
network to local public security organs and report in time changes in the
receiving units and users of the network.

Article 13 Registrants that use public account numbers should strengthen
the management of the public account numbers and establish the registration
system of account number use. No user account number shall be lended or
transferred.

Article 14 The units involving such important fields as state affairs,
economic construction, national defense construction, highly sophisticated
science and technology and others shall, while going through the formalities
for the record, present the proof of examination and approval of its competent
administrative department.

Corresponding security protection measures shall be taken in the computer
information networks and international networking of units listed in the
preceding paragraph.
Chapter III Security Supervision

Article 15 Public security departments(bureaus) of the provinces,
autonomous regions and municipalities directly under the Central Government
should have correspondidng agencies to be responsible of the work of security
protection administration of international networking.

Article 16 Computer administration and supervision agencies of public
security organs should keep themselves abreast of the record information of the networking units, receiving units and users, establish
record files,
make record statistics and report level by level in accordance with relevant
state provisions.

Article 17 Computer administration and supervision agencies of public
security organs should supervise and urge the networking units, receiving
units and relevant users to establish and perfect the security protection
administration system, supervise and inspect the state of implementation of network security protection administration and the technical
measures.

While computer administration and supervision agencies of public security
organs organize security inspections, the units concerned should despatch
persons to participate. Computer administration and supervision agencies of public security organs should come up with suggestions
for improvement
with respect to problems discovered in security inspections and make
detailed minutes for the file for future reference.

Article 18 Computer administration and supervision agencies of public
security organs should notify the units concerned to close down or delete
them on the discoery of the addresses, contents or servers listed in Article 5
of these Measures.

Article 19 Computer administration and supervision agencies of public
security organs should be responsible to keep track of and investigate and
handle the illegal acts through computer information networks and criminal
cases directed against computer information networks, and should transfer
the cases to the departments concerned or the judicial organs for handling
in pursuance of relevant state provisions with respect to illegal criminal
acts stipulated in Article 4 and Article 7 of these Measures.
Chapter IV Legal Liability

Article 20 Whoever commits any of the acts listed in Articles 5 and 6
of these Measures in violation of laws and administrative regulations shall
be administered a warning by the public security organ; where there is illegal
gains, the illegal gains shall be confisticated, a fine of less than RMB
5,000 Yuan may concurrently be imposed on an individual and a fine of less
than RMB 15,000 Yuan may concurrently be imposed on a unit; where the
circumstances are serious, the penalty of suspension of networking and
computers for consolidation within 6 months may concurrently be imposed,
and when necessary a proposal may be sent to the original licensing,
examination and approval authority to revoke the business license or
nullify the networking qualifications; where acts in violation of public
security administration has been constituted, penalties shall be imposed
in pursuance of the regulations for public security administration penalties;
where a crime has been constituted, criminal liability shall be investigated
in accordance with law.

Article 21 Whoever commits any of the following acts shall be ordered
by the public security organ to make a rectification within the specified
time period, administered a warning and confisticated of the illegal gains
where there is illegal gains; where no rectification has been made within
the specified time period, the person-in-charge and other persons directly
responsible of the unit may be imposed a fine of less than RMB 5,000 Yuan,
and a fine of less than RMB 15,000 Yuan may concurrently be imposed on the
unit; where the circumstances are serious, the penalty of suspension of networking and shutting down of computers for consolidation
within 6 months
may be imposed, when necessary a proposal may be sent to the original
licensing, examination and approval authority to revoke the business license
or nullify the networking qualifications.

(1)failure to establish rules for security protection administration;

(2)failure to take technical protective measures for security;

(3)failure to conduct security education and training of network users;

(4)failure to provide information, materials and data documents required
for security protection administration or the contents provided are untrue;

(5)failure to carry out scrutiny of the contents of the information
entrusted for publication or failure to register the entrusting units or
individuals;

(6)failure to establish user registration and information management
system for electronic announcement systems;

(7)failure to delete the website addresses, contents or shut down the
servers in pursuance of relevant state provisions;

(8)failure to establish the registration system for the use of public
account numbers; and

(9)lending and transfer of user account numbers.

Article 22 Whoever violates the provisions of Articles 4 and 7 of these
Measures shall be imposed a penalty in pursuance of the relevant laws and
regulations.

Article 23 Whoever fails to fulfil the responsibilities of putting
on record in violation of the provisions of Articles 11 and 12 of these
Measures shall be administered a warning or imposed a penalty of shutting
down the computers for consolidation not exceeding 6 months by the public
security organ.
Chapter V Supplementary Provisions

Article 24 Security protection administration of computer information
networks hooked up with the Hong Kong Special Administrative Regions and
the regions of Taiwan and Macau shall be implemented with reference to
these Measures.

Article 25 These Measures shall enter into force as of December 30, 1997.

INTERIM MEASURES FOR THE ADMINISTRATION OF SECURITIES INVESTMENT FUNDS

Category	SECURITIES	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1997-11-14	Effective Date	1997-11-14

Interim Measures for the Administration of Securities Investment Funds

Chapter I  General Provisions
Chapter II  Fund Establishment, Raising and Transactions
Chapter III  The Fund Trustee and the Fund Administrator
Chapter IV  Fund Holders’ Rights and Obligations
Chapter V  Investment Operations, Supervision and Administration
Chapter VI  Penalty Provisions
Chapter VII  Supplementary Provisions

(Approved by the State Council on November 5, 1997 and promulgated by

the Securities Commission under the State Council on November 14, 1997)
Chapter I  General Provisions

Article 1 These Measures are formulated with a view to strengthening the
administration of securities investment funds, protecting the legitimate
rights and interests of the parties interested and promoting sound and
steady development of the securities market.

Article 2 The securities investment funds (hereinafter referred to as
the funds) referred to in these Measures mean an interest-sharing,
risk-sharing collective securities investment mode, namely concentration of
investors’ funds through fund issuing units under the trusteeship of the
fund trustees, funds administered and employed by fund administrators
for engaging in investment in such financial tools as stocks and bonds.

Article 3 Fund assets shall be independent of the assets of the fund
trustees and fund administrators.

Article 4 Whoever engages in fund operations and natural persons, legal
persons and other organizations related to such operations within the
territory of China shall abide by these Measures.
Chapter II Fund Establishment, Raising and Transactions

Article 5 Establishment of a fund shall be subject to the examination
and approval of China Securities Supervisory and Control Commission
(hereinafter referred to as CSSCC).

Article 6 A fund sponsor may apply for the establishment of an open
fund or may apply for the establishment of a closed fund.

Article 7 The following terms shall be met for an application for the
establishment of a fund:

(1) its main sponsors are securities firms, trust and investment companies
and fund administering companies established in accordance with relevant
state provisions;

(2) the actual capital of each sponsor shall not be less than RMB 300
million Yuan, and the main sponsors shall have experiences in securities
investment and a record of consecutive profits for over three years. However,
the fund administering companies are excluded;

(3) the sponsors, fund trustees and fund administrators shall have sound
organizational institutions and management system with good financial status
and standardized acts of operations;

(4) the fund trustees and fund administrators shall have a site for
business operations, facilities for security and precaution and other
business-related facilities commensurate with requirements; and

(5) other terms prescribed by CSSCC.

An applicant for the establishment of an open fund must also be able to
ensure in qualified personnel and technical facilities the announcement at
least once a week for the investors with respect to the net value of the fund
assets and the bid price and the redemption price.

Article 8 A fund sponsor applying for the establishment of a fund shall
present the following documents to CSSCC:

(1) an application report;

(2) a list of sponsors and the agreement;

(3) the fund deed and the trusteeship agreement;

(4) the prospectus;

(5) in the case of a securities company or a trust and investment
company serving as the sponsor, financial reports of the sponsor in
the past three years audited by an accountant firm;

(6) legal opinion letter issued by a law firm;

(7) a fund-raising proposal; and

(8) other documents the presentation of which is required by CSSCC.

The contents and formats of the fund deed, trusteeship agreement and
prospectus of the preceding paragraph shall be prescribed by CSSCC.

Article 9 The percentage of the fund sponsors’ subscription of fund
units in the total amount of the fund and the percentage of holding fund
units in the total amount of the fund during the fund’s existence shall be
determined by CSSCC.

Article 10 The existence of a closed fund shall not be less than five
years and the minimum amount raised shall not be less than RMB 200 million
Yuan.

Article 11 Expansion of fund-raising and extension of a closed fund
shall have the following qualifications and be subject to the examination
and approval of CSSCC:

(1) annual rate of returns is higher than the average rate of returns
nationwide;

(2) the fund trustee and the fund administrator have committed no major
acts in violation of laws and regulations in the past three years;

(3) the fund holders’ meeting and the fund trustee’s agreement on the
expansion of fund-raising or extension; and

(4) other qualifications prescribed by CSSCC.

Relevant documents shall be presented in accordance with the requirements
of CSSCC for application for expansion of fund-raising or extension.

Article 12 The fund sponsors shall, three days prior to the fund-raising,
publish the prospectus in the newspaper designated by CSSCC.

Article 13 The duration of fund-raising of a closed fund shall be three
months, which is to be calculated from the date of approval of the said
fund. A closed fund can only be established when the fund raised within
three months from the date of approval of the said fund exceeds 80% of the
approved scale of the said fund. An open fund can only be established
when the net sales within three months from the date of approval of the
said fund exceed RMB 200 million Yuan.

A closed fund shall not be established when the fund raised is less than
80% of the approved scale of the said fund on expiry of the duration of
fund-raising of the said fund. An open fund shall not be established when
the net sales within three months from the date of approval of the said fund
are less than RMB 200 million Yuan. The fund sponsors must bear expenses for
the fund-raising and the fund raised with additional calculation of bank
current deposit interest must be refunded to fund subscribers within 30 days.

Article 14 Bidding and redemption of an open fund can only be conducted
in sites in conformity with the state provisions.

The fund administrator and the fund trustee may, upon establishment of
a closed fund, apply to CSSCC and securities exchanges for listing of the
fund. Rules for fund listing shall be formulated by securities exchanges
and submitted to CSSCC for approval.
Chapter III The Fund Trustee and the Fund Administrator

Article 15 The fund established upon approval shall entrust a commercial
bank as the fund trustee for trusteeship of the fund assets and entrust a
fund administering company as the fund administrator for administration and
employment of the fund assets.

Article 16 The fund trustee must be subject to the examination and
approval of CSSCC and the People’s Bank of China.

Article 17 The fund trustee and the fund administrator shall be
independent of each other administratively and financially, and their
high-ranking administrative staff shall not take up concurrent positions
of the other party.

Article 18 The fund trustee shall have the following qualifications:

(1) has a special fund trusteeship department;

(2) has an actual capital not less than RMB 8 billion Yuan;

(3) has adequate specialized staff conversant with trusteeship business;

(4) has facilities for the safekeeping of the total assets of the fund; and

(5) has capabilities of secure and high-efficiency settlement and
delivery.

Article 19 The fund trustee shall fulfil the following functions and
responsibilities:

(1) safekeeping of the total assets of the fund;

(2) execution of the investment directives of the fund administrator and
responsibility for the handling of fund transactions under the name of the
fund;

(3) supervision over the investment operations of the fund administrator,
non-execution of the investment directives in violation of laws and
regulations upon discovery and a report submitted to CSSCC;

(4) reverification and examination of the net value of the fund assets
and the fund price calculated by the fund administrator;

(5) safekeeping of the account books and records of the fund for more
than 15 years;

(6) issuance of a report on the achievements of the fund, provision of
information on the fund trusteeship and a report submitted to CSSCC and the
People’s Bank of China; and

(7) other functions and responsibilities prescribed by the fund deed and
the trusteeship agreement.

Article 20 The fund trustee must strictly separate the fund assets
under its trusteeship from the fund trustee’s own assets, establish separate
accounts for different funds and conduct the administration according to
separate accounts.

Article 21 The fund trustee having any of the following circumstances
must, upon approval of CSSCC and the People’s Bank of China, retire from
office:

(1) disbandment of the fund trustee, revocation and bankruptcy in
accordance with law or its assets taken over by the person taking over;

(2) the fund administrator has ample reasons to hold that change of
the fund trustee is in the interests of the fund holders;

(3) fund holders representing over 50% of the fund units demand the
retirement from office of the fund trustee; and

(4) the People’s Bank of China has ample reasons to hold that the fund
trustee is unable to continue to fulfil the functions and responsibilities
of fund trusteeship.

Article 22 The new fund trustee shall be subject to the examination and
approval of CSSCC and the People’s Bank of China; upon approval, the former
fund trustee may retire from office. The fund under the trusteeship of the
former fund trustee without being taken over by a new fund trustee shall
terminate.

Article 23 An application for the establishment of a fund administering
company shall be subject to the examination and approval of CSSCC.

Article 24 Establishment of a fund administering company shall have
the following qualifications:

(1) the main sponsors shall be a securities company and a trust and
investment company established in accordance with relevant state provisions;

(2) the operating status of the main sponsors has been good with
consecutive profits in the last three years;

(3) the actual capital of each sponsor shall be no less than RMB 300
million Yuan;

(4) the minimum actual capital of the fund administering company proposed
to be established shall be RMB 10 million Yuan;

(5) has a clear-cut and feasible fund administration plan;

(6) has qualified personnel for fund administration; and

(7) other qualifications prescribed by CSSCC.

Relevant documents shall be presented in accordance with the requirements
of CSSCC for an application for the establishment of a fund administering
company.

Article 25 A fund administering company may, upon approval, engage in
the following businesses:

(1) business of fund administration; and

(2) sponsorship for the establishment of funds.

Article 26 A fund administrator shall fulfil the following functions
and responsibilities:

(1) employment of the fund assets in investment and administration of the
fund assets in accordance with the fund deed;

(2) payment of fund benefits to the fund holders in time and in full
amount;

(3) safekeeping of the account books and records of the fund for more
than 15 years;

(4) compilation of the financial report of the fund, making an
announcement in time and submitting a report to CSSCC;

(5) calculation and announcement of the net value of the fund and the
net value of each fund unit asset; and

(6) other functions and responsibilities prescribed by the fund deed.

The administrator of an open fund shall also, in accordance with the
relevant state provisions and the provisions of the fund deed, handle
timely and accurately the bidding and redemption of the fund.

