CIRCULAR OF THE MINISTRY OF COMMERCE ON CLARIFYING RELEVANT ISSUES CONCERNING THE INSPECTION OF DIRECT SELLING SERVICE NETWORK

Circular of the Ministry of Commerce on Clarifying Relevant Issues Concerning the Inspection of Direct Selling Service Network

Shang Zi Han [2007] No. 35

In accordance with Article 6 of the Measures for Administration of the Establishment of Direct Selling Service Network (Decree of
the Ministry of Commerce No. 20, 2006), administrative commercial departments of all provinces, autonomous regions, municipalities
directly under the Central Government shall, jointly with administrative commercial departments at or above the district/county level
where the service network is located, conduct examination on the service network that has been set up in accordance with the Regulations
on Direct Selling Administration, and shall report the result of the examination to the Ministry of Commerce for archival purpose
in a one-off manner. For the purpose of unifying the examination requirements and the format of the examination report after examination,
it is hereby notified as follows:

The administrative commercial departments at or above the district/county level where the service network is located shall offer suggestions

The administrative commercial departments at or above the district/county level where the service work is located shall carry out
examination on the service network in accordance with projects of service network approved by the Ministry of Commerce as well as
the Regulations on Direct Selling Administration. In principle, the reduction of the number of service network and the trans-district
or trans-county change of the address of service network both are cases where the establishment of service network failed to comply
with the project. In line with Article 11 of the Regulations on Direct Selling Administration, the enterprise shall be required
to report the revised project of service network in conformity with the original procedure, and examination in a one-off manner,
upon approval, shall be carried out in accordance with the new project. However, the decrease of service network caused by the reduction
of areas for direct selling made by the enterprise and the dismantling of service network that is inconsistent with the provisions
of the Regulations on Direct Selling Administration shall not be included herein. The administrative commercial departments at or
above the district/county level shall file a written report after examination to the administrative commercial departments at the
provincial level, and the format shall be designed by the latter.

The format of the letter of examination report by the administrative commercial departments at the provincial level

The administrative commercial departments at the provincial level, in accordance with the suggestions given by the administrative
commercial departments at or above the district/county level of all provinces, autonomous regions, municipalities directly under
the Central Government, shall submit the letter of examination report (see Appendix I for model format) to the Ministry of Commerce
and clarify the name and number of districts in districted cities. The letter of examination report given by the administrative commercial
departments at or above the district/county level shall be kept for record by the administrative commercial departments at the provincial
level and need not be submitted to the Ministry of Commerce.

The letter of examination report may only bear the official seal of the foreign investment division or the domestic trade division
under the administrative commercial departments at the provincial level, but shall bear such a statement as “This letter of examination
report has been examined by officials in charge of commerce of all provinces (autonomous regions, municipalities directly under the
Central Government)”.

The time limit for examination

The administrative commercial departments at the provincial level shall finish the examination within 30 working days as from the
day the enterprise files the application and write out a letter of examination report and submit it to the Ministry of Commerce.

Ministry of Commerce

March 21, 2007
Appendix:
Letter Concerning the Submission of Examination Report on XXX Enterprise Service Network

Ministry of Commerce:

XXX enterprise has filed an application for service network examination to the present department/committee/bureau within six months
as of the day of distribution of the document of approval.

Upon examination by the administrative commercial departments at the county/city/district level, XXXenterprise has completed the establishment
of service network in such places as XXX city or XXX county. It set up__ (number) service network in the present province (district/city)
in total which are all in conformity with the service network project approved by the Ministry of Commerce. The number, location
and function of the service network are in accordance with the requirements provided by Item 2 of Article 10 of the Regulations
on Direct Selling Administration and that by Article 3 of the Measures for Administration of the Establishment of Direct Selling
Service Network. To be specific, there are __districts such as XXX district and XXX district in XXX city.

(Where the district fails to finish the establishment of service network or that which does not comply with the service network project
approved by the Ministry of Commerce, a clear statement shall be added: upon examination by the administrative commercial departments
at the county/city/district level, XXX enterprise fails to complete the establishment of service network or fails to comply with
the service network project)

This letter of examination report has been examined by officials in charge of commerce of all provinces (autonomous regions, municipalities
directly under the Central Government), and is hereby submitted for record.

Appendix:

Form of Examined Service Network of XXX Enterprise (Omitted)

Administrative Commercial Departments at the Provincial Level (Seal)

Date:________________

Ministry of Commerce
2007-03-21

OFFICIAL REPLY OF THE STATE ADMINISTRATION OF TAXATION ON HOW TO DEAL WITH THE INCOME TAX ON THE GOVERNMENT SUBSIDES ACQUIRED BY FOREIGN-FUNDED ENTERPRISES AND FOREIGN ENTERPRISES

Official Reply of the State Administration of Taxation on How to Deal with the Income Tax on the Government Subsides Acquired by Foreign-funded
Enterprises and Foreign Enterprises

Guo Shui Han [2007] No. 408

State Taxation Bureau of Gansu Province:

We have received your Request for Instructions on Whether Netzsch (Lanzhou) Pumps Co., Ltd. Should Pay Enterprise Income Tax on Its
Income from Government Subsidies (Gan Guo Shui Fa [2006] No. 146). We hereby render a reply as follows:

The various forms of monetary assets or non-monetary assets gratuitously acquired from the government (hereinafter referred to as
government subsidies) by the agencies and offices set up by foreign-funded enterprises and foreign enterprises inside China (hereinafter
referred to as enterprises) shall be dealt with respectively in light of the following circumstances:

(1)

Subject to the laws, regulations and the provisions of the State Council, if the government subsides acquired by the enterprises are
exempted from enterprise income tax, such government subsides acquired by the enterprises shall be taken as investments, that is
to say, the assets of government subsides as accepted shall be assessed and may be depreciated or amortized in light of the taxation
treatments for investment assets, and the value of such government subsides are not calculated into the amount of taxable incomes
of the enterprises.