Article 27 The fund administrator having any of the following
circumstances must retire from office upon approval of CSSCC:

(1) disbandment of the fund administrator, revocation and bankruptcy in
accordance with law or its assets being taken over by the person taking over;

(2) the fund trustee has ample reasons to hold that change of the fund
administrator is in the interests of the fund holders;

(3) the fund holders representing more than 50% of the fund units demand
the retirement from office of the fund administrator; and

(4) CSSCC has ample reasons to believe that the fund administrator is
unable to continue to fulfil the functions and responsibilities of fund
administration.

Article 28 The new fund administrator shall be subject to the examination
and approval of CSSCC; upon approval, the former fund administrator may
retire from office. The fund under the administration of the former fund
administrator without being taken over by a new fund administrator shall
terminate.
Chapter IV Fund Holders’ Rights and Obligations

Article 29 Fund holders have the following rights:

(1) to attend or to entrust a representative to attend the fund holders’
meeting;

(2) to obtain fund benefits;

(3) to oversee the fund management and obtain information on the status
of the fund business and finances;

(4) to bid, redeem or transfer fund units;

(5) to obtain the surplus assets of the fund after settlements; and

(6) other rights provided for in the fund deed.

Article 30 A fund holders’ meeting shall be convened in the event of
any of the following circumstances:

(1) revision of the fund deed;

(2) termination of the fund ahead of time;

(3) change of the fund trustee;

(4) change of the fund administrator; and

(5) other circumstances prescribed by CSSCC.

Matters of the preceding paragraph shall, upon resolutions being adopted
by the fund holders’ meeting, be subject to the approval of CSSCC.

Article 31 Fund holders shall fulfil the following obligations:

(1) to abide by the fund deed;

(2) to pay the amount subscribed to the fund and the prescribed fees;

(3) to bear limited liabilities for the losses or termination of the fund;
and

(4) not to engage in any activity detrimental to the interests of the
fund and other fund holders.
Chapter V Investment Operations, Supervision and Administration

Article 32 Prior to the establishment of a fund, the amount subscribed by
the investors shall only be deposited in a commercial bank and shall not
be used.

Article 33 The investment combination of a fund shall conform to the
following provisions:

(1) the percentage of investment in stocks and bonds of a fund shall not
be less than 80% of the total value of the assets of the said fund;

(2) the stocks of a listed company held by a fund shall not exceed 10%
of the net value of the assets of the said fund;

(3) the securities distributed by a company held by the entire fund under
the administration of the same fund administrator shall not exceed 10% of
the said securities;

(4) the percentage of investment in state bonds by a fund shall not be
less than 20% of the net value of the assets of the said fund; and

(5) other restrictions on percentage provided for by CSSCC.

Article 34 Engagement in the following acts shall be prohibited:

(1) mutual investment among funds;

(2) engagement by fund trustees and commercial banks in fund investment;

(3) buying and selling of securities by fund administrators in the name of
funds by using funds not under the name of the funds;

(4) engagement by fund administrators in any form in underwriting
securities or engagement in other independently operated business of
securities in addition to state bonds;

(5) engagement by fund administrators in call loan business;

(6) engagement in fund investment by using bank credit funds;

(7) fund scalping by state-owned enterprises in violation of relevant
state provisions;

(8) fund assets used for mortgage, guarantee, call loans or loans;

(9) engagement in securities credit transactions;

(10) engagement in real estate investment with fund assets;

(11) engagement in investment which might cause the fund assets to bear
unlimited liabilities;

(12) investment of fund assets in securities distributed by companies
having relations of interests with the fund trustees or fund administrators;
and

(13) other acts prohibited by the provisions of CSSCC.

Article 35 An open fund must keep adequate cash or state bonds to pay
for the redemption.

Article 36 The trusteeship fee of fund trustees, the remuneration
for fund administrators and other expenses which may be deducted from
the fund assets shall be handled pursuant to the relevant state provisions
and made clear in the fund deeds and trusteeship agreements.

Article 37 Fund trustees and fund administrators shall implement the
financial accounting rules of the State and pay taxes in accordance with law.

Article 38 Distribution of fund benefits shall take the form of cash
at least once a year. The percentage of distribution of fund benefits shall
not be less than 90% of the net returns of the fund.

Article 39 CSSCC and the People’s Bank of China shall, pursuant to
their respective functions and powers, carry out inspection and audit
from time to time over fund-raising, transactions, investment operations and
related business activities and financial and accounting material. Fund
trustees, fund administrators and related agencies and personnel shall
provide the relevant information and material in time and shall not refuse
and obstruct.

Article 40 A fund shall terminate in the event of any of the following
circumstances:

(1) expiry of the duration of closure of a fund and extension has not
been approved;

(2) approval has been granted for the termination of a fund ahead of time;
and

(3) a fund which has been ordered by CSSCC to terminate due to major acts
in violation of laws and regulations.

Article 41 A settlement team must be formed to carry out settlement of
the fund assets at the time of termination of a fund; the settlement results
shall be submitted to CSSCC for approval and announced.

CSSCC shall oversee the settlement process of a fund.

Article 42 All surplus assets after settlement of a fund shall be
distributed to fund holders according to the percentage of the fund units
held by the fund holders in the fund assets.
Chapter VI Penalty Provisions

Article 43 Whoever establishes, raises or raises in disguised form a fund
on one’s own without approval shall be banned by CSSCC and ordered to refund
the funds raised as well as their interests; where there are illegal gains,
they shall be confiscated, and a fine more than 100% less than ten times
of the amount of the illegal gains concurrently imposed; where there are no
illegal gains, a fine under RMB 1 million Yuan shall be imposed.

Article 44 Whoever lists for trading of a fund on one’s own without
approval shall be ordered by CSSCC to stop the trading and imposed a fine
under RMB 1 million Yuan.

Article 45 Whoever establishes a fund administering company on one’s own
or engages in business of fund administration on one’s own without
approval shall be banned by CSSCC; where there are illegal gains, they
shall be confiscated and a fine more than 100% less than ten
times of the amount of the illegal gains concurrently imposed; where there are
no illegal gains, a fine under RMB 1 million Yuan shall be imposed.

Article 46 Whoever engages in fund trusteeship business on one’s own
without approval shall be ordered to stop the fund trusteeship business,
the illegal gains shall be confiscated and a fine under RMB 500,000 Yuan
concurrently imposed.

The fund trustee who fails to separate the fund assets under its
trusteeship from the trustee’s own assets in accordance with provisions,
or fails to conduct separate-account administration of the fund assets
shall be ordered to make a rectification, his/her illegal gains shall be
confiscated and concurrently imposed a fine more than 100% less than
five times of the amount of the illegal gains.

Article 47 Any fund administrator who violates the provisions of Article
32 of these Measures shall be ordered to make a rectification; where there
are illegal gains, they shall be confiscated and a fine more than 100% less
than five times the amount of the illegal gains shall be concurrently imposed;
where there are no illegal gains, a fine of less than RMB 500,000 Yuan shall
be imposed.

Article 48 Any fund administrator who violates the provisions of Article
33 of these Measures shall be ordered by CSSCC to make a rectification;
where there are illegal gains, they shall be confiscated and a fine more
than 100% less than three times of the amount of the illegal gains shall be
concurrently imposed; where there are no illegal gains, a fine of under RMB
300,000 Yuan shall be imposed.

Article 49 Whoever has committed any of the acts listed in Article
34 of these Measures shall be ordered to make a rectification; where there are
illegal gains, they shall be confiscated and a fine more than 100% less than
five times of the amount of the illegal gains shall be concurrently imposed;
where there are no illegal gains, a fine of under RMB 500,000 Yuan shall be
imposed.

Article 50 Any fund administrator or fund trustee who indulges in
self-seeking misconduct, operates in violation of regulations and fails to
perform its functions and responsibilities in fund administration or fund
trusteeship, or seriously neglects its duties resulting in bad fund
management or major losses, shall be suspended and revoked of its fund
administration business qualifications or fund trusteeship business
qualifications in addition to penalty according to law.

Article 51 Any fund administrator or fund trustee who, in violation of
the provisions of Article 39 of these Measures, fails to provide or delays
in providing relevant information and material, or refuses and hinders
inspection and audit conducted according to law shall be ordered
to make a rectification, administered a warning and concurrently imposed
a fine of under RMB 50,000 Yuan.

Article 52 Decisions on penalties prescribed in Articles 46, 47, 49, 50
and 51 of these Measures shall be made by CSSCC and the People’s Bank of
China pursuant to their respective functions and powers; however, no more
than two penalties shall be imposed with respect to the same illegal act.

Article 53 Whoever commits the securities fraudulent acts of
manipulating the market price, inside trading or false statement shall be
imposed penalties by CSSCC in accordance with law.

Article 54 The person-in-charge held directly responsible and other
persons directly responsible in violation of the provisions of these Measures,
shall be temporarily suspended and revoked of its qualifications for
operations in addition to imposing administrative sanctions according to law.

Whoever causes losses to others in violation of the provisions of these
Measures shall bear civil liability for compensation.

Whoever constitutes a crime in violation of the provisions of these
Measures shall be investigated of the criminal liability.
Chapter VII Supplementary Provisions

Article 55 The implications of the following terms in these Measures
are:

(1) “Fund unit” means the voucher the fund sponsor issues to unspecified
investors indicating that the holder has asset ownership and right of
distribution of benefits of the fund and other related rights and assumes
corresponding obligations.

(2) “An open fund” means a fund that the total amount of its fund issuance
is not fixed, that the total number of fund units increases or decreases from
time to time, that investors may bid or redeem the fund unit in accordance
with the offering of the fund at business sites prescribed by the State.

(3) “A closed fund” means a fund the total amount of its issuance is
predetermined, the total number of fund units during closure remains
unchanged and investors may transfer or buy and sell its fund units through
securities markets after the fund is listed.

(4) “Total value of fund assets” includes the aggregate of the value of
all types of securities purchased by the fund, the principal and interests of
bank deposits as well as the value formed by other investments.

(5) “Net value of fund assets” means the value of the total value of fund
assets minus the expenses which may be deducted from the fund assets pursuant
to relevant state provisions.

(6) “Net value of fund assets per unit” means the value of the net value
of fund assets on the date of calculation divided by the total number of
fund units on the date of calculation.

(7) “Returns on the fund” include dividends, share interests,
bond interests acquired through fund investment, difference in the buying
and selling price of securities, interests from deposits as well as other
revenues.

(8) “Net returns on the fund” mean the balance of returns on the fund
minus the expenses which may be deducted from the returns on the fund
pursuant to relevant state provisions.

&nbs

REGULATIONS OF SHANGHAI MUNICIPALITY ON RESIDENTIAL PROPERTY MANAGEMENT

Regulations of Shanghai Municipality on Residential Property MANAGEMENT

(Effective Date:1997.07.01–Ineffective Date:)

CHAPTER I GENERAL PROVISIONS CHAPTER II PROPRIETORS’ AUTONOMOUS MANAGEMENT CHAPTER III PROPERTY MANAGEMENT SERVICES CHAPTER IV THE
USE OF PROPERTY CHAPTER V THE MAINTENANCE OF PROPERTY CHAPTER VI FIRST-PHASE PROPERTY MANAGEMENT CHAPTER VII COMPLAINTS CHAPTER VIII
LEGAL LIABILITIES CHAPTER IX SUPPLEMENTARY PROVISIONS

Article 1 With a view to standardizing the use and maintenance of residential property and other management services in this municipality,
protecting the legitimate rights and interests of the proprietors, house users and property management enterprises, and creating
and maintaining a neat, safe and comfortable living environment, the present Regulations are formulated in accordance with the relevant
state laws and regulations, and in line with the actual circumstances of this municipality.

Article 2 The present Regulations apply to the residential property management within the administrative area of this municipality.

Article 3 The residential property (hereinafter referred to as property) specified in the present Regulations refers to the residential buildings
and relevant public facilities.

The proprietors specified in the present Regulations refer to those who own the property.

The users specified in the present Regulations refer to the lessees of the property and those other persons who actually use the property.

The property management enterprises specified in the present Regulations refer to those which, entrusted by proprietors or proprietors
committees, perform professional management services in accordance with the property management and service contracts.

Article 4 Property management shall follow the principle of combining the autonomous management of proprietors with entrusted professional
management services of property management enterprises.

Article 5 Shanghai Municipal Housing and Land Administration Bureau (hereinafter referred to as the Municipal Housing and Land Administrate
on Bureau) shall be the competent authority of this municipality responsible for organizing the enforcement of the present Regulations.

The property management departments at district or county level shall be the administrative departments within their own areas in
charge of the administration and supervision of the property management in accordance with the present Regulations.

Administrative departments of construction, planning, municipal administration, public utilities, power, post and telecommunication,
environment sanitation, landscape gardening, housing, public security, price control, and industry and commerce shall coordinate
in the enforcement of the present Regulations in accordance with their own responsibilities.

Subdistrict offices and township people’s governments shall assist relevant administrative departments with supervision of property
management and coordination of the mutual relations between property management and community management and services.

CHAPTER II PROPRIETORS’ AUTONOMOUS MANAGEMENT

Article 6 The proprietors committee is an organization which represents all the proprietors in property management within its property management
area.

Only one proprietors committee shall be set up within one property management area.

The size of a property management area shall be determined by the district or county housing and land administrative departments in
accordance with the relevant conditions of residence and public facilities.

Article 7 The proprietors committee shall be elected by the proprietors meeting or by the proprietors’ representatives meeting. Members of
the proprietors committee shall be chosen from the proprietors.

When one of the following situations exists within the property management area, the district or county property management departments
concerned shall work jointly with residence-selling units to organize and hold the first proprietors meeting or the proprietors’
representatives meeting so as to establish the proprietors committee through election:

1. More than 30% of the floor area of the publicly-owned residential buildings are sold;

2. More than 50% of the floor area of the newly-built commodity residential buildings are sold;

3. The residential buildings have been sold for two years already.

Article 8 The proprietors meeting shall be composed of all the proprietors within the property management area; the proprietors’ representatives
meeting shall be formed through proportional election when the proprietors within the property management area are great in number.

The proprietors meeting or the proprietors’ representatives meeting shall be attended by more than half of the proprietors or proprietors’
representatives. The decisions made by the proprietors meeting or the proprietors’ representatives meeting shall be approved by more
than half of the proprietors or by more than half of their representatives.

The proprietors committee shall convene the proprietors meeting or the proprietors’ representative meeting at least once a year and
shall, at the proposal made by more than 15% of the proprietors, or 15% of their representatives, convene the proprietors meeting
or the proprietors’ representatives meeting to discuss the proposals raised.

The proprietors meeting or the proprietors’ representatives meeting shall invite representatives from among the neighborhood committee
and house users to attend the meeting as non-voting delegates.

Article 9 The proprietors meeting or the proprietors’ representatives meeting shall exercise the following functions and powers:

1. Elect or recall the members of the proprietors committee;

2. Examine and approve the regulations of the proprietors committee and proprietors’ joint pledge;

3. Listen to, examine and approve the work reports on property management services supplied;

4. Make decisions on other major items concerning property management.

Article 10 The proprietors committee shall, within 15 days after its election, register at the district or county property management departments
concerned with the following documents:

1. Application for the registration of the established proprietors committee;

2. the list of member of the proprietors committee;

3. the regulations of the proprietors committee.

The district or county property management departments shall complete the registration within 15 days after receipt of the registration
application, and shall reject the application and inform the applicants in written form if the establishment of the proprietors committee
does not conform to the provisions of the present Regulations.

Article 11 The proprietors committee shall be composed of 5 to 15 members according to the size of the property management area.

The chairman and vice-chairmen of the proprietors committee shall be chosen from among the committee members.

The term of the proprietors committee shall be two years.

Article 12 The proprietors committee shall protect the legitimate rights and interests of all the proprietors and perform the following duties:

1. Convene the proprietors meeting or the proprietors’ representatives meeting and report implementation of property management within
the area;

2. Engage or discharge property management enterprises, and make, alter, or cancel property management contracts signed with property
management enterprises;

3. Be responsible for the raising, use, and management of the property maintenance fund that has been established in accordance with
the present Regulations;

4. Examine and determine the annual plan, budget, and final accounts of property management services put forward by the property management
enterprise;

5. Listen to complaints and suggestions of the proprietors and house users, and supervise management services conducted by the property
management enterprise;

6. Supervise the proper use of public buildings and facilities;

7. Perform other responsibilities delegated by the proprietors or the proprietors’ representatives meeting.

The proprietors committee shall hold meeting regularly which shall be effective only when more than half of the committee members
attend, and decisions shall be made by more than half of the committee member voting for the decisions.

Article 13 Residence-selling units shall provide the property management area with necessary houses for property management services in accordance
with relevant stipulations, and the ownership of there houses shall belong to all the proprietors; the profit gained from the houses
used for property management services shall be spent to cover working expenses of the proprietors committee and replenish the property
maintenance fund. Detailed measures be worked out by the Municipal People’s Government.

Article 14 The proprietors group shall be formed by several representatives chosen from among the proprietors in the residential building, and
its shall be:

1. Listen to the complaints and suggestions of the proprietors and house users about property management services and report them
to the proprietors committee or the property management enterprise;

2. Carry out the decisions made by the proprietors committee;

3. Make proposals about the maintenance and renovation space and facilities for common use.

Article 15 All the proprietors shall be bound by the proprietors’ joint pledge, which is the norms of conduct in the use and maintenance of
property and other management services. House users shall abide by the proprietors’ joint pledge, too.

The proprietors’ joint pledge shall become effective on the day when it is approved by the proprietors meeting or the proprietors’
representatives meeting.

The proprietors committee shall, within 15 days after the proprietors’ joint pledge becomes effective, submit the pledge for the record
to the district (county) property management departments concerned.

Article 16 The decisions made by the proprietors meeting, the proprietors’ representatives meeting and the proprietors committee shall have
a binding force on all proprietors and house users within the property management area.

The decisions made by the proprietors meeting, the proprietors’ representatives meeting and the proprietors committee shall not contravene
the laws and regulations.

CHAPTER III PROPERTY MANAGEMENT SERVICES

Article 17 The property management enterprise shall, in accordance with relevant stipulations, apply to the Municipal Housing and Land Bureau
or the district (county) property management departments with whom it has registered for the qualifications certificate in property
management.

The Municipal Housing and Land Bureau and the district (county) property management departments shall, within 20 days after receiving
the application from the property management enterprises, ratify and issue the qualifications certificate.

The property management enterprise shall offer property management services as stipulated in qualifications control.

Article 18 Proprietors or the proprietors committee shall entrust a property management enterprise to handle their property affairs.

After accepting the entrustment to perform property management services. The property management enterprise shall, on accepting the
entrustment to render property management services, sign a property management service contract with the proprietors or the proprietors
committee.

The property management service contract shall include the following major items:

1. the name and address of the proprietor committee and the property management enterprise;

2. the size of the property management area and the items to be under management;

3. the contents of property management services;

4. the requirements and standards for property management services;

5. the service fees for property management;

6. the duration of property management services;

7. liabilities for breach of contract;

8. the agreement on termination and cancellation of the contract;

9. other items agreed on by both parties concerned.

The duration shall be two years for the property management service contract.

The property management enterprise shall, within 15 days after the property management service contract becomes effective, submit
the contract for the record to the district (county) property management departments.

Article 19 The parties to the property management service contract shall agree on the following property management services:

1. the use, maintenance and renovation of the areas and installation for common use in the residential buildings;

2. the use, maintenance and renovation of the public facilities within the property management area;

3. proper service of operation of the installations of the building, such as elevators and pumps;

4. sanitation and cleaning service;

5. security service;

6. keep accounts of property maintenance and renovation expenses;

7. safekeep the archives and other datum of the property.

The parties to the property management service contract shall agree on the following items in property management services:

1. maintenance and renovation of the private areas and private installations of the building;

2. other items in property management services entrusted by the proprietors committee.

Article 20 In order to keep the buildings and public facilities in good condition, to render the environment clean tidy and fine to maintain
good public order and to ensure the convenience and safety in the use of the property, the property management services shall meet
the following requirements:

1. Perform management services in accordance with the technical standards and norms specified by the state and this municipality and
the annual plan of the property management services approved by the proprietors committee;

2. Inform the proprietors and house users in writing of the methods, requirements, points for attention before they begin to use the
buildings; about the use and maintenance of the areas and installations for common use and public facilities in the buildings;

3. Inspect and examine the property management area regularly and thoroughly, and make periodical maintenance of the areas and installation
for common use and public facilities in the residential buildings;

4. Take protective measures immediately after spotting any damage of the areas and installations for common use and public facilities,
and repair them as stipulated in the property management service contract;

5. Repair the damages of the property within a time limit when notified of the damages;

6. Keep a good record of the maintenance and renovation of the property and of incomes received and expenses incurred, and keep the
property archives and relevant account books properly;

7. Submit the income-expense accounts of property maintenance and renovation to the proprietors committee for examination every six
months;

8. Listen to the complaints and suggestions made by the proprietors committee, the proprietors and house users periodically, and improve
and perfect the management services;

9. Dissuade and stop any person from violating the present Regulations or the proprietors’ joint pledge and report the wrongful act
to the proprietors committee and related administrative organs;

10. Offer other management services entrusted by the proprietors committee, the proprietors and house users in accordance with the
stipulations of the property management service contract.

Apart from the provisions mentioned above, the property management enterprise shall cooperate with the neighborhood committee in community
management and services.

Article 21 The service fees for property management shall be charge on the principle of reasonableness, openness and in conformity with the
management level.

Article 22 The property management service fees shall include the following:

1. management fees, which shall be used for the daily management within the property management area, including inspection and examination
within the property management area, book-keeping of maintenance and renovation expenses, the safekeeping of property archives and
datum, as well as other relevant management services;

2. operating cost for installations in buildings which is used as expense needed for service rendered to the operating of installations
such as elevators and water-pumps in buildings.

3. sanitation fees, which shall be used for the daily sanitation service within the property management area;

4. security fees, which shall be used for the service rendered to daily security within the property management area;

5. maintenance expenses, which shall be used to pay the expenses for property maintenance.

The fees in Items 1, 2, 3 and 4 above shall be calculated separately once a month. The expenses in Item 5 shall be calculated in accordance
with the maintenance that has been actually done.

Article 23 The standard of property management service fees charged shall be determined in accordance with the following provisions:

1. The standard of service fees for the publicly-owned residential building already sold to its residents shall be determined jointly
by the Municipal Price Control Bureau and the Municipal Housing and Land Administration Bureau;

2. The standard of service fee for the ordinary commodity residential buildings for the domestic market shall be determined through
negotiation between property management enterprises and proprietors or the proprietors committee within the floating range of base
price set by the district (county) price control departments jointly with the property management departments concerned;

3. The standard of the service fees for the high-quality commodity residential buildings for the domestic market and commodity residential
buildings to be sold to foreigners shall be determined through negotiation between the property management enterprises and proprietors
or the proprietors committee.

The fees for other management services shall be determined through negotiation between the property management enterprise and the
proprietors committee or proprietors or house users.

Article 24 The property management enterprise shall charge the proprietors the property management service fees as stipulated in the property
management service contract.

If proprietors and house users have agreed that the property management service fees shall be paid by the house users, the service
fees shall be paid as agreed.

If it is agreed that the property management service fees may be collected in advance, the term of advanced payment shall be to more
than 3 months.

Article 25 The items and standards concerning property management service fees shall be made known to the public. If proprietors or house users
have paid the property management service fees specified in the present Regulations, no other unit and individual person shall charge
any fees of the same nature again.

Proprietors or house users may refuse to pay property management service fees charged by some property management enterprise which
has offered services without being entrusted by the proprietors committee, the proprietors or house users.

Article 26 The property management enterprise shall, within 10 days after the termination or cancellation of the property management service
contract, handle the following for the proprietors committee, and report to the district (county) property management departments
for the record:

1. Settle the accounts of property management service fees paid in advance and refund the overcharge;

2. Hand over all the archives and relevant account books;

3. Hand over the houses, grounds and other properties jointly owned by the proprietors.

Article 27 Proprietors and house users shall abide by the relevant provisions of the laws and regulations, follow the principle of being beneficial
to the use and safety of the property, and the principle of, fairness and reasonableness, and properly handle the interrelations
between water supply, drainage, passage, ventilation, lighting, maintenance, sanitation and environmental protection.

Article 28 The following acts shall be prohibited in the property use:

1. Damage the load-bearing structures of houses and destroy the appearances of houses;

2. Occupy or damage the areas and installations for common use or move installations for common use to another location;

3. Put up buildings or structures in courtyards or gardens, on platforms, roofs, roads or other places;

4. Occupy greenspace or destroy greenery;

5. Set up vendors’ stands and open markets without permission;

6. Dump garbage or odds and ends at random;

7. Put up posters, or draw and carve on building and structures without permission;

8. discharge poisonous or harmful materials or harmful materials, or make noises that go beyond the standard specified;

9. Other acts prohibited by the laws and regulations.

Article 29 Proprietors or house users shall inform the property management enterprise before they decorate their residential buildings, and
the property management enterprise shall inform the proprietors house users of the prohibitions and points for attention in interior
decoration.

The property management enterprise shall offer advice on and exercise supervision over interior decoration of residential buildings.
When it finds out any act violating Article 28 of the present Regulations, it shall try to stop it and press for correction. It shall
report the case to the proprietors committee timely and ask the relevant administrative organs to impose penalties on those who refuse
to make the correction in accordance with the laws.

Article 30 The residential function of the building shall not be changed. If there are any special needs that make a functional change necessary,
the change shall be carried out in line with the requirements of the city planning. The proprietor in question shall ask the neighboring
proprietors, the house users and the proprietors committee for a written consent and submit the written consent to the district (county)
property management departments for examination and approval.

The functions of public buildings and facilities built within the property management area according to plan shall not be changed.

Article 31 No unit or individual person shall occupy any roads and grounds within the property management area. If there is a need to occupy
temporarily any roads or grounds within the management area because of property maintenance or in the public interests, such as digging
the roads or grounds, an agreement has to be reached with the proprietors committee, and the original state has to be restored within
the time limit agreed on.

The proprietors committee shall make the regulations on motor vehicles’ moving about, parking and charging of fee within the property
management area except those special vehicles performing the tasks of security, fire fighting, emergency, first-aid and environment
protection. Parking fees shall be determined in accordance with the provisions of the district (county) price control departments
concerned. The income from vehicle parking shall go into the property maintenance funds and be spent on the maintenance and renovation
of public facilities.

Article 32 Those who use the property to set up business facilities such as advertisements, shall first ask the relevant proprietors, house
users and the proprietors committee for a written consent, and then go through formalities for examination and approval at the administrative
management department concerned. After given the permission, they shall sign an agreement with the proprietors committee and pay
the set-up fees.

The business facilities set-up fees received shall go into the property maintenance funds.

If the property is used for setting up facilities for public welfare, the relevant provisions stipulated by the Municipal People’s
Government shall be observed.

Article 33 The disposal and treatment of daily garbage and excrement and urine within the property management area shall follow the relevant
provisions on the management of environmental sanitation in this municipality.

Article 34 When a proprietor transfers or rent out his residence, the proprietors’ joint pledge shall be attached as an appendix to the residence
transfer contract or the residence lease contract.

The parties concerned shall, within 10 days after the signing of the residence transfer contract or the residence lease contract,
inform in writing the proprietors committee and the property management enterprise of the residence transfer or the residence lease.

CHAPTER V THE MAINTENANCE OF PROPERTY

Article 35 The property maintenance funds shall be established upon the sale of publicly-owned residences and newly-built ordinary commodity
houses for domestic market.

The property maintenance fund may be established upon the sale of newly- built high-quality commodity houses for domestic and foreign
markets and commodity residential buildings for foreign buyers.

The specific standards and measures for the establishment of property maintenance funds shall be set by the Municipal People’s Government.

Article 36 The residence selling unit shall deposit the property maintenance funds with a financial institution and open a special account in
the name of the proprietors’ committee at the interest rate of no less than that of the bankdeposit or urban and rural residents.

The property maintenance fund shall have separate accounts for each building, and be calculated household by household.

Article 37 The property maintenance funds shall be used for the purpose of maintenance and renovation of the areas and installations for common
use and public facilities, and shall not be used otherwise.