(2)

Unless it is under the circumstance as prescribed in Item (1) of this Article, if the government subsides acquired by the enterprises
satisfies any of the following conditions, they may not be calculated into current losses and profits of the enterprises, but the
assets purchased or formed by the said government subsides shall be estimated, depreciated or amortized after deduction of the amount
of government subsides:

(a)

The assets from government subsidies are the non-current assets an enterprise owns for a long time; or

(b)

An enterprise has acquired government subsidies in the form of current assets, but it has used or must use such subsidies for purchase,
construction or improvement of non-current assets in accordance with the requirements for government subsidies.

(3)

Where the government subsidies acquired by an enterprise do not fall into the circumstances as provided in items (1) or (2) of this
Article, the amount of government subsidies shall be calculated into the current losses and profits of the enterprise, and the enterprise
income tax shall be paid by the enterprise.

Where the taxation treatment is dealt with in accordance with the present Reply, and the tax repayment or refund is involved, it shall
be dealt with under the Law of the People’s Republic of China on the Administration of Tax Collection and the detailed rules for
the implementation thereof.

The State Administration of Taxation

April 5, 2007

The State Administration of Taxation
2007-04-05

MEASURES FOR THE ADMINISTRATION OF LAUNDRY AND DYEING INDUSTRY

Decree of the Ministry of Commerce, State Administration for Industry and Commerce, State Environmental Protection Administration

No.5

Measures for the Administration of Laundry and Dyeing Industry is hereby announced and shall come into effect as of July 1, 2007 after
it has been deliberated and passed at the 10th executive conference of the Ministry of Commerce on December 20, 2006 with the approval
of State Administration for Industry and Commerce and State Environmental Protection Administration

Minister of the Ministry of Commerce Bo Xilai

Director of General Administration for Industry and Commerce Zhou Bohua

Director of State Environmental Protection Administration Zhou Shengxian

May 11, 2007

Measures for the Administration of Laundry and Dyeing Industry

Article 1

The Measures herein are formulated in accordance with the relevant state law, administrative regulations for the purpose of standardizing
the behavior of laundry and dyeing service, maintaining the lawful rights and interests of operators and consumers, preventing environmental
pollution, promoting the sound development of laundry and dyeing industry.

Article 2

The Measures herein shall apply to the laundry and dyeing operation within the territory of the People’s Republic of China.

“Laundry and Dyeing” mentioned in the Measures herein refers to such operation activities as washing, ironing, dyeing, and weaving
of clothes and washing, maintaining of leather-made products and clothes.

Article 3

The Ministry of Commerce shall undertake guidance, coordination, supervision and management of national laundry and dyeing industry,
various local authorities in charge of commerce shall be responsible for the guidance, coordination, supervision and management of
laundry and dyeing industry within its administrative region respectively.

The industrial and commercial authorities shall be responsible for regulating laundry and dyeing industry, supervising the quality
of service products and business operation, and for investigating and punishing in light of the laws such acts as infringing the
legal rights of interests of consumers.

The environmental protection authority shall undertake supervision and administration of such acts as affecting the environments in
the process of opening and operating the laundry and dyeing enterprise, investigating and punishing in light of the laws environmental
unlawful acts.

Article 4

To open washing and dyeing store and water washing factory shall accord with the relevant laws and standard requirement with respect
to safety, sanitary, environmental protection, water saving, energy saving.

The enclosure dry-cleaning making with purifying, recycling and dry-cleaning solvent functions shall be used in the newly build, altered,
or extended washing and dyeing stores.

The open dry-cleaning machine shall be phased out. The open dry-cleaning machine currently used shall be refitted to increase the
compressor cooling recycling system, and forcefully recycle the dry-cleaning solvent; where the open petroleum derivative solvent
dry-cleaning machine and drying machine is used, it shall be equipped with fire-proof and explosion-proof safety equipment.

Article 5

Environmental influence assessment shall be carried out upon the newly built, altered or extended washing and dyeing store and water
washing factory and can be put into use after it has passed the inspection and collection by environmental authority.

The operator who undertakes washing and dyeing shall register lawfully and withdraw the business license.

The operator shall, within 60 days after having acquired the business license, handle the record in the same level commerce authority
as the industrial and commercial administrative authority at the registration place.

Article 6

The operator shall have fixed business site, such equipments as washing, custody, and pollution prevention in par with its business
scale and accord with the relevant national regulations.

Article 7

The washing and dyeing store shall not use such dry-washing solvents as does not accord with the relevant national regulations. The
storage, usage and recycling site shall be equipped with leakage-proof condition, the dangerous chemical products shall accord with
the relevant administration of dangerous chemical products.

The laundering factory shall be encouraged to use phosphor-free and low phosphor washing products.

Article 8

The discharge of pollutant shall meet the requirement of pollutant discharge in national or local regulations. The new discharge
standard shall be implemented after it has been promulgated.

The residue, sewage containing dry-cleaning solvent generated in the process of dry cleaning shall be appropriately collected and
handled. The dangerous wastes shall be lawfully entrusted to the units holding the business license of dangerous wastes for handling
and disposal.

Where the sewage is discharged to urban sewage tubes to be treated together, it shall accord with the relevant water quality requirement
by the sewage treatment factory. Where the factory hereof is equipped with sewage treatment equipment, it shall carry out innocuity
treatment upon the generated sewage.

Such sewage as does mot accord with the standard shall not be discharged to river, lake, rain sewer, leakage pit, leakage well and
etc.

The noise zone in the laundering and water-washing factories shall accord with the relevant rules of the Standard of Noise at Boundary
of Industrial Enterprises GB12348-90.

Article 9

The operator shall formulate the system of safe production, environmental protection and sanitary management system in line with
the requirement of laws and regulations, provide effective protective products to the staff and undertake regular safe, environmental
protection, sanitary education training upon the staff.