The proprietors committee shall periodically make public the financial operations of the property maintenance funds and put itself
under the supervision of the proprietors.

Article 38 The expenses on property maintenance and renovation shall be borne in the following ways:

1. Those for private areas and installation shall be borne by the proprietors.

2. Those for areas and installation for common use shall be borne by all the proprietors involved in the whole building in proportion
to the floor area each of them possesses.

3. Those for public facilities shall be borne by all proprietors within the property management area in proportion to the floor area
each of them possesses.

If the areas, and installations for common use and public facilities in residential buildings are intentionally damaged by some person,
the maintenance and renovation expenses shall be borne by the person who is directly liable.

If serious damages occur in the property and affect the safety of the proprietors and house users, the district (county) property
management departments shall press for maintenance within set time limit.

If the property maintenance funds appear to be in sufficient, the proprietors shall pay the property maintenance funds in accordance
with the decisions made by the proprietors committee and in proportion to the floor area each of them possesses. The expenses on
the maintenance and renovation for public facilities in the publicly owned residential building sold to its residents out shall follow
the provisions stipulated by the Municipal People’s Government.

Article 39 When areas and installations for common use are under repair, the neighboring proprietors and house users shall coordinate. If anyone
brings about property losses to other proprietors and house users by hindering the repairs, he shall be liable for compensation.

If property maintenance and renovation damage the private areas and installations of the neighboring proprietors and house users,
or cause other property losses, those liable for the damage and losses shall restore them to their original state or compensate for
them.

Article 40 When proprietors transfer their residences, the balance in the property maintenance fund accounts shall not be refunded but continue
to be used for maintenance and renovation of the areas and installation for common use and public facilities in the buildings, the
balance of what was paid by the proprietors shall be paid to the transferor by the transferee.

CHAPTER VI FIRST-PHASE PROPERTY MANAGEMENT

Article 41 The first-phase property management in the present Regulations refers to the property management from the day when a residence is
sold to the day when the proprietors’ committee is established.

Article 42 The unit which sells newly-built commodity residential buildings shall make the pledge on residence use before the sale of a residence
and draw up the first-property management contract with the property management enterprise it has selected and appointed, and then
submit both the joint pledge and the contract to the district (county) property management departments concerned for the record.

When signing the residence transfer contract with the residence buyer, the unit which sells newly-built commodity residential buildings
shall attach the residence use contract, first-phase property management service contract and the instructions for using the residence
as appendices to the residence transfer contract.

The pledge on residence use shall not contravene the laws and regulations.

Article 43 The unit which sells newly-built commodity residential buildings is not allowed to transfer separately the ownership’s of areas and
installations for common use or public facilities and the right to use them.

Article 44 The unit which sells newly-built commodity residential buildings shall assume the responsibility to maintain them in accordance with
the period of guaranteed maintenance and scope of guaranteed maintenance stipulated by the state and this Municipality.

Article 45 The units which sells newly-built commodity residential buildings shall not use the property management funds during the period of
first-phase property management.

Article 46 The first-phase property management fees between the day when the first-phase property management service contract is signed and
the day when the newly-built commodity residential buildings are put to use shall be borne by the residence sellers, while those
between the day when the newly-built residential buildings are put to use and the day when the first-phase propert

MEASURES OF CUSTOMS FOR SUPERVISION AND CONTROL OF THE BONDED AREAS

19970610The State Council

The General Administration of Customs

Decree of the General Administration of Customs of the People’s Republic of China

No.65

Measures of Customs for Supervision and Control of the Bonded Areas adopted by the State Council on June 10, 1997, are hereby promulgated
and shall come into force as of the date of promulgation. The Administration Measures of the Customs of the People’s Republic of
China on Importing and Exporting Goods, Vehicles and Articles Carried by an Individual of Shanghai Waigaoqiao Bonded Area promulgated
by the General Administration of Customs and its relative specific rules formulated according with the Measures, shall be annulled
therefrom.

Director General of the General Administration of Customs, Qian Guanlin

August 1, 1997

Measures of Customs for Supervision and Control of the Bonded Areas

Chapter I General Provisions

Article 1

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

Article 2

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

Article 3

The bonded areas are specially designated areas under customs supervision and control. The customs exercise supervision and control
over goods, transportation vehicles and articles carried by individuals entering or leaving the bonded areas pursuant to these Measures.
Isolation facilities meeting the requirements for customs supervision and control should be installed between the bonded areas and
other areas within the territory of the People’s Republic of China(hereinafter referred to as un-bonded areas).

Article 4

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

Article 5

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

Article 6

The bonded areas practice the customs auditing system. In-area enterprises should hook up with the electronic computer network of
the customs and carry out electronic data exchange.

Article 7

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

Article 8

Goods and articles the import and export of which are prohibited by the State must not enter or leave the bonded areas.

Chapter II Supervision and Control of Entry and Exit Goods between the Bonded Areas and Beyond-the-boundary Areas

Article 9

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

Article 10

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

Article 11

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

Article 12

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

(1)

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

(2)

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

(3)

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

(4)

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

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

Goods for transshipment and goods stored in the bonded areas shall be put under control as bonded goods.

Chapter III Supervision and Control of Entry and Exit Goods between the Bonded Areas and the Un-bonded Areas

Article 13

Formalities for import goods shall be completed for goods from the bonded areas entering un-bonded areas; formalities for export goods
shall be completed for goods from un-bonded areas entering the bonded areas and export tax refund shall be processed in accordance
with the relevant provisions of the State. The customs exercise supervision and control over entry and exit goods between the bonded
areas and the un-bonded areas pursuant to the provisions of the State related to import-export control.

Article 14

For machinery, equipment, capital goods and articles entering the bonded areas from the un-bonded areas for in-area use, user units
should submit lists of the above-mentioned goods or articles which will be cleared upon customs inspection. Goods or articles of
the preceding paragraph, which have already paid import duty and import linked tax, shall not be refunded.

Article 15

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

Chapter IV Supervision and Control over Goods in the Bonded Areas

Article 16

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

Article 17

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

Article 18

When in-area enterprises hold exhibitions and displays of foreign commodities and commodities of the un-bonded areas in the bonded
areas, the displayed commodities should be subjected to customs supervision and control.

Chapter V Control of Goods of Processing Trade in the Bonded Areas

Article 19

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

Article 20

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

Article 21

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

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

Article 22

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

Article 23

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

(1)

They have in-area production sites, which have already formally conducted processing business;

(2)

Main working procedure of the processing business entrusted to enterprises in un-bonded areas should be carried out in the bonded
areas;

(3)

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

(4)

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

Article 24

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

When the processing business is entrusted to enterprises in un-bonded areas, the enterprises in the un-bonded areas shall go through
the formalities of contract registration for the record and follow the bank guarantee machine account system.

Chapter VI Supervision and Control over Transportation Vehicles and Articles Carried by Individuals Entering and Leaving the Bonded
Areas

Article 25

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

Article 26

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

Article 27

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

Chapter VII Supplementary Provisions

Article 28

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

Article 29

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

Article 30

These Measures enter into force as of the date of promulgation. The Measures of the Customs of the People’s Republic of China on Administration
of Goods, Transportation Vehicles and Articles Carried by Individuals Entering and Leaving the Shanghai Waigaoqiao Bonded Area is
simultaneously nullified.

The General Administration of Customs
1997-08-01

PROCEDURES OF SHANGHAI MUNICIPALITY ON THE ADMINISTRATION OF PASSENGER TRANSPORT BY BUS, TRAM AND TROLIYBUS

Procedures of Shanghai Municipality on the Administration of Passenger Transport by Bus, Tram and Troliybus

(Effective Date:1997.06.01–Ineffective Date:)

CHAPTER I GENERAL PROVISIONS CHAPTER II LINES AND LINE OPERATORS CHAPTER III OPERATION MANAGEMENT CHAPTER IV MANAGEMENT OF FACILITIES
CHAPTER V INSPECTION AND COMPLAINT CHAPTER VI LEGAL LIABILITIES CHAPTER VII SEVEN SUPPLEMENTARY PROVISIONS

Article 1 (Purpose)

The present Procedures are formulated in order to strengthen the administration of bus, tram and trollybus passenger transport in
this Municipality, to protect the legitimate rights and interests of passengers and operators and to meet the basic demands of city
public passenger transport.

Article 2 (Definition)

The buses, trams, and trollybuses as defined in the present Procedures refer to the passenger transport buses, trams and trollybuses
within this Municipality that are open to the public, run along a fixed route, follow a set schedule, take and discharge passengers
at regular stops, and charge fares according to the transport distance.

Article 3 (Scope of Application)

The present Procedures are applicable to the operation and its related administrative activities of bus, tram and trollybus passenger
transport within the administrative areas of this Municipality.

Article 4 (Principles for Development)

The development of bus, tram and trollybus passenger transport shall be geared to urban construction, socio-economic development and
the actual living standards of the people in coordination with other means of public transport.

The people’s government at various levels shall follow a policy of support on the development of bus, tram and trollybus passenger
transport.

Article 5 (Principles for Operation)

The operation of bus, tram and trollybus passenger transport shall follow the principles of unified planning, moderate competition,
standardized service and conveniencing the passengers.

Article 6 (Administrative Departments)

The Shanghai Municipal Public Utilize Administration Bureau (hereinafter referred to as “the Municipal Public Utilities Bureau”) is
the administrative department of this Municipality responsible for the administration of bus, tram and trollybus passenger transport,
while the Shanghai Municipal Administrative Section of Public Passenger Transport (hereinafter referred to as “the Municipal Public
Transport Administrative Section) takes charge of the specific administrative work in this field in accordance with the present Procedures.

Related departments of city planning, public security, traffic and municipal public works shall work in coordination in implementing
the present Procedures in accordance with their respective duties.

Article 7 (Development Plan and Annual Plan)

The plans of development for this Municipality’s bus, tram and trollybus passenger transport and the annual plans shall be organized
and formulated by the Municipal Public Utilities Bureau and shall, after being overall balanced by relevant departments, according
to the specified procedure, be submitted to the Municipal People’s Government for approval.

CHAPTER II LINES AND LINE OPERATORS

Article 8 (Planning of Lines and Networks)

The Municipal Public Utilities Bureau shall, jointly with relevant departments, formulate plans of lines and networks for bus, tram
and trollybus passenger transport in accordance with the municipal plan of development for this city’s bus, tram and trollybus.

The opening, rerouting and canceling of bus, tram and trollybus passenger transport lines (hereinafter referred to as lines) shall
meet the requirements of plans of bus, tram and trollybus passenger transport lines and networks.

Article 9 (Requirements for Line Operators)

Line operators shall meet the following requirements:

1. Possessing more than 100 passenger transport vehicles that meet the stipulated requirements;

2. Possessing parking lots and supporting facilities that meet the stipulated requirements;

3. Having rational and feasible plans for line operation;

4. Having a sound system of operation management concerning passenger service and safe driving;

5. Having adequate managing personnel and drivers, conductors and dispatchers who have been trained and qualified in accordance with
relevant stipulations of the State.

Article 10 (Announcement of Plans of Lines)

The Municipal Public Utilities Bureau shall announce regularly the annual plans of newly-opened and extended lines.

Article 11 (Ways of Choosing Line Operators)

The Municipal Public Utilities Bureau may, in accordance with the actual demands of public passenger transport in this Municipality
and the plans of line and networks for bus, tram and trollybus passenger transport, decide on line operators by way of applying for
examination and approval, inviting bids or appointment respectively.

Article 12 (Procedures of Applying for examination and Approval)

To apply for the opening or extending of lines, the applicant shall submit to Municipal Public Utilities Bureau the following documents:

1. Application;

2. Certificates of credit standing;

3. Certificates of parking lots;

4. Plans of line operation, operational management system and feasibility study report.

Upon accepting an application, the Municipal Public Utilities Bureau shall seek, in written from, the opinions of the municipal administrative
departments of public security. traffic control, and municipal public works, which shall make a written reply within 30 days after
receiving the letter seeking opinions, and their failure to make a reply within the prescribed period shall be regarded as approval.

The Municipal Public Utilities Bureau shall, within 60 days after accepting the application, make a decision of approval or disapproval
and notify the applicant in writing.

Article 13 (Procedures of Inviting Bids)

When line operators are to be chosen by inviting bids, the following procedures shall be followed:

1. The Municipal Public Utilities shall, according to the plans of lines and networks for bus, tram and trollybus passenger transport,
publicize documents on bid invitations and relevant materials concerning the opening and extending of bus, tram or trollybus lines
or send them to potential bidders on a selective basis;

2. The bidder shall put his sealed bidding documents into the designated bid box according to the requirements of bid invitations
documents;

3. The Municipal Public Utilities Bureau shall, jointly with relevant departments, invite experts to form a bid appraisal committee,
which, after having decided on a way of appraisal, preside over the bid opening, bid appraisal. and the decision on the winning bidder;

4. The bid appraisal committee shall appraise the valid bidding documents and decide on the winning bidder;

5. The bid appraisal committee shall sign and issue the decision on the winning bidder, to whom the Municipal Public Utilities Bureau
shall send a notice.

Article 14 (Restriction on Appointing Line Operators)

The Municipal Public Utilities Bureau may appoint line operators for the opening and expending of the lines in one of the following
situations;

1. Lines are listed in the Municipal Government’s practical projects;

2. Lines are operated as supporting facilities for newly-built residential areas.

The Municipal Public Utilities Bureau shall jointly with municipal administrative departments of public security, traffic control
and municipal public works, decide on the lines to be opened or extended, and appoint line operators in the light of the areas through
which the lines run and the actual operating capacity of existing line operators.

Article 15 (Naming of the Lines)

The Municipal Public Utilities Bureau shall decide, in a unified manner, on the name of the lines to be opened, and make them known
to the public.

Article 16 (Issuance of Qualification Certificates)

The chosen line operators that need to attend to the enterprise’s establishment or alteration registration shall go to the administrative
department of industry and commerce and the department of taxation, with relevant certificates issued by the Municipal Public Utilities
Bureau, to complete the relevant formalities.

Upon the completion of the formalities as prescribed in the preceding paragraph the Municipal Public Utilities Bureau shall issue
to line operators a Shanghai Municipality Qualification Certificate for Operating Bus, Tram and Trollybus Passenger Transport (hereinafter
referred to as “Qualification Certificate”)

No one shall operate bus, tram or trollybus passenger transport without a Qualification Certificate.

Article 17 (Issuance of Operation Certificates)

The Municipal Public Transport Administrative Section shall issue operation certificates to line operators according to the number
of vehicles they put into operation and shall issue corresponding service certificates to the drivers, conductors and dispatchers
that are trained and qualified in accordance with relevant regulations of the State.

Article 18 (Examination and Renewal of Qualification Certificates)

The qualification certificates shall be valid for one year. Line operators shall, fifteen days before the expiration of qualification
certificates, go to the Municipal Public Utilities Bureau to go through the formalities of examination.

The Municipal Public Utilities Bureau shall issue new qualification certificates to those line operators who meet the conditions and
requirements as prescribed in the qualification certificates of those line operators who fail to meet the conditions and requirements
as prescribed in the present Procedures shall not be renewed.

Article 19 (Alteration and Cancellation of Qualification Certificates)

Line operators who have a merger or split-off shall go, with relevant certificates issued by the industry and commerce department
tax department, to the Municipal Public Utilities Bureau, within fifteen days of the merger or split-off, to go through the formalities
of qualification certificate alteration.

Line operators who are to close down business shall notify the Municipal Public Utilities Bureau in writing ninety days before close
down and shall go, with relevant certificates issued by the industry and commerce department and the tax department, to the Municipal
Public Utilities Bureau, within fifteen days upon closing business, to complete the formalities of canceling the qualification certificates.

Article 20 (Choosing of New Line Operators)

The Municipal Public Utilities Bureau shall choose new line operators in accordance with the stipulations of this chapter to replace
those who have closed business.

Article 21 (Plans of Line Operation)

Line operators shall formulate plans of line operation before formally starting business. The plans shall be implemented after they
are examined, verified and approved by the Municipal Public Transport Administrative Section.

Article 22 (Overall Requirements for Operation)

Line operators shall start operation within the period prescribed by the Municipal Public Transport Administrative Section in accordance
with the approved operational plans, including the routes, number of runs, schedules, vehicle models, number of vehicles, and the
number of passengers to be carried. Line operators shall not stop operation without approval.

Line operators shall not reduce the number of vehicles in operation, nor the number of runs, once the line has gone into formal operation.
When passenger traffic increases on the line, the line operator shall increase the number of vehicles and their runs proportionately
in accordance with the requirements of the Municipal Public Transport Administrative Section.

Article 23 (Restriction on Conductorless Operation)

Line operators who need to engage in conductorless operation shall meet the requirements of conduetorless operation with respect to
their vehicles and the number of runs, and shall start conductorless operation only after approval has been obtained from the Municipal
Public Transport Administrative Section.

The requirements for conducterless operation shall be stipulated separately by the Municipal Public Utilities Bureau.

Article 24 (Alteration and Cancellation of Routes and Steps or Temporary Suspension of Operation)

Line operators who need to alter routes and stops shall first obtain approval from the Municipal Public Transport Administrative Section
which shall examine, and verify the matter jointly with the municipal administrative departments of public security, traffic control,
and municipal public works before giving approval.

Under any one of following circumstances, the Municipal Public Transport Administrative Section may, after getting approval from the
municipal administrative departments of public security, traffic control, and municipal public works, ask the line operators to alter
or cancel lines or stops, or to temporarily suspend operation:

1. Adjustment of bus, the plan of tram and trollybus passenger transport lines and networks;

2. Construction of municipal public works such as roads and underground pipes and cable;

3. Needs of road traffic control;

4. Safety of operation being affected by road conditions.

Line operators shall notify the public by putting up notices at all the stops along the lines five days before alteration or cancellation
of lines and stops or the temporary suspension of operation. Alteration or cancellation of lines and stops or temporary suspension
of operation due to force majeure shall be made known to the public immediately.

When two or more lines are simultaneously to be altered or canceled, or their operation are to be to temporarily suspended, the Municipal
Public Transport Administrative Section shall notify the public through mass media.

Article 25 (Rates of Fares)

Line operators and personnel engaged in passenger transport shall adopt the standard rates of fares for bus, tram and trollybus operation
set by municipal price control departments and shall not be allowed to make any alteration without approval.

Article 26 (Use and Management of Tickets)

Line operators and personnel engaged in passenger transport shall use the uniform tickets bearing the name of line operator uniformly
printed or approved by the Municipal Public Utilities Bureau jointly which the municipal tax department. The face value of the ticket
shall conform to the set rates of fares.

Universal bus, tram and trollybus tickets shall be printed and sold by the public passenger transport tickets agency uniformly set
up by this Municipality. These tickets shall be valid on all buses, trams and trollybuses throughout this Municipality and on line
operators or personnel engaged in passenger transport shall have the right to refuse to accept them.

The redemption and settlement of the universal bus, tram and trollybus tickets shall be carried out by the public passenger transport
tickets agency uniformly set up by this Municipality with the line operators in accordance with the stipulations of the Municipal
Public Utilities Bureau.

Article 27 (Requirements of Operational Vehicles)

Lime operators shall strengthen their administration of operational vehicles. Vehicles in operation shall meet the following requirements:

1. They are clean and tidy, with adequate facilities;

2. Their performance conforms with the technical standards set by the State;

3. Their two sides bear the name of the line operator at the prescribed position;

4. Their front, tail, and right side bear the name of the line;

5. They post a copy of operational certificate at the top right side of their windscreen;

6. They post, at the prescribed positions inside the vehicle, the rules on riding buses, tram and trollybuses, a sketch map of the
their routes, and telephone numbers for passenger supervision and complaint;

7. They meet other requirements of operational service standards.

Advertisements, if and, to be put up inside the vehicle shall be posted at positions prescribed by the Municipal Public Transport
Administrative Section.

Article 28 (Operational Service Standards for Drivers and Conductors)

Bus, tram and trollybus line operators shall strengthen their administration of drivers and conductors and urge them to abide by following
rules:

1. Carry service certificates in conformity with the operational certificates;

2. Follow the approved routes and operate according to the approved number of runs and the approved number of passengers to be carried,
and not to shorten the line nor to force passengers to get off midway, without approval;

3. Take on and discharge passengers within the prescribed limits of the stops;

4. Announce clearly the names of stops, the name of routes and the direction in which the vehicle is running;

5. Maintain normal order inside the vehicles and guarantee personal safety of passengers;

6. Not to hand over vehicles for operation to personnel who have not the qualifications for operation as stipulated in the present
Procedure;

7. Submit themselves to the supervision and inspection of the administrative personal of passenger transport;

8. Comply with other rules concerning operational service standards.

In case the vehicle fails to operate normally, the driver and the conductor shall organize the passengers to board, without charge,
vehicles running on the same route and in the same direction, and the drivers and conductors of these vehicles running on the same
route and in the same direction shall not refuse.

Article 29 (Operational Service Standard of Dispatchers)

Bus, tram and trollybus line operators shall strengthen their administration of dispatchers and urge them to abide by the following
rules:

1. Wear service credentials;

2. Dispatch vehicles according to approved runs and schedules and make rational adjustments in special circumstances so as to disperse
passengers as soon as possible;

3. Fill in daily report forms of bus, tram and trollybus runs accurately;

4. Submit themselves to the supervision and inspection of the administrative personnel of passenger transport;

5. Comply with other rules concerning operational service standards.

Article 30 (Chargeable Operational Service)

Passengers shall buy tickets or pay the fares according to prescribed rates of fares. However, they may refuse to buy tickets or pay
fares if any one of following circumstances arises:

1. The driver or conductor does not produce tickets that are in conformity with the stipulations;

2. Passengers carrying electronic boarding tickets can not have their tickets read due to failure of the ticket reading machine.

Line operators and personnel engaged in passenger transport may ask passengers who do not buy tickets or pay fares according to the
prescribed rates of fares to pay retroactively the ticket prices or fares equal to ten times the prescribed rate of fares.

Article 31 (Riding rules)

Passengers shall observe the rules on riding buses, trams and trollybuses. They shall not interfere with the normal riding or affect
personal the safety of other passengers.

Drivers and conductors may refuse to provide service to passengers who violate the rules on riding buses, and tram and trollybuses.

The rules on riding buses, trams and trollybuses shall be formulated by the Municipal Public Utilities Bureau.

Article 32 (Requirements on the Use of Radio Communications Equipment)

Line operators shall ensure that their radio communications equipment be in continuos, normal working conditions and shall not shut
it down without approval.

The frequency used by line operators shall be reported to the Municipal Public Transport Administrative Section for the record.

Article 33 (Requirements on Operation in Special Circumstances)

Line operators shall, under the unified command of the Municipal Public Transport Administive Section, organize vehicles and personnel
timely to carry out dispersal transportation in case one of the following circumstances arises:

1. Emergency rescue;

2. Serious shortage of vehicles available at major passenger gathering and dispersing spots;

3. Major social gathering;

4. Other circumstances prescribed by the Municipal People’s Government.

Article 34 (Submission of Statistical Report Forms)

Line operators shall fill out the statistical report forms for bus, tram and trollybus passenger transport accurately, and submit
them to the Municipal Public Transport Administrative Section in time.

Article 35 (Payment of Passenger Transport Administration Fees)

Line operators shall make timely payment of passenger transport administration fees to the Municipal Public Transport Administrative
Section.

The rates of public transport administration fees shall be set by the municipal price control department jointly with the municipal
finance department.

CHAPTER IV MANAGEMENT OF FACILITIES

Article 36 (Construction of Stations and Stops)

Construction units shall build bus, tram and trollybus stations and stops and corresponding parking spaces as ancillary facilities
in accordance with approved plans and relevant construction design standards in any one of the following circumstances:

1. Construction or extension of public passenger gathering and dispersal places, such asairports, railway stations, passenger transport
piers, long distance bus stations and rail transport stations;

2. Construction or extension of large-scale cultural, sports and other public facilities;

3. Construction or extension of residential areas.

Article 37 (Administration of Shared Stations and Stops)

Stations and stops constructed with government and shared by more than two lines (hereinafter referred to as “shared stations and
stops”) shall be managed by a unit appointed by the Municipal Public Transport Administrative Section; other shared stations and
stops shall be managed by a unit chosen by the construction unit or by the line operators sharing the stations or stops through consultation.

Drivers and conductors entering the shared stations or stops shall submit themselves to the unified command of the management unit
in charge of the said stations or stops.

The management unit in charge of the shared stations and stops shall maintain their operational order and ensure their safety and
smooth transit. It shall not closed them down or turn them to other uses without the approval of the Municipal Public Transport Administrative
Section.

Article 38 (Fixtures at the Terminals)

Line operators shall set up facilities for waiting passengers at the terminals, and post the rules on riding buses, trams and trollybuses,
the table of rates of fares and the telephone numbers for passenger supervision and complaint.

Newly-opened lines shall set up signs for boarding and discharging passengers respectively at the terminals.

Article 39 (Maintenance of Station and Stop Facilities)

The construction unit or its authorized unit shall be responsible for the routine maintenance of the facilities at the stations and
stops and for keeping them clean and tidy and in good condition.

Article 40 (Erection of Sign Boards at the Stations and Stops)

Line operators shall erect signposts, including temporary signposts (similarly hereinafter), at bus, tram and trollybus stations and
stops in accordance with the unified standard prescribed by the Municipal Public Transport Administrative Section.

The bus, tram and trollybus station and stop signposts shall be distinct and in good condition. They shall bear the name of the line,
the time for the first and the last run, the name of the stop and the name of the other stops along the route, the rates of fares,
etc. In the case of lines with vehicles running at an intervals of more than 30 minutes, the time of each run passing the stop should
be clearly indicated.

Article 41 (Maintenance of Power Supply Facilities for Trams and Trollybuses)

Trams and Trollybus power suppliers shall, in accordance with the technical specifications and standards set by the State, regularly
check and repair tram and trollybus power supply facilities such as tram and trollybus overhead line networks, power feed line networks
and direct- current traction transformer substations to ensure their safety and normal use.

In case of a breakdown in the tram and trollybus power supply facilities, the power supplier shall organize emergency repairs at once
and restore their normal function as soon as possible.

Article 42 (Safeguarding of Tram and Trollybus Power Supply Facilities)

Tram and Trollybus power supply shall, in accordance with relevant regulations of the State, erect protection markers around tram
and trollybus power supply facilities.

The following acts posing hazards to the safety of tram and trollybus power supply facilities are prohibited:

1. Cover, alter or damage protection markers for tram and trollybus power supply facilities;

2. Hang posters, billboards and clothing or put up other facilities on tram and trollybus overhead line networks or power feed line
networks without approval;

3. Other acts that endanger the safety of power supply.

In case construction for engineering projects may endanger the safety of tram and trollybus power supplier facilities, the construction
unit shall, in accordance with relevant regulations of the State, hold consultation with the power supply and take corresponding
safety measures before starting construction.

CHAPTER V INSPECTION AND COMPLAINT

Article 43 (Supervision and Inspection)

The Municipal Public Transport Administrative Section shall intensify supervision and inspection of bus, tram and trollybus operations.
Administrative personnel of public passenger transport, when going on inspection, shall wear distinctive uniforms, carry law enforcement
ID cards and wear on-duty marks.

Administrative personnel of public passenger transport, upon discovering acts violating the present Procedures shall order the wrongdoer
to rectify immediately or within a prescribed time limit.

Article 44 (Complaint)

The Municipal Public Transport Administrative Section and line operators shall institute a system to hear and deal with complaints
against acts violating the present Procedures.

Complaints may be sent either to the line operator or to the Municipal Public Transport Administration Section. The complainant shall
provide relevant evidence,

Article 45 (Handling of Complaints)

Line operators shall make a reply to the complainant within ten days after receiving the complaint.

In case the complainant disagrees with the reply made by the line operator, he may complain to the Municipal Public Transport Administrative
Section.

If the complaint is sent to the Municipal Public Transport Administration Section, this Section shall make a reply within 30 days
after receiving the complaint.

Article 46 (Verification of Complaints)

When the Municipal Public Transport Administrative Section needs to verify complaints with the line operator, it shall issue a notice
for complaint verification to the latter.

The line operator shall, within 10 days after receiving the notice for complaint verification make a written reply to the Municipal
Public Transport Administrative Section, stating relevant circumstances and his opinions on the handling of the complaints.