Article 10

The employed staff shall observe professional ethics, abide by national laws and regulations, the washing and dyeing technical staff
shall have the relevant professional skills, shall be encouraged to obtain the qualification certificate issued by the relevant national
authority or the training qualification certificate issued by the relevant organizations and to work with the certificates hereof.

Article 11

The operator shall hang business license at the noticeable place of the business site and to expressly show service content, service
price and complaint telephone number and etc.

Article 12

The operator shall follow the principle of good faith in the process of operation and give real and clear reply to the relevant questions
raised by consumers, may not deceive and misguide consumers, may not conduct the following deceptions:

(1)

deceptive propaganda;

(2)

to undertake consumption default by using value card;

(3)

such deceptive acts as using “water washing”, ” iron” to work off dry wash;

(4)

to conceal the fact that the clothes have been damaged in the process of washing deliberately;

(5)

other deceptive acts against laws, and administrative regulations.

Article 13

The operator shall check seriously the received clothes and perform the following liabilities:

(1)

hint the consumer to check whether any carry-over is left and to confirm whether the attachment and decorates are complete;

(2)

hint the consumer the damageable, corruptive and expensive decorates or attachment to clarify service liabilities;

(3)

to explain to consumers new and old, dirty and clean, damage of clothes, quality of the cloth, performance variance and effect of
washing and dyeing;

(4)

to inform consumers the clothes which is really difficult to wash and dye or have hard besmirch and to confirm the effect of washing
and dyeing.

Article 14

The operator may undertake value-preserving washing in accordance with the willing of the consumers, i.e. the written washing agreement
made by the operator and consumers about cost of washing, value-preserving cost, value-preserving amount and service content.

Where the clothes subject to value-preserving are damaged or lost, or directly undermine the quality of the original clothes after
washing, the operator shall compensate in accordance with the preserving amount agreed with the consumer.

Article 15

The operator shall issue service bill to consumers when offering service. The content of the service bill shall include: name of
clothes, quantity, color, damage or shortage, service content, price, date of delivery, period of custody, particulars agreed by
both parties, means of dispute settlement.

Article 16

The operators shall act the service code of launder and dyeing industry, operation regulations and quality standard and appoint designated
personnel to undertake quality inspection launder and dyeing.

Article 17

The operators shall standardize the clothes handing-over procedure to prevent loss or damage of clothes; dirty and clean clothes
shall be stored and paid respectively.

Article 18

The textile products of the medical unit shall be washed and processed in the specialized factory zone, special washing equipment
and be sanitized strictly.

The washed textile products after sanitation shall accord with the relevant national requirement.

Article 19

Where the washed clothes fail to meet the washing quality requirement or do not accord with the requirement reached with the consumers
in advance or the clothes are damaged or lost because of the responsibilities of the operators, the operator shall reprocess it in
light of different situation, refund the launder and dyeing fee or compensate the damage.

Where the quality of washed clothes fails to reach quality standard because the misguided washing mark or quality does not accord
with national and professional standard requirement rather than it is the fault of the operator, the operator shall be exempted from
the relevant responsibility.

Article 20

The authority in charge of commerce shall standardize and clean market order and promote the development of the industry herein by
formulating industrial development program, promotion policy, standard and comprehensive coordination, promoting the industrial development.

The authorities in charge of commerce shall guide and support launder and dyeing quality appraisal committee to carry out quality
appraisal work, guide the relevant professions to formulate solutions to consumption dispute and to maintain the lawful rights and
interests of the operators and consumers.

Article 21

The Laundry and Dye Industry Association shall accept the business guidance of the authorities in charge of commerce to strengthen
professional self-discipline, carry out such industrial promotion development works as faithful operation, organizing the implementation
standard, providing information consultation, pursuing technical training, mediating service disputes, and reflecting the opinions
and requirements of the operators.

Article 22

Should the operator violates the Measures herein which is prescribed in laws and regulations, the laws and regulations herein shall
prevail; otherwise, the Ministry of Commerce, the industrial and commercial authority and the environmental authority shall, in accordance
with Article 3 in the Measures hereinorder the violators herein to rectify its acts, should the violators have illegal income,
the violators herein may be fined below 3 times and the maximum fine shall not exceed 30,000 yuan, should the violators have no illegal
income. The violators may be charged less than 10,000 yuan and may be announced.

Article 23

The authorities in charge of commerce in all provinces, autonomous regions, and municipalities may, in accordance with the Measures
herein and the practical situation of the dyeing industry in its administrative region , enact the relevant implementation measures
with the relevant authorities.

Article 24

The definitions of the terms mentioned in the Measures herein:

Enclosure dry-cleaning machine: such dry cleaning machines as use Tetrachloroethylene or petroleum derivative solvent as dry-cleaning
solvent, equipped with solvent recycled cooling system, in the process of deodorization, the gas in machine and the work place don’t
exchange and waste gas doesn’t discharge directly.

Open dry cleaning machine: such dry cleaning machines as use Tetrachloroethylene or petroleum derivative solvent as dry-cleaning solvent,
use water-cooling recycling system to conduct deodorization by absorbing fresh air and discharging dry-cleaning solvent and gas mixture
discharged from the machine before opening the in-out gate.

Dyeing: only the redyeing and dyeing of other colors in the washing and dyeing stores,

Article 25

The Measures herein shall come into effect as of July 1, 2007.