Article 47 (Penalties on Line Operators)

For acts violating the present Procedures line operators shall be penalized by the Municipal Public Utilities Bureau in accordance
with the following rules:

1. For violations of the first clause of Article 18, Article 19 or Article 21 of the present Procedures a fine of 500 to 1,000 yuan
shall be imposed;

2. For violations of Article 22, the first clause of Article 23, or Article 33 of the present Procedures, a fine of 1,000 to 5,000
yuan shall be imposed;

3. For violations of the third clause of Article 24, the first and second clauses of Article 26, Article 32, Article 38, or Article
40 of the present Procedures a disciplinary warning shall be give or a fine of 100 to 1,000 yuan shall be imposed;

4. For violations of the first clause of Article 24, or Article 25 of the present Procedures a fine of 500 to 5,000 yuan shall be
imposed;

5. For violation of Article 27 of the present Procedures a disciplinary warning shall be given or a fine of 50 to 100 yuan shall be
imposed;

6. For violation of Article 28, article 29, or the second clause of article 37 of the present Procedures a disciplinary warning shall
be given or a fine of 50 to 500 yuan shall be imposed;

7. For violations of the first clause of Article 45, or the second clause of Article 46 of the present Procedures a disciplinary warning
shall be given, or a fine of no more than 50 yuan shall be imposed;

Article 48 (Penalties on Related Units or Individual Persons)

For violation of the third clause of article 37 of the present procedures, the Municipal Public Utilities Bureau Shall impose a fine
of 500 to 1,000 yuan on the unit in charge of the management of stations or stops.

For violations of article 41 or the first clause of Article 42 of the present Procedures, the Municipal Public Utilities Bureau shall
give a disciplinary warning to, or impose a fine of 100 to 1,000 yuan on the tram and trollybus power supplier.

For violation of the second or third clause of Article 42 of the present Procedures, the Municipal Public Utilities Bureau shall give
a disciplinary warning to, or impose a fine of 100 to 1,000 yuan on the units or individual persons concerned.

Those units or individual persons who engage in bus, tram or trollybus passenger transport without qualification certificates or operation
certificates shall be fined 5,000 to 30,000 yuan by the Municipal Public Utilities Bureau.

Article 49 (Handling of Obstruction of Public Duties)

Those who obstruct passenger transport administrative personnel in performing their duties in violation of “Regulations of the People’s
Republic of China on Public Security Administration and Imposition of Punishment” shall be turned over to the public security departments
and dealt with in accordance with the law, and where such wrong constitute a crime, the wrongdoer shall be prosecuted for his/her
crim

CIRCULAR OF THE STATE COUNCIL ON THE APPROVAL AND TRANSMISSION OF THE SUGGESTIONS OF THE STATE PLANNING COMMISSION, THE STATE ECONOMIC AND TRADE COMMISSION AND THE STATE RESTRUCTURING COMMISSION ON THE WORK OF DEEPENING THE EXPERIMENTS OF LARGE-SIZE ENTERPRISE GROUPS

Category	INDUSTRY	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1997-04-29	Effective Date	1997-04-29

Circular of the State Council on the Approval and Transmission of the Suggestions of the State Planning Commission, the State Economic and Trade Commission and the State Restructuring Commission on the Work of Deepening the Experiments of Large-size Enterprise Groups

Appendix: The Suggestions on the Work of Deepening the Experiments of
Enclosure:List of the Second Batch of Enterprise Groups Making

(April 29, 1997)

The State Council approves the Experiments of Large-size Enterprise Groups> of the State Planning
Commission, the State Economic and Trade Commission and the State
Restructuring Commission which are transmitted to you for earnest
implementation.

The work of deepening the experiments of large-size enterprise groups
is essential for promoting the basic transformation of the economic
structure and the mode of economic growth. Stress should be laid on
running a number of large-size enterprise groups well, linking and
bringing along the reorganization and development of a number of enterprises, pressing forward structural adjustment, forming scale
economy, improving the operational efficiency and performance of the
state-owned assets and actively extending the role of large-size enterprise
groups as the backbone of the national economy in line with the requirements
of establishing the modern enterprise system and managing well the entire
state-owned economy. The State Planning Commission, the State Economic and
Trade Commission and the State Restructuring Commission should step up
the organization and guidance of the work, and all regions and all
departments concerned should actively coordinate with one another and
create good external conditions for the growth in strength of the large-
size enterprise groups.

Appendix: The Suggestions on the Work of Deepening the Experiments of Large-size Enterprise Groups(The State Planning Commission,
the State
Economic and Trade Commission and the State Restructuring Commission
April 8, 1997)

For the purpose of adapting to the requirements of establishing the
socialist market economic system and in accordance with the spirit of the
Fifth Plenary Session of the Fourteenth Central Committee of the Communist
Party of China that “the State must lay the stress on running well a batch of large-size enterprises and enterprise groups which
play the role of backbone
in the national economy” and the State Council’s requirements for the
selection of second batch of large-size enterprise groups for experiments,
the following suggestions are hereby put forth on the related questions
on the work of making experiments and the list of second batch of enterprise
groups selected for experiments:

I.The Necessity and Purpose of Deepening the Experiments of Enterprise
Groups

Since the transmission of the Approval and Transmission of the Report Requesting Instructions on the
Selection of a Batch of Large-size Enterprise Groups for Experiments
Submitted by the State Planning Commission, the State Restructuring
Commission and the Production Office under the State Council>(Guo Fa
[1991] No. 71), positive progress has been made in the work of making
experiments by 57 enterprise groups in the first batch and the purpose
of making experiments has been basically realized. The main manifestations
are as follows:explorations have been made in smoothing the internal
relations of the enterprise groups with capital as the linkage; functions
of the enterprise groups have been extended and the strength of the groups
has grown, having initially formed a batch of enterprise groups with
considerable market competitiveness which has played a positive role
in promoting structural adjustment and improving scale performance;
having deepened the internal reform of the enterprise groups, promoted
the transformation of the operational mechanism of enterprises and improved
the operational and management level of enterprises; the experiments having
played a demonstrative role in the building and development of enterprise
groups throughout the country.

At present, national socio-economic development in our country has
entered a new phase. The transformation of the economic system from that
of the traditional planned economy to one of socialist market economy and
the transformation of the mode of economic growth from the extensive
management to intensive management are underway. In the process of establishing the socialist market economic system, it has been
determined
that the direction of the reform of state-owned enterprises is the
establishment of the modern enterprise system with the promulgation and
implementation of (hereinafter referred to as ). With further extension
in opening up to the outside world, enterprises face increasingly fierce
competition in the domestic and world markets. Therefore, during the
crucial period of realizing the two basic transformations in the development
of the national economy, it becomes all the more necessary to deepen the
experiments of large-size enterprise groups in accordance with the
requirements for the establishment of the modern enterprise system and
good management of the entire state-owned economy.

The following major purposes should be served in deepening the
experiments of large-size enterprise groups:

(1)form a batch of large-size enterprise groups in the key fields and
key trades in the national economy and actively bring into full play the
backbone role of large-size enterprise groups in the national economy.

(2)by the end of the century, modern enterprise system should be
established initially in parent and subsidiary companies of large-size
enterprise groups which are legal entities and main body of market
competition responsible for their independent operations, their own gains
and losses, self-development and self-restraints. The parent and subsidiary
structure with capital as the main linkage should be established.

(3)promote rational flow of production factors and optimal allocation of resources, linking and bringing
along the reorganization and development of a batch of enterprises, forming scale economy and enhancing competitive
capability in the domestic and world markets.

(4)improve the operational efficiency and performance of the state-
owned assets to ensure the preservation and increment of the value of the
state-owned assets.

(5)effect transfer in government functions and realize step by step
the separation of functions of government from those of the enterprise.
Promote transregional and transtrade economic association and enhance
the macro regulatory and control capability of the State.

II.The Building of the Structure of Parent-subsidiary Companies with
Capital as the Main Linkage

(1)On the basis of settlement of assets and verification of capital and
defining property rights, the parent companies and their member enterprises
of the enterprise groups making experiments should, in compliance with the
relevant provisions of , carry out standardization or
rebuilding, smooth step by step the internal relations of property rights
of the groups, and build the parent-subsidiary company structure with capital
as the main linkage. The parent companies of the enterprise groups making
experiments may, in general, be reconstructed to be state-owned sole-capital
companies or limited liability companies with more than two shareholders;
the subsidiary companies of the enterprise groups making experiments should
generally be reconstructed to be limited liability companies with more than
two shareholders or companies limited by shares.

(2)Clearly define the promoters of the parent companies of the enterprise
groups making experiments by establishing the promoters’ system. Those
parent companies of the groups making experiments that are sole-proprietor-
ship state-owned comapnies, their promoters shall be the state-authorized
investment institutions or the state-authorized departments.

A small number of parent companies of the enterprise groups making
experiments which have the required conditions can become the state-
authorized investment institutions with the approval of the State Council.

(3)Establish scientific and democratic leadership structure and decision-
making structure. The parent companies and subsidiary companies of the
enterprise groups making experiments should, in compliance with Company Law>, build the structure of corporate management, and build a
mutually-separated and checking mechanism of the power structure, the
operations departments and the supervisory organs. The boards of directors
and boards of commissioners of the parent companies and subsidiary companies
of the enterprise groups making experiments shall be formed in accordance
with and the constitutions of the companies.

The board of directors shall employ a general manager. The chairman of the board of directors generally shall
not be concurrently the general
manager. The sole-proprietorship state-owned companies approved by the
State Council may not establish boards of directors for the time being.

(4)The enterprise groups making experiments should, in accordance with
the requirements for the establishment of the modern enterprise system and
the relevant provisions of the State, carry out reform in labor, personnel
and wage systems and strengthen internal management; carry out pension,
medical, unemployment and vocational injuries insurance for workers and
staff members in accordance with the provisions of the State; the non-
production and operational functions undertaken at present should be
separated step by step, and measures should be taken for a satisfactory
settlement of the personnel upon separation.

III.Further Enhancement of the Functions of the Parent Companies of the Enterprise Groups Making Experiments

The parent companies of the enterprise groups making experiments should
play a leading role in formulating the group development strategy,
structural adjustment and coordination of interests and become, step by step,
the decision-making centers of such major operational activities as
investment and adjustment of funds, sci-tech development, foreign trade and
economic and technological exchanges. The parent companies of the enterprise
groups making experiments should, in accordance with the development of the industries and the market characteristics of the products,
rationally
determine the operational and management structure of the enterprise groups,
perfect the rules and regulations of the groups, standardize the relations
of rights and obligations between the parent companies and the member
enterprises of the enterprise groups making experiments, and enhance the
overall advantages and competitive capability of the enterprise groups
making experiments.

(1)Enhance the investment function of the parent companies of the
enterprise groups making experiments. Investment of fixed assets in small
and below-ceiling projects which are in line with the State industrial
policy and distribution policy shall be decided by the parent companies
of the enterprise groups making experiments and the same shall be submitted
to the competent departments of the related industries for the record.

Projects attracting direct foreign investment which are in compliance
with and in the categories encouraged or allowed by for Industries for Foreign Investment>, investment by the Chinese party, and
conditions for construction, production and operations as well as the
foreign exchange required can be balanced and settled on their own,
production projects the scale of investment of which is under US$ 30 million
can be decided by the parent companies of the enterprise groups making
experiments; and the same shall be submitted to the State Planning
Commission and the State Economic and Trade Commission respectively for
the record according to the nature of the construction projects, and the
contracts and constitutions of the enterprises submitted to the Ministry
of Foreign Economic Cooperation and Trade for the record. The State Planning
Commission and the State Economic and Trade Commission can veto or put forth
suggestions for revision within one month upon the receipt of the documents.

Large- and medium-size and above-ceiling projects shall be processed
in accordance with the relevant provisions of the State.

The amount of cumulative investment by the parent companies of the
enterprise groups making experiments in other limited liability companies
and companies limited by shares in the light of requirements may exceed
fifty percent of their own net assets when entrusted by the State Council,
with the approval of the State Planning Commission, the State Economic and
Trade Commission and the State Restructuring Commission and submission to
the State Council for the record.

(2)Enhance the function in the adjustment of funds of the parent
companies of the enterprise groups making experiments. With the approval
of the competent departments concerned under the State Council, the parent
companies of the enterprise groups making experiments may engage in
adjustment of funds in domestic and foreign financial and stock markets.
Priority shall be given to those enterprises which meet the required
conditions in the enterprise groups making experiments in making arrangements
for the issuance of enterprise bonds and selection of listing companies.

A small number of the parent companies of the enterprise groups making
experiments which meet the required conditions can have the right to engage
in adjustment of funds abroad with the approval of the competent departments
concerned under the State Council.

The parent companies of the enterprise groups making experiments
engaging in international project contracting and other businesses of international economic cooperation can have the right of external
guaranty
in accordance with the provisions of <Guaranty by Domestic Institutions>>>(Yin Fa [1996] No. 302) and with the
approval of the competent department under the State Council.

(3)With the approval of the competent department under the State Council,
the parent companies of the enterprise groups making experiments have self-
operated import-export right and can engage in import-export business
operations in products of identical categories relevant to the groups and
matching products. The subsidiary companies or member enterprises of the
enterprise groups making experiments which meet the required conditions
can apply separately for self-operated import-export right. Encouragement
should be given to the organization of export with complete sets of equipment
composed mainly of products of the groups.

With the approval of the competent department under the State Council,
the parent companies of the enterprise groups making experiments which meet
the required conditions can engage in overseas project contracting and
overseas services cooperation of their respective industries.

(4)The enterprise groups making experiments which have the required
conditions should all set up technology centers, upgrade their capabilities
in technological innovation, digestion and absorption of the inducted
technologies and in development of new products so as to enhance competitive-
ness in the world market.

VI.Multi-channel Increase and Supplement of the Capital Funds of the
Enterprise Groups Making Experiments to Extend their Role in Structural
Adjustment

The parent companies of the enterprise groups making experiments should,
in keeping with the requirements of division of labor in specialization,
carry out structural adjustments in internal organizations of the groups,
in industries and products so as to improve structural performance and
scale performance.

(1)Adjust rationally the liability structure of the state-owned
enterprise groups making experiments. Concerning the question of turning
the “appropriated-changed-to-loaned” funds of the enterprise groups making
experiments into state capital funds, it should be implemented in accordance
with the provisions of <and Transmission of the Suggestions of the State Planning Commission, the
Ministry of Finance and the State Economic and Trade Commission Concerning
Turning the Balance of the Principle and Interest of the “Appropriated-
changed-to-loaned” Funds of a Number of Enterprises into State Capital
Funds>>(Guo Fa [1995] No. 20).

The departments concerned under the State Council should study ways to
increase and supplement the state capital funds of the parent companies of the state-owned enterprise groups undergoing experiments
through various
channels to enable the state capital funds to reach the prescribed
percentage step by step.

(2)Establish rules for the input of capital funds. The parent companies
and subsidiary companies of the enterprise groups undergoing experiments
without capital funds or whose capital funds do not reach the level as
prescribed, their promoters should put in capital funds.

(3)Actively support the enterprise groups making experiments in the
reorganization of the state-owned stock assets. The parent companies and
subsidiary companies of the enterprise groups making experiments in cities
undergoing experiments on the “optimization of capital structure” of enterprises determined by the State Council can implement the
relevant
provisions on enterprise merger, bankruptcy and reemployment of workers
and staff members laid down in the Council Concerning Questions Relating to the Trial Implementation of the
State-owned Enterprise Merger, Bankruptcy and Reemployment of Workers and
Staff Members in a Number of Cities>(Guo Fa [1997] No. 10); the state-owned
enterprise groups making experiments in cities not undergoing experiments
can likewise implement the relevant policy provisions in Guo Fa [1997] No. 10
Document, however, they are subjected to the approval of the National
Leading Group on Enterprise Merger, Bankruptcy and Reemployment of Workers
and Staff Members upon submission of the reports by the Coordinating Teams
on Enterprise Merger, Bankruptcy and Reemployment of Workers and Staff
Members of the provinces and autonomous regions wherein the enterprises
are located and the same shall be integrated into the national work plan
for enterprise merger, bankruptcy and reemployment of workers and staff
members.

V.Strngthening of Supervision over and Evaluation of the Enterprise
Groups Making Experiments

(1)The parent companies of the enterprise groups making experiments
which are sole-proprietorship state-owned companies should, in accordance
with the provisions of the , form boards of commissioners composed
of commissioners sent by the relevant authorized supervisory organs.

(2)The authorized supervisory organs or the departments concerned
with functions of promoters should carry out regular supervision over
or evaluation of the operations and management of the assets and operations
of the state-owned capital of the parent companies of the enterprise groups
undergoing experiments and decide on the reward or penalty based on the
completion of the evaluation targets.

(3)The enterprise groups undergoing experiments should, in accordance
with the State provisions, establish rules for accounting statements and
tables for group amalgamation. Internal financial and accounting rules and
rules for auditing and supervision of capital operations of the groups
should be perfected to improve the efficiency of capital operations and
regular truthful report on capital operations made to the promoters or
supervisory organs.

(4)The enterprise groups undergoing experiments and their member
enterprises which make tax payments on a consolidated basis should, in
accordance with the relevant provisions of the State Taxation Administration,
be subject to the supervision and control of local tax organs.

VI.Extension of the Scope of Large-size Enterprise Groups
Making Experiments and Eligibilities

The scope for the selection of second batch of enterprise groups
making experiments is:(1)industries suitable for group development which
the State industrial policy renders major support; (2)enterprise groups
with stronger market competition capabilities or outward-oriented enterprise
groups with strengths; and (3)the parent companies of enterprise groups
with state-owned enterprises as the main body, while simultaneous
consideration will be given to enterprises of other forms of ownership
which meet the required conditions.

The main eligibilities for the selection of second batch of enterprise
groups making experiments are:(1)the enterprise groups already established
with the approval of the State or the departments concerned at the provincial
level, or the enterprise groups the formation of which are underway in the
light of the requirements of the State industrial structural adjustment.
(2)the enterprise groups which hold a decisive position in the scale of assets, production and operations, export and foreign exchange
earnings
and contributions to the country and rank high in the industries. In case
of the parent companies being industrial enterprises, they should, in
general, be ultra-large-size enterprises. (3)the enterprise groups with
better operational achievements and prospects for development, sound
rules for operations and management and higher leadership quality.
(4)the parent companies which do not perform the administrative functions
of the government.

63 large-size enterprise groups have been ascertained to take part in
the experiments for the second batch(list enclosed) on the basis of the
above-mentioned principles and eligibilities with the approval of the
State Council.

VII.Carrying out Efficient Organizational Work and Exercising Good
Leadership in the Experiments of Enterprise Groups

The State Planning Commission, the State Economic and Trade Commission
and the State Restructuring Commission should, in accordance with the
division of labor and requirements prescribed in Guo Fa [1991] No. 71
Document, continue to do a good job of organization, guidance and
coordination in conducting the experiments, and all local People’s
Governments concerned and the relevant departments under the State
Council should continue to provide positive coordination.

The enterprise groups making experiments should, in accordance with
the requirements put forth in this Document for deepening the experiments,
work out proposals for experiments to be submitted to the State Planning
Commission, the State Economic and Trade Commission and the State
Restructuring Commission as well as the departments concerned under the
State Council or the local governments. The work of coordination and guidance
for the formulation of proposals for experiments shall be headed by the State
Economic and Trade Commission. The formulation of proposals for experiments
should be completed by the end of June, 1998. To do a better job in
conducting experiments in enterprise groups, the State Planning Commission,
the State Economic and Trade Commission and the State Restructuring
Commission may, in the light of the actual progress made in the experiments,
put forward suggestions for necessary readjustments in the list of enterprise
groups making experiments in conjunction with the sides concerned and submit
the same to the joint session of the State Council on the reform of the
state-owned enterprises for examination and finalization.

On the questions of the establishment of financial companies by the
enterprise groups making experiments and application for authorization of examination and approval in foreign affairs, the provisions
laid down in
Guo Fa [1991] No. 71 Document shall continue to be observed; payment of enterprise income tax on a consolidated basis shall be processed
in
accordance with the existing procedures; administration of the main
leading personnel of the parent companies of the enterprise groups
making experiments shall follow the existing management structure and
the relevant provisions of ; in principle, there shall
be no new additions of enterprise groups making experiments listed as
independent units in the state plans and enjoying the political treatment
of the corresponding levels. Where there are inconsistencies in respect of other contents in Guo Fa [1991] No. 71 Document with this
Document, this
Document shall prevail. The departments concerned under the State Council
should, in accordance with the spirit of this Document, revise and perfect
the matching documents formulated for the experiments of enterprise groups
in the past or work out new documents, and promulgate the same for
implementation in conjunction with the State Planning Commission, the
State Economic and Trade Commission and the State Restructuring Commission,
so as to create conditions for pressing forward the experiments of enterprise
groups.

It is proposed that the above suggestions, if not found inappropriate,
be approved and transmitted to all regions and departments for compliance
and implementation.

Enclosure:List of the second batch of enterprise groups making
experiments

Enclosure:List of the Second Batch of Enterprise Groups Making
Experiments

__________________________________________________________________________

| | (temporary) |
______________|________|_______________________|__________________________

CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON THE ISSUE OF WHETHER THE INTEREST AND RENT EARNED BY THE FOREIGN ENTERPRISES WITHIN THE TERRITORY OF CHINA SHOULD BE LEVIED SALES TAX

The State Administration of Taxation

Circular of the State Administration of Taxation on the Issue of Whether the Interest and Rent Earned by the Foreign Enterprises within
the Territory of China Should be Levied Sales Tax

CaiShuiZi [1997] No.35

March 14, 1997

It is reported recently from the localities whether the interest and rent earned by the foreign enterprises that have not set up branches
and institutions within the territory of China should be levied sales tax is not clear. Through study, it should be clarified as
follows:

According to Article 7 of Rules for the Implementation of the Interim Regulations of People’ Republic of China on Sales Tax, the
interest and rent earned from renting the tangible movables property within the territory of China by the foreign enterprises that
have not set up branches and institutions in our country should not be levied sales tax.

II.

This circular entered into force on July 1, 1997. The previous treatment inconsistent with the present Measures, the present Measures
shall prevail.