Ministry of Commerce, State Administration for Industry and Commerce, State Environmental Protection Administration
2007-05-11

CIRCULAR OF THE MINISTRY OF FINANCE AND THE STATE ADMINISTRATION OF TAXATION CONCERNING LOWERING THE EXPORT REBATE RATES FOR SOME COMMODITIES

Circular of the Ministry of Finance and the State Administration of Taxation concerning Lowering the Export Rebate Rates for Some
Commodities

Cai Shui[2007] No. 90

Each department (bureau) of public finance, and state taxation bureau of each province, autonomous region, municipality directly under
the Central Government and each city specifically designated in the state plan:

The export rebate rates for some commodities have been adjusted upon approval of the State Council. The related matters are hereby
noticed as follows:

Cancel the export tax rebates for the following commodities:

(1)

Endangered animals and plants, and their products;

(2)

The mineral products such as salt, solvent naphtha, cement, liquefied propane, liquefied butane and liquefied petroleum gas;

(3)

Fertilizer (not including urea and diammonium phosphate for which the tax rebates have been cancelled);

(4)

Chemical product such as chlorine, dyestuffs (excluding fine chemical products);

(5)

Metal carbides and activated carbon products;

(6)

Leather;

(7)

Some wood boards and one-off wood products;

(8)

Ordinary plain carbon welded pipe products (excluding petroleum casing pipes);

(9)

Simple products processed from nonferrous metals such as non-alloyed aluminum bars;

(10)

Segmented vessels and non-motor vessels.

See Appendix 1 for the names and HS codes of the specific commodities.

Lower the rates of export tax rebate for the following commodities:

(1)

The rate of export tax rebate for vegetable oil shall be lowered to 5%;

(2)

The rate of export tax rebate for some chemical products shall be lowered to 9% or 5%;

(3)

The rate of export tax rebate for plastic, rubber and their products shall be lowered to 5%;

(4)

The rate of export tax rebate for boxes shall be lowered to 11%, and the rate of export tax rebate for other leather and fur products
shall be lowered to 5%;

(5)

The rate of export tax rebate for paper products shall be lowered to 5%;

(6)

The rate of export tax rebate for garments shall be lowered to 11%;

(7)

The rate of export tax rebate for shoes, caps, umbrellas, and feather products, etc. shall be lowered to 11%;

(8)

The rate of export tax rebate for some stone materials, ceramic, glass, pearls, jewelries, precious metals and their products shall
be lowered to 5%;

(9)

The rate of export tax rebate for some steel products (petroleum casing pipes excluded) shall be lowered to 5%, but the oceanographic
engineering structures for domestic sale as stipulated in the “Circular of the Ministry of Finance and the State Administration of
Taxation Concerning the Application of VAT Rebate to Oceanographic Engineering Structures” (Cai Shui [2003] No. 46) shall still be
governed by the original rate of tax rebate;

(10)

The rate of export tax rebate for other base metals and their products (not including export rebates commodities which have been cancelled
or which are being cancelled, as well as aluminum foils, aluminum pipes and aluminum structures, etc.) shall be lowered to 5%;

(11)

The rate of export tax rebate for planers, slotting machines, cutting machines, and broaching machines, etc. shall be lowered to 11%,
and the rate of export tax debate for diesel engines, pumps, fans, exhaust valves and the parts thereof, rotary furnaces, coke furnaces,
sewing machines, staplers, golf carts, over-snow vehicles, motorcycles, bicycles, trailers, elevators and the parts thereof, faucets,
soldering machines, etc. shall be lowered to 9%;

(12)

The rate of export tax rebate for furniture shall be lowered to 11% or 9%;

(13)

The rate of export tax rebate for clocks, watches, toys and other miscellaneous products, etc. shall be lowered to 11%;

(14)

The rate of export tax rebate for some wood products shall be lowered to 5%;

(15)

The rate of export tax rebate for viscose fiber shall be lowered to 5%.

See Appendix 2 for the names and HS codes of the specific commodities.

The following commodities shall be duty free when exported:

Peanut kernels, canvas, decorative carved boards, postage stamps, duty stamps, etc.

See Appendix 3 for the names and HS codes of the specific commodities.

Implementation Time

The export rebate rates which have been adjusted for the commodities mentioned above shall be enforced as of July 1, 2007. The specific
implementation time shall be the date of export as indicated on the customs’ “Declaration Form for the Export of Goods (specially
used for export rebates)”.

The original rebate rate shall be permitted to continue to apply to the export enterprise if it has signed a vessel export contract
relating to cancelled export rebates before July 1, 2007, and brought the export contract (original copy and counterpart) to the
taxation authority responsible for export rebate taxes for registration and archival filing before July 20, 2007, the export tax
rebate treatment shall be considered as having been cancelled in case it fails to handle the procedures for archival filing before
July 20, 2007.

For the export equipment and building materials involved in a long-term foreign contracted engineering project for which an export
enterprise eligible for foreign contracted engineering won the bid before July 1, 2007 or in a contract for long-term foreign contracted
engineering including an unchangeable price which the enterprise concluded before July 1, 2007, the original export tax rebate rate
shall be permitted to continue applying to the enterprise if the effective bid-winning certificate (original copy and duplicate),
or the concluded contract for long-term foreign contracted engineering (original copy and duplicate) and the list of engineering
estimation had been bought by the enterprise to the taxation authority responsible for export tax rebates for registration and archival
filing before July 20, 2007. The adjusted export tax rebate policies shall apply if it fails to handle the procedures for archival
filing before July 20, 2007.

Appendixes:

1. List of Commodities the Export Rebates of Which Are Cancelled (omitted)

2. List of Commodities the Export Rebate Rates of Which Are Lowered (omitted)

3. List of Commodities Which Will be Duty Free (omitted)

The Ministry of Finance

The State Administration of Taxation

June 19, 2007

The Ministry of Finance, the State Administration of Taxation
2007-06-19

DECISION OF THE STANDING COMMITTEE OF THE NATIONAL PEOPLE’S CONGRESS ON ANNULLING THE REGULATIONS OF THE PEOPLE’S REPUBLIC OF CHINA ON AGRICULTURAL TAX

Decision of the Standing Committee of the National People’s Congress on Annulling the Regulations of the People’s Republic of China on Agricultural Tax



	Order of the President of the People’s Republic of China No. 46 The Decision of the Standing Committee of the National People’s Congress on Annulling the Regulations of the People’s Republic of China on Agricultural Tax, adopted at the 19th Meeting of the Standing Committee of the Tenth National People’s Congress of the People’s Republic of China on December 29, 2005, is hereby promulgated. Hu Jintao President of the People’s Republic of China December 29, 2005 (Adopted at the 19th Meeting of the Standing Committee of the Tenth National People’s Congress on December 29, 2005) At its 19th Meeting, the Standing Committee of the Tenth National People’s Congress made the following decision: The Regulations of the People’s Republic of China on Agricultural Tax, adopted at the 96th Meeting of the Standing Committee of the First National People’s Congress on June 3, 1958, shall be annulled as of January 1, 2006.

ANNOUNCEMENT NO.2, 2006 OF THE GENERAL ADMINISTRATION OF CUSTOMS OF THE PEOPLE”S REPUBLIC OF CHINA

the General Administration of Customs

Announcement No.2, 2006 of the General Administration of Customs of the People”s Republic of China

[2006] No.2

State Council has approved to offer the “Roasted coffee, not decaffeinated” (with tariff code of 09012100) originating from Uganda
preferential zero customs duty as from Jan 1, 2006, the standards of origin are subject to Customs of the People’s Republic of China
Regulations on Implementation of Regulations on Origins of Commodities under the Preferential Customs Duties Treatment of the People’s
Republic of China to the least developed countries of Africa (General Administration of the Customs Decree No.123). Those complying
with above regulations and having finished declaration formalities and paid customs duties after Jan 1, 2006 may enjoy tax-refund.

The declaration forms of above commodities should be filled in accordance with General Administration of Customs Announcement No.69,
2005 “Specific Filling Requirements of Un-net-working Administration of Origins Certificate”. The code for favorable trade negotiation
is “05”.

General Administration of Customs

Jan 12, 2006

the General Administration of Customs
2006-01-12

CIRCULAR OF THE MINISTRY OF COMMERCE ON ENTRUSTING THE ADMINISTRATIVE DEPARTMENTS OF COMMERCE AT PROVINCIAL LEVEL TO EXAMINE, APPROVE AND ADMINISTRATE THE FOREIGN-INVESTED CONSTRUCTION ENTERPRISES

Ministry of Commerce

Circular of the Ministry of Commerce on Entrusting the Administrative Departments of Commerce at Provincial Level to Examine, Approve
and Administrate the Foreign-invested Construction Enterprises

Shang Zi Han [2005] No. 90

To the administrative departments of commerce of all provinces, autonomous regions, municipalities directly under the Central Government
and cities under separate state planning, and the administrative department of commerce of Xinjiang Production and Construction Corp.,

In light of the requirements of the State Council on simplifying the administrative examination and approval system and for the purpose
of simplifying the procedures for the examination and approval of the contracts and articles of association of foreign-funded enterprises,
enhancing the efficiency and accelerating the work relevant to the drawing of foreign capital in the field of service trade, we hereby
issue a notice on entrusting the administrative departments of commerce of all provinces, autonomous regions, municipalities directly
under the Central Government and cities under separate state planning, and the administrative department of commerce of Xinjiang
Production and Construction Corps (hereinafter referred to as the provincial administrative departments of commerce) and the administrative
commissions of national economic and technical development zones to examine, approve and administrate the foreign-funded construction
enterprises as follows:

The administrative departments of commerce at provincial level and the administrative commissions of national economic and technical
development zones are entrusted to examine, approve and administrate the foreign-funded construction enterprises.

II.

All the entrusted departments and institutions shall rigorously enforce the standards, seriously examine and approve the establishment
or alteration of foreign-funded construction enterprises, and conduct the relevant matters after soliciting the opinions of the construction
administrative department according to the Provisions on the Administration of Foreign-funded Construction Enterprises (No. 113 [2002]
of the Ministry of Construction and the Ministry of Foreign Trade and Economic Cooperation) and other laws and regulations on foreign
investment. The entrusted departments and institutions shall report all the problems encountered in the examination and approval
to the Ministry of Commerce, and in case that any illegal examination and approval act occurs during the course of entrustment, the
Ministry of Commerce may circulate a notice of reprimand or even take back the entrustment according to the actual situation.

III.

All the entrusted departments and institutions shall have the conditions for connecting their own networks to the network of the Ministry
of Commerce for issuing the documents on approval of foreign-funded enterprises and carrying out the joint online annual inspection,
and shall manage the work relevant to the examination and approval, archival filing and statistics by making use of the network certificate
issuance system for foreign-funded enterprises. All the relevant statistical data shall conform to the requirements and be convenient
so that the Ministry of Commerce may know the conditions and strengthen the supervision. The Ministry of Commerce will conduct trainings
on the local administrative departments of commerce and the administrative commissions of national economic and technical development
zones so as to clarify the specific issues during the course of examination and approval in the near future.

IV.

All the entrusted administrative commissions of national economic and technical development zones shall apply the simple and efficient
administrative system in accordance with the Notice of the General Office of the State Council on Forwarding Some Opinions of the
Ministry of Commerce and Other Departments on Further Enhancing the Development Level of National Economic and Technical Development
Zones (No. 15 [2005] of the State Council). After the archival filing of administrative systems, personnel trainings and networking
check conducted by the administrative commissions of national economic and technical development zones are accepted qualified after
examination, the Ministry of Commerce shall separately handle the corresponding entrustment formalities by batches.

This Entrustment shall come into force as of March 31, 2006.

Ministry of Commerce of the People’s Republic of China

January 22, 2006

Ministry of Commerce
2006-01-22

MEASURES FOR PUBLIC FINANCE EXAMINATION WORK

Ministry of Finance

Order of the Ministry of Finance

No. 32

The Measures for Public Finance Examination Work, which were adopted at the executive meeting of the Ministry of Finance on January
10, 2006 upon deliberation, are hereby promulgated and shall enter into effect as of the day of March 1, 2006.

Minister of the Ministry of Finance, Jin Renqing

January 26, 2006

Measures for Public Finance Examination Work

Article 1

The present Measures are formulated in accordance with the laws of the Budget Law of the People’s Republic of China and the Regulation
on Penalties and Sanctions against Illegal Fiscal Acts and other administrative regulations for the purpose of regulating the public
finance examination work, guaranteeing and supervising the effective implementation of finance examination conducted by the department
of finance and protecting the legitimate rights and interests of citizens, legal persons and other organizations.