The State Administration of Taxation
1997-03-14

TOWNSHIP ENTERPRISES LAW

Law of the People’s Republic of China on Township Enterprises



	(Adopted at the 22nd Meeting of the Standing Committee of the Eighth National People’s Congress on October 29,1996, promulgated by Order No. 76 of the President of the People’s Republic of China on October 29,1996) Article 1 This Law is enacted for the purpose of facilitating and guiding the sound and sustained development of township enterprises, protecting their legitimate rights and interests, standardizing their operations, bringing about a prosperous rural economy and promoting the socialist modernization drive. Article 2 The term “township enterprises” as used in this Law refers to the different types of enterprises that are established in townships(including the villages under their jurisdiction) with the bulk of their capital being invested by rural economic collectives or farmers and that undertake the obligations to support agriculture . The words “the bulk of their capital” as used in the preceding paragraph mean that the capital invested by the rural economic collectives or farmers exceeds 50 percent of the total, or is less than 50 percent but enough to play a holding or dominating role. A township enterprise that meets the qualifications for an enterprise legal person shall obtain the status of a legal person as an enterprise. Article 3 Township enterprises provide the mainstay of the rural economy and constitute an important component of the national economy. The main tasks of township enterprises are to develop production of commodities in light of market demands, provide service to the public, increase the supply of marketable products, absorb surplus rural labor, help raise the income of farmers, support agriculture, advance agricultural and rural modernization and promote the development of the national economy and social undertakings. Article 4 In developing township enterprises, the principle of taking the rural collective economy as the leading force and promoting the simultaneous development of the diversified economic sectors shall be adhered to. Article 5 The State gives active support to township enterprises, makes rational planning for their development, provides different guidance to different types of them and administer their affairs pursuant to law. Article 6 The State encourages and mainly helps the economically underdeveloped areas and areas inhabited by ethnic minorities to develop township enterprises, and encourages township enterprises and other economic organizations in economically developed areas to support, by different means, the economically underdeveloped areas and areas inhabited by ethnic minorities in their efforts to run township enterprises. Article 7 The administrative department for township enterprises under the State Council and other relevant departments shall, in accordance with their respective functions and responsibilities, make plans for and arrange coordination among, exercise supervision over and provide service to township enterprises nationwide; the administrative departments for township enterprises and other relevant departments of the local people’s governments at or above the county level shall, in accordance with their respective functions and responsibilities, do the same with regard to township enterprises within their respective administrative regions. Article 8 The township enterprises established through registration pursuant to law shall go through the procedure of registration for the record with the local administrative department for township enterprises. Where a township enterprise wishes to change its name or domicile, or to divide itself or merger with another, to suspend operation or close down, it shall, after making the registration of alteration, establishment or cancellation according to law, report to the administrative department for township enterprises for the record. Article 9 The branches established in cities by township enterprises and the enterprises set up by rural economic collectives in cities to undertake the obligations in support of agriculture shall be treated as township enterprises. Article 10 Where a township enterprise is established with the investment of rural economic collectives, its property rights shall be owned collectively by all the farmers who help establish such enterprise. Where a township enterprise is established with the joint investment of rural economic collectives and other enterprises, organizations or individuals, its property rights shall be owned by the investors in proportion to the amount of their shares. Where a township enterprise is established with the investment of farmers in partnership or of a farmer alone, its property rights shall be owned by the investor(s). Article 11 Township enterprises shall, in accordance with law, practise independent accounting and independent management and take full responsibility for its own profits and losses. A township enterprise that has acquired the status of an enterprise legal person shall enjoy the right to the property of the legal person. Article 12 The State protects the lawful rights and interests of township enterprises; the legitimate property of township enterprises shall be inviolable. No organizations or individuals may, in violation of laws, administrative rules and regulations, intervene in the production and operation of township enterprises, remove or replace the leading members of the enterprises; and they may not illegally take into their own possession or use without compensation the property of township enterprises. Article 13 Township enterprises shall be established in the forms provided by laws, administrative rules and regulations. The investors shall, in accordance with relevant laws, administrative rules and regulations, decide on major issues of the enterprises, institute operation and management systems, and enjoy the rights and undertake the obligations according to law. Article 14 Township enterprises shall practise democratic management in accordance with law. The investors shall, before instituting the operation and management systems of the enterprise, deciding on the leading members of the enterprise, making decisions concerning major issues such as operation, the employees’ wages and welfare, their occupational protection and safety, listen to the opinions of the trade union and the employees of such enterprise, regularly make public the implementation of the above-mentioned decisions and accept supervision by the employees. Article 15 The State encourages the institution of a sound social insurance system for the employees of township enterprises in areas where conditions permit. Article 16 If a township enterprise suspends operation or closes down, where the social insurance system has been instituted, it shall make arrangements for the employees in accordance with relevant regulations; where a labour contract has been concluded, it shall handle the matter as agreed in the contract. Those employees who came from rural economic collectives shall have the right to return to their original rural economic collectives to engage in production or they may try to seek jobs themselves. Article 17 Township enterprises shall draw a certain proportion of their after-tax profits to support agriculture and to spend on rural social undertakings. The proportion of such profits and measures for its use and management shall be prescribed by the people’s governments of provinces, autonomous regions and municipalities directly under the Central Government. Unless otherwise provided by laws, administrative rules and regulations, no State organs, organizations or individuals may, in whatever form, impose charges on or apportion expenses among township enterprises. Article 18 The State reduces a certain proportion of the tax to be collected from township enterprises for a certain period of time, depending on the level of their development. The types of tax to be reduced, the period of time for and the proportion of such reduction shall be prescribed by the State Council. Article 19 The State applies a preferential policy of taxation, for a certain period of time and in light of different circumstances, towards the small and medium-sized township enterprises that meet one of the following conditions: (1) being a collectively owned township enterprise that truly has difficulties in operation in the incipient stage after its establishment; (2) being established in an area inhabited by ethnic minorities or in an outlying and poverty-stricken area; (3) being engaged in processing, storage, transport or marketing of grain, feed or meat; or (4) being in need of special assistance according to the industrial policy of the State. The specific measures for executing the preferential policy of taxation mentioned in the preceding paragraph shall be prescribed by the State Council. Article 20 The State encourages and facilitates the development of township enterprises by means of credit and loan. With regard to the township enterprises that meet one of the conditions provided in the preceding article and the qualifications for loan, the relevant financial institutions of the State may grant them priority loan or provide concessional loan to the ones that lack funds for production but have a promising future. The specific measures for granting priority loan and concessional loan mentioned in the preceding paragraph shall be prescribed by the State Council. Article 21 The people’s governments at or above the county level may, in accordance with the relevant regulations of the State, set up development funds for township enterprises. The funds shall consist of the following: (1) the working funds allocated by the government for the development of township enterprises; (2) a certain proportion of the increased taxes annually turned over to the local people’s governments by the township enterprises; (3) the profits derived from use of the funds; and (4) the funds provided of their own free will by the rural economic collectives, township enterprises and farmers. Article 22 The development funds for township enterprises shall specially be used for supporting the development of such enterprises in the following ways: (1) to support the development of township enterprises in areas inhabited by ethnic minorities, in outlying areas and poverty-stricken areas; (2) to support economic and technological cooperation between township enterprises in economically developed areas and such enterprises in economically underdeveloped areas and areas inhabited by ethnic minorities and support their efforts in undertaking jointly-invested projects. (3) to support township enterprises in their efforts to readjust the structure of production and the mix of their products in accordance with the industrial policy of the State; (4) to support township enterprises in their efforts to update technology, to develop famous-brand, special, excellent and new products and to produce traditional handicrafts; (5) to develop such township enterprises as manufacture means of production for agriculture or directly serve the needs of agricultural production. (6) to develop such township enterprises as are engaged in processing, storage, transport and marketing of grain, feed and meat; (7) to support vocational education and technical training for employees of township enterprises; and (8) other projects that need support. The specific measures for establishment, use and management of the development funds for township enterprises shall be formulated by the State Council. Article 23 The State helps train skilled people for township enterprises and encourages scientists, technicians, managers and administrators and graduates of universities, colleges and specialized secondary schools to work in such enterprises and serve them in various ways. Township enterprises shall, through various channels and forms, train their own technicians, managers and administrators and producers and adopt preferential measures to recruit skilled people. Article 24 The State adopts preferential measures to encourage all forms of economic and technological cooperation between township enterprises on the one hand and scientific research institutions, institutions of higher learning, State-owned enterprises and other enterprises and organizations on the other. Article 25 The State encourages township enterprises to carry out economic and technological cooperation and exchange with other countries, build export-oriented commodity production bases and increase foreign exchange earnings from exports. Township enterprises that meet the requirements may, after approval in accordance with law, be authorized to engage in foreign trade. Article 26 Local people’s governments at all levels shall, under the principle of unified planning and rational geographical distribution, combine the development of township enterprises with the construction of small towns, guide and promote the properly concentrated development of township enterprises and gradually increase the building of infrastructure and service facilities to accelerate the construction of small towns. Article 27 Township enterprises shall, in accordance with market demand and the industrial policy of the State, appropriately readjust the structure of production and the mix of products, promote technical updating, constantly adopt advanced technology, production techniques and equipment and improve the standard of management and administration. Article 28 The land used for construction of township enterprises shall be in line with the general plan for the use of land, and it shall be kept under strict control and used rationally and economically; where it is possible to use wasteland or land of inferior quality, no cultivated land or land of good quality shall be used. Where land owned by rural collectives is used for construction of a township enterprise, relevant procedures shall have to be gone through to obtain approval and to register for the use of the land in accordance with laws and regulations. If the land owned by rural collectives to be used for construction of a township enterprise has been left unused for two successive years or more, or left unused for one year or more because its construction has been called off, the right to use of the land shall be taken over by the original owner, which shall make new arrangement for its use. Article 29 Township enterprises shall rationally develop and use natural resources in accordance with law. In order to extract mineral resources, a township enterprise must, in accordance with relevant laws, obtain approval of the relevant department, a mining permit and a production permit, operate in line with relevant rules and guard against waste of resources, and destruction of resources is strictly prohibited. Article 30 Township enterprises shall, in accordance with relevant regulations of the State, set up a financial and accounting system to tighten financial control and keep account books according to law to record financial activities truthfully. Article 31 Township enterprises must, according to the statistical regulations of the State, submit reports of truthful statistical data. They shall have the right to refuse to fill in statistical survey forms prepared and issued in violation of State regulations. Article 32 Township enterprises shall go through the formalities for tax registration according to law, submit tax returns regularly and pay taxes in full. The people’s governments at all levels shall strengthen the administration of tax collection in relation to township enterprises in accordance with law and the relevant administrative department shall not reduce the taxes of township enterprises or exempt them from taxation beyond the limit of its authority for administration. Article 33 Township enterprises shall pay close attention to the quality control of their products and make efforts to improve the quality; the products they manufacture and market must meet both the national standards and the trade standards for safeguarding human health and safety of the person and property; no products that have ceased to be effective, that have gone bad or that have been eliminated by formal State orders shall be manufactured or marketed; and it is forbidden to mix impurities or imitations into products, or pass a fake or defective product off as a genuine or good one. Article 34 Township enterprises shall use trademarks in accordance with law and cherish their own reputation; they shall print trademarks for the commodities they produce in accordance with State regulations, and they shall not forge the place of origin or forge or falsely use the name and address of a factory of another producer, as well as authentication marks and famous-and-excellent product marks of another producer. Article 35 Township enterprises must abide by laws and regulations regarding environmental protection and, in adherence to the industrial policy of the State and under the unified guidance of the local people’s governments, take measures to make themselves enterprises that discharge little or no pollution and consume less resources, in order to prevent and control environmental pollution and ecological disruption and to protect and improve the environment. Local people’s governments shall formulate and implement the plans of township enterprises for protecting the environment, thus increasing their ability to prevent and control pollution. Article 36 If a township enterprise undertakes a construction project that will have an impact on the environment, it must strictly apply the evaluation system governing impact on the environment. Installations for preventing or controlling pollution embraced in the construction project that is undertaken by a township enterprise must be designed, constructed and put into operation or use simultaneously with the main part of the project. The project shall not be put into operation or use until the installations for preventing or controlling pollution have been examined and accepted by the administrative department for environmental protection. No township enterprises may adopt or make use of production techniques and equipment formally prohibited by the State for they cause serious environmental pollution; and they may not manufacture or market products formally prohibited by the State for they seriously pollute the environment. Those township enterprises that discharge pollutants in excess of the standard set by the State or local authorities and thus seriously pollute the environment shall bring the pollution under control within a time limit; those that fail to do so within the time limit shall close down, suspend production or change the line of production. Article 37 Township enterprises must abide by laws and regulations regarding occupational protection and safety, conscientiously carrying out the principle of putting safety and prevention first, adopting effective technical and managerial measures for occupational health and preventing the occurrence of casualties in production and occupational diseases; and they shall remove the hidden elements of accidents that may endanger the safety of employees within a time limit or suspend production for rectification. Managers are strictly forbidden to give instructions against rules and regulations or compel employees to work at risk. Once casualties occur, they shall take emergency rescue measures, make proper arrangements for the victims according to law, and report the matter to the departments concerned. Article 38 Whoever, in violation of this Law, commits any of the following acts shall be ordered to put it right by the administrative department of the people’s government at or above the county level that is in charge of township enterprises: (1) altering ownership of a township enterprise in violation of law; (2) taking into his possession or using without compensation the property of a township enterprise in violation of law; (3) removing or replacing the leading members of a township enterprise in violation of law; or (4) encroaching on the right of a township enterprise to independent management. If any of the said acts causes economic losses to a township enterprise, compensation shall be made in accordance with law. Article 39 Township enterprises shall have the right to accuse or report against any units or individuals that collect charges from, apportion expenses among or impose fines on them in violation of law to the administrative departments for audit, supervision, finance, price control and township enterprises. The department concerned and the organ at higher levels shall order the persons who are responsible for the violation to desist and return the money within a time limit. And the departments concerned may, in light of seriousness of the violation, impose appropriate sanctions on the persons who are directly responsible for the violation. Article 40 Before they put it right, township enterprises that violate laws or regulations of the State regarding product quality, environmental protection, land administration, development of natural resources, occupational safety, taxation, etc. shall, in light of seriousness of the violation, be deprived of part or all of the preferential treatment they have enjoyed in accordance with this Law, in addition to sanctions imposed pursuant to relevant laws and regulations. Article 41 Township enterprises that, in violation of this Law, refuse to undertake the obligations in support of agriculture, shall be ordered to put it right by the administrative department for township enterprises and may, before they put it right, be deprived of part or all of the preferential treatment that they have enjoyed according to this Law. Article 42 If a party is not satisfied with the handling done or sanctions imposed according to the provisions from Article 38 through Article 41 of this Law, it may apply for administrative reconsideration or bring a lawsuit in accordance with law. Article 43 This Law shall go into effect as of January 1, 1997.

CIRCULAR OF THE STATE COUNCIL ON RELATED QUESTIONS CONCERNING THE ADJUSTMENT OF THE TAXATION POLICY FOR THE FINANCIAL AND INSURANCE INDUSTRIES

Category	TAXATION	Organ of Promulgation	The State Council	Status of Effect	In Force
Date of Promulgation	1997-02-19	Effective Date	1997-02-19

Circular of the State Council on Related Questions Concerning the Adjustment of the Taxation Policy for the Financial and Insurance Industries

(February 19, 1997)

For the purpose of bringing into play the role of taxation in regulation
and control, further smoothing the relations of distribution between the
State and the financial and insurance enterprises, promoting equal competition
among financial and insurance enterprises and guaranteeing the financial
revenue of the State, the State Council decides to adjust the taxation policy
for the financial and insurance industries as of January 1, 1997. The related
questions are hereby notified as follows:

1.Standardize the income tax rate of the financial and insurance enter-
prises. The income tax rate of 55% currently in force for the financial and
insurance enterprises, their income tax rate shall be unifiedly reduced to
33%. Budget grades for the income tax of the financial and insurance enter-
prises shall remain unchanged.

2.Revise the provisions on sales tax rate for the financial and insurance
industries in the of China>, raising the current sales tax rate of 5% for the financial and
insurance industries to 8%. After the increase in the sales tax rate,
exclusive of the sales tax paid by the head offices of all banks and
insurance companies which shall be the revenue of Central finance in its
entirety, the sales tax paid by other financial and insurance enterprises,
the portion collected according to the original 5% rate goes to the revenue
of local finance, the portion collected according to the raised 3% rate
belongs to Central finance.

3.Financial enterprises with foreign investment and foreign financial
enterprises set up in the special economic zones(including Shanghai Pudong
New Development Zone and Suzhou Industrial Park, the same hereinafter),
whose sales revenue originating from inside the special economic zones shall
continue to implement the preferential policy of sales tax exemption
starting from the date of registration and collection at the rate of 8%
shall be enforced upon expiration of the exemption period; the portion of sales revenue originating from outside the special economic
zones, the
preferential policy of tax exemption for special economic zones shall no
longer be implemented, and relevant taxation policy for financial enterprises
with foreign investment and foreign financial enterprises established outside
special economic zones shall be implemented.

4.For financial and insurance enterprises with foreign investment and foreign
financial and insurance enterprises established outside special economic
zones before December 31, 1996, sales tax shall be levied at the reduced
rate of 5% which shall remain to be revenue of local finance before December
31, 1998; sales tax shall be levied at the rate of 8% as of January 1, 1999.
Financial and insurance enterprises with foreign investment and foreign
financial and insurance enterprises newly established outside special economic
zones after January 1, 1997 shall all implement the sales tax rate of 8%.

5.After the increase in sales tax rate for the financial and insurance
industries, State policy banks shall be levied at the reduced rate of 5%.
Sales tax paid by policy banks shall be returned to them as State capital
investment. The return policy shall cease to be implemented starting from
the date when capital of policy banks reaches the amount prescribed by the
State Council.

6.After the increase in sales tax rate for the financial and insurance
industries, sales tax of rural credit unions shall be levied at the reduced
rate of 5% before December 31, 1997 which shall continue to be the revenue
of local finance;it shall be levied at the resumed rate of 8% as of January 1,
1998.

7.After the increase in sales tax rate for the financial and insurance
industries, urban maintenance and construction tax and additional education
fee levied along with sales tax shall continue to be calculated and levied
at the original rate of 5%, the portion of the increased rate of 3% shall
be exempted. Revenue of additional taxation shall continue to be revenue
of local finance.

8.After the increase in sales tax rate for the financial and insurance
industries, sales tax of financial and insurance enterprises the collection
of which is the responsibility of the collection organs under local tax
bureaus currently shall be jointly collected by collection organs under
State tax bureaus and local tax bureaus. Among this tax, the portion
calculated and levied at the original rate of 5% shall be collected by
collection organs under local tax bureaus, the portion calculated and
levied at the increased rate of 3% shall be collected by collection organs
under State tax bureaus. Sales tax paid by head offices of all banks and
insurance companies shall continue to be collected by collection organs
directly under the State Taxation Administration. Urban maintenance and
construction tax and additional education fee levied along with sales tax
shall be collected by collection organs under local tax bureaus.

Adjustment of taxation policy for the financial and insurance industries
constitutes an important decision made by the State Council, people’s
governments of all localities must attache great importance to it and
strengthen leadership;organs of State tax bureaus and local tax bureaus
at all levels should closely cooperate with each other, really strengthen
taxation administration, plug tax avoidance, evasion and leakage;
all financial and insurance enterprises should further enhance
the consciousness of paying tax, declare and pay tax in sufficient amount
and timely in accordance with the provisions of the State to ensure the
implementation of the State taxation policy for financial and insurance
enterprises.

1...343536...212 Page 35 of 212

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CIRCULAR OF THE STATE ADMINISTRATION OF TAXATION ON THE ISSUE OF WHETHER THE INTEREST AND RENT EARNED BY THE FOREIGN ENTERPRISES WITHIN THE TERRITORY OF CHINA SHOULD BE LEVIED SALES TAX

TOWNSHIP ENTERPRISES LAW

CIRCULAR OF THE STATE COUNCIL ON RELATED QUESTIONS CONCERNING THE ADJUSTMENT OF THE TAXATION POLICY FOR THE FINANCIAL AND INSURANCE INDUSTRIES

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

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CONSTITUTION ACT, 1982 – page 7