Article 2

The present Measures shall be applied to any finance examination implemented in accordance with the law by the departments of finance
of the people’s governments at or above the county level and the offices dispatched by the departments of finance of the people’s
governments at or above the provincial level (hereinafter uniformly referred to as the finance department).

Article 3

The term “public finance examination” as mentioned in the present Measures refers to an act that the finance department carries out
an examination on the implementation of regulations on finance and taxes and the matters of administration on fiscal, finance and
accounting etc. by entities and individuals for the purpose of executing its duties and functions of supervision over public finance,
rectifying any illegal fiscal act and maintaining the fiscal and economic order of the state.

Article 4

When implementing any public finance examination, the finance department shall follow the principles of legality, objectivity, fairness
and openness.

Article 5

The finance department shall, in accordance with the provisions of laws, regulations, rules as well as the present Measures, implement
public finance examination within the scope of its prescribed powers and functions, and draw a relevant conclusion on examination
or decision on treatment or punishment in accordance with law.

Any dispute on the jurisdiction of public finance examination shall be reported to the same superior finance department to designate
the jurisdiction.

Article 6

The finance department shall establish an annual plan of public finance examination and organize and implement relevant public finance
examination in accordance with the plan, or organize and carry out the relevant public finance examination in accordance with the
requirements of daily fiscal administration.

Article 7

Where the finance department implements any public finance examination, an examination team shall be set up and a team leader shall
be designated as well. Examination teams shall adopt a leader responsibility system.

Article 8

The examiners of an examination team shall consist of functionaries of the finance department, who shall be qualified as follows:

(1)

Being familiar with the relevant laws, regulations, rules and policies;

(2)

Mastering the relevant professional knowledge; and

(3)

Having the capability of investigation and research, comprehensive analysis and literal expression.

Article 9

In accordance with the requirements, the finance department may invite special institutions or personnel with specialized knowledge
to assist the relevant examiners to implement the finance examination.

Article 10

Any examiner who has any direct interest with any entity or individual under examination (hereinafter uniformly referred to as the
examinee) shall withdraw. Where any examinee believes that any examiner has any interest with him, he may require the withdrawal
of the examiner.

The principal of the finance department shall be responsible for making decision on the withdrawal of any examiner.

Article 11

The examiners shall comply with the relevant provisions of the state on confidentiality and shall not reveal any state secret or commercial
secret learned from the examination or use any data as learned from the examination for any matter impertinent to the examination.

Article 12

Before the implementation of any finance examination, the examination team shall be familiar with the relevant laws, regulations,
rules and policies concerning the examined items, find out the essential information of the relevant examinee and formulate a work
plan for public finance examination.

Article 13

Where the finance department implements any public finance examination, it shall send a Notice on Public Finance Examination to the
examinee 3 workdays before the relevant examination.

Where the finance department considers that the sending of a Notice on Public Finance Examination 3 workdays before the relevant examination
will cause any negative impact on the examination, it may, with the approval of the principal of the finance department, the Notice
on Public Finance Examination may be sent at a proper time before implementing the public finance examination.

The contents in a Notice on Public Finance Examination shall be as follows:

(1)

The name of the examinee;

(2)

The basis, scope, contents, means and time of the examination;

(3)

The specific requirement to the relevant examinee on cooperating with the work of examination;

(4)

A name list of the leader and examiners of the examination team and their contact ways; and

(5)

The seal of the finance department and the date of issuance.

Article 14

Where any public finance examination is implemented, there shall be not less than 2 examiners, who shall show the relevant examinee
their certificates.

The examiners may inquire of the relevant examinee about the relevant information, wherein the relevant examinee shall cooperate with
them by replying to the inquiries and reflecting the circs faithfully. A transcript shall be formulated for an inquiry, which shall
bear the signature or seal of the examinee.

Article 15

Where any public finance examination is implemented, the examiners may require the relevant examinee to provide relevant materials,
which may be photocopied thereof.

Where any material as provided is written in a foreign language or in any language of a minority ethnical group, the examinee shall
translate the said material into Chinese.

Article 16

Where any public finance examination is implemented, such methods as account check, inventory check, inquiry and letter-confirmation,
calculation and analytical check may be adopted by the examiners.

Article 17

Where any public finance examination is implemented, with the approval of the principal of the department of finance, the relevant
examiners may inquire the relevant entity that has any economic and business relation with the examinee about the relevant information
and may also inquire the relevant financial institution about the deposit of the examinee under examination according to law.

Any examiner shall, when inquiring about the relevant deposit, hold the Notice on Deposit Inquiry as issued by the finance department
and perform the obligation of confidentiality.

Article 18

Where any public finance examination is implemented, and under any circumstance that the relevant evidence may be destroyed or lost
or hard to obtain later, the said evidence may be registered for preservation in advance upon the approval of the principal of the
finance department and a decision of treatment shall be made within 7 workdays timely. During this period, the relevant examinee
or relevant personnel shall not destroy by melting or burning or transfer the evidence.

Article 19

The certification materials as obtained by any examiner in an examination shall bear the signature or seal of the relevant provider.

For any material that doesn’t bear the signature or seal of the relevant provider, the examiner shall give a note of the reasons.

Article 20

Where any public finance examination is implemented, the relevant examiner shall make records and extracts on the contents and matters
under examination, and formulate a draft on public finance examination, which shall bear the signature or seal of the examinee.

Article 21

The leader of an examination team shall conduct supervision over the work quality of other examiners in the team and shall conduct
necessary examination and review on the relevant matters.

Article 22

When meeting with any serious problem during the implementation of examination, the examination team shall report it to the finance
department for instructions in time.

Article 23

Before any examination is concluded, an examination team shall solicit the opinions of the relevant examinee on such matters as the
fundamental state of implementation on the examination as well as the subsistent problem of the examinee in written form. The relevant
examinee shall, within 5 workdays as of the day when he receives a letter of opinion solicitation in written form, bring up written
opinions or explanations. Where the relevant examinee fails to refer any written opinion or statement within the prescribed time
limit, it shall be considered to have no different objection.

Article 24

An examination team shall, within 10 workdays as of the day when the relevant examination comes to an end, submit to the finance department
a written report on public finance examination. Under any special circumstance, the time limit to submit a report on public finance
examination may be prolonged upon approval, which shall be not more than 30 days at the most.

An examination team shall, when handing in a report on public finance examination, simultaneously hand in such materials as administrative
treatment, suggestion on penalties or suggestion on transfer for treatment as well as a draft on public finance examination.

Article 25

A report on public finance examination shall include such contents as follows:

(1)

The brief introduction of the examinee;

(2)

The scope, contents, means and time of the examination;

(3)

The implementation of regulations on finance and taxes by the examinee as well as the essential information on such administrative
matters as fiscal, finance and accounting;

(4)

The basic facts of fiscal illegal act of the examinee as well as the basis and evidence for confirmation;

(5)

The opinions or statement of the examinee;

(6)

Any other matter that shall be submitted to the finance department; and

(7)

The signature of the leader of the examination team as well as the date when the report on public finance examination is filed.

Article 26

The finance department shall establish and perfect a check system of public finance examination, authorize the relevant internal functionary
department or special personnel to have a check on the report of public finance examination as well as other relevant materials as
handed in by the examination team.

Where any functionary in charge of a check has any direct interest with the relevant examinee or examiner, he shall withdraw.

Article 27

The relevant functionary department or special personnel in charge of a check shall conduct the check to the report on public finance
examination and other relevant materials from the following aspects:

(1)

Whether or not the facts as confirmed in the examination are clear;

(2)

Whether or not the evidence as obtained is true and ample;

(3)

Whether or not the procedures of examination are legal;

(4)

Whether or not the legal basis for confirming any illegal fiscal act is proper;

(5)

Whether or not the administrative treatment, suggestion on punishment or suggestion on transfer for treatment is appropriate; and

(6)

Any other matter that shall be checked.

The relevant functionary department or special personnel shall, after a check on the report of the public finance examination, put
forward relevant check opinions.

Article 28

The finance department shall, after conducting an examination on a report of public finance examination and relevant opinions on check,
make the following treatment in accordance with the different circumstances:

(1)

Drawing a conclusion on examination for an examinee without illegal fiscal act;

(2)

Drawing a decision on administrative treatment or punishment to any examinee with illegal fiscal act in accordance with law; or

(3)

Transferring any matter that doesn’t belong to the power limit of this department.

In the case of any great difference between the report on public finance examination and the relevant opinions on check, the finance
department shall order the examination team to make further verification as well as supplement and correct of the relevant information
or materials. Where necessary, another examination team shall be sent to implement renew a public finance examination.

Article 29

The finance department shall, when drawing any decision on administrative treatment or punishment, formulate a decision letter on
administrative treatment or punishment. A Decision Letter on Administrative Treatment or Punishment shall indicate the matters as
follows:

(1)

The name or post_title and address of the party involved;

(2)

The facts in violation of any law, regulation or rule and the relevant evidence;

(3)

The categories and basis of administrative treatment or punishment;

(4)

The means and time limit for the performance of administrative treatment or punishment;

(5)

In the case of dissatisfaction with the relevant administrative treatment or punishment, the means and time limit to apply for an
administrative reconsideration or lodge an administrative litigation; and

(6)

The name of the finance department that has made a decision on administrative treatment or punishment as well as the date when the
decision is made. The Decision Letter on Administrative Treatment or Punishment shall be affixed with the seal of the finance department
that has made the decision.

Article 30

The finance department shall, before making any decision on administrative punishment, notify the party involved of the facts, reasons
and basis for the administrative punishment, and notify the party involved of the rights that he may enjoy in accordance with law.

Any party involved has the right to make statement and defense. The finance department shall fully solicit the opinions of the party
involved and verify the facts, reasons and evidence as brought up by the party involved. Where the relevant facts, reasons and evidence
as brought up by the parties involved are reasonable, the finance department shall adopt them.

Article 31

The finance department shall, before making any decision on administrative punishment where about the right to hold a hearing shall
be notified, inform the party involved of his right to require a hearing. Where any party involved requires a hearing, the finance
department shall organize it.

When the finance department holds a hearing, it shall implement the hearing in accordance with the provisions of the Measures for
Implementing a Hearing on Administrative Punishment by Public Finance Organ (Order of the Ministry of Finance, No.23).

Article 32

The finance department shall, after making a decision on administrative treatment or punishment, send a Decision Letter on Administrative
Treatment or Punishment to the party involved.

The Decision Letter on Administrative Treatment or Punishment shall become effective as of the day of sending.

Article 33

Any party involved who is dissatisfied with any administrative treatment or punishment may apply for an administrative check or lodge
an administrative litigation in accordance with the provisions of the Administrative Review Law of the People’s Republic of China
and the Administrative Litigation Law of the People’s Republic of China.

During the period of any administrative check or administrative litigation, the implementation of the relevant administrative treatment
or punishment shall not be stopped except as otherwise herein provided by law.

Article 34

The finance department shall conduct supervision and examination over the implementation of the relevant administrative treatment
or punishment in accordance with law.

Article 35

Where any examinee has any illegal fiscal act, the finance department may proclaim the illegal fiscal act thereof as well as the relevant
decision on administrative treatment, punishment or sanction.

Article 36

Where any public finance examination is concluded, the finance department shall do a good job in filing for records of the relevant
materials pertinent to public finance examination.

Article 37

Where any functionary of the finance department abuses his power, neglects his duty or misconduct for self-seeking in any public finance
examination, an administrative sanction shall adopted to him in accordance with law. Where any crime is constituted, the offender
shall be subject to relevant criminal liabilities in accordance with law.

Article 38

The finance department shall, when finding any serious problem that may influence the implementation of policies for finance and taxes
or budget, report it to the people’s government at the same level or the finance department at a higher level in a timely manner.

Article 39

Any accounting examination as implemented by the finance department shall be applicable to the present Measures as well as the Measures
for the Implementation of Accounting Supervision by the Public Finance Department (Order of the Ministry of Finance, No.10)

Article 40

The present Measures shall go into effect as of March 1, 2006. The Rules on the Public Finance Examination (Cai Jian Zi [1998] No.223)
as promulgated by the Ministry of Finance on October 8, 1998 shall be abolished simultaneously.

Ministry of Finance
2006-01-26

ANNOUNCEMENT NO.9, 2006 OF THE MINISTRY OF COMMERCE OF THE PEOPLE’S REPUBLIC OF CHINA, ON CEASING THE ANTI-DUMPING INVESTIGATION TO IMPORTED ETHYLENE PROPYLENE TERPOLYMER ORIGINATED FROM THE USA, SOUTH KOREA AND NETHERLANDS

Ministry of Commerce

Announcement No.9, 2006 of the Ministry of Commerce of the People’s Republic of China, on Ceasing the Anti-dumping Investigation to
Imported Ethylene Propylene Terpolymer Originated from the USA, South Korea and Netherlands

[2006] No. 9

In accordance with Anti-dumping Regulations of the People’s Republic of China, Ministry of Commerce released announcement on Aug 10,
2004, deciding to carry out anti-dumping investigation on Ethylene Propylene Terpolymer (“investigated commodity” for short in the
following) originated from the United States, the Republic of Korea and Netherlands, which is under item 40027010 and 40027090 in
Import and Export Tariff of the People’s Republic of China.

Ministry of Commerce carried investigation into the existence of dumping, dumping margin, and injury and injury degree of the domestic
industries. According to investigating results as well as Article 24 of Anti-dumping Regulations of the People’s Republic of China,
Ministry of Commerce released preliminary arbitration, confirming the existence of dumping and injury of the domestic industries
as well as the causality between the dumping and the injury.

On Jan 23, 2006, Jilin Chemical Industry Company Limited, the applicant of this case apply to cancel his application on anti-dumping
investigation on Ethylene Propylene Terpolymer and ask for termination of Ethylene Propylene Terpolymer anti-dumping investigation.
In accordance related regulations of Article 27 of Anti-dumping Regulations of the People’s Republic of China, Ministry of Commerce
accepted the application and decided to terminate anti-dumping investigation on Ethylene Propylene Terpolymer originated from the
United States, the Republic of Korea and Netherlands as from release of this announcement. Chinese Customs will return deposit of
related importers for import of investigated commodities originated from the United States, the Republic of Korea and Netherlands.

Ministry of Commerce

Feb 9, 2006

Ministry of Commerce
2006-02-09

ACCOUNTING STANDARD FOR BUSINESS ENTERPRISES NO. 8 – IMPAIRMENT OF ASSETS

Ministry of Finance

Accounting Standard for Business Enterprises No. 8 – Impairment of Assets

Cai Kuai [2006] No. 3

February 15, 2006

Chapter I General Provisions

Article 1

To standardize the confirmation and measurement of the impairment of assets, and the disclosure of relevant information, these Standards
are formulated according to the Accounting Standard for Business Enterprises – Basic Standards.

Article 2

The term “impairment of assets” refers to that the recoverable amount of assets is lower than its carrying value.

The assets as mentioned in these standards shall include single item assets and group assets.

The term “group assets ” refers to a minimum combination of assets that may be recognized by an enterprise, by which the flow-in cash
generated shall be generally independent of those by other assets or group assets.

Article 3

The following items shall be subject to other relevant accounting standards:

(1)

The impairment of inventories shall be subject to the Accounting Standard for Business Enterprises No. 1 – Inventories;

(2)

The impairment of investment properties measured through the fair value method shall be g subject to the Accounting Standard for Business
Enterprises No. 3 – Investment Properties;

(3)

The impairment of consumptive biological assets shall be subject to the Accounting Standard for Business Enterprises No. 5 – Biological
Assets;

(4)

The impairment of assets formed by construction contracts shall be subject to the Accounting Standard for Business Enterprises No.
15 – Construction Contracts;

(5)

The impairment of deferred income tax assets shall be subject to the Accounting Standard for Business Enterprises No. 18 – Income
Taxes;

(6)

The impairment of the unsecured residual value of the lessor in a financial leasing shall be subject to the Accounting Standard for
Business Enterprises No. 21 – Leases;

(7)

The impairment of financial assets regulated by the Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement
of Financial Instruments shall be subject to the Accounting Standard for Business Enterprises No. 22 – Recognition and Measurement
of Financial Instruments; and

(8)

The impairment of the rights and interests of unverified petroleum and natural gas mining areas shall be subject to the Accounting
Standard for Business Enterprises No. 27 -Extraction of Petroleum and Natural Gas.

Chapter II Recognition of Assets with Potential Impairment

Article 4

An enterprise shall, on the day of balance sheet, make a judgment on whether there is any sign of possible assets impairment.

No matter whether there is any sign of possible assets impairment, the business reputation formed by the merger of enterprises and
intangible assets with uncertain service lives shall be subject to impairment test every year.

Article 5

There may be an impairment of assets when one of the following signs occurs:

(1)

The current market price of assets falls, and its decrease is obviously higher than the expected drop over time or due to the normal
use;

(2)

The economic, technological or legal environment in which the enterprise operates, or the market where the assets is situated will
have any significant change in the current period or in the near future, which will cause adverse impact on the enterprise;

(3)

The market interest rate or any other market investment return rate has risen in the current period, and thus the discount rate of
the enterprise for calculating the expected future cash flow of the assets will be affected, which will result in great decline of
the recoverable amount of the assets;

(4)

Any evidence shows that the assets have become obsolete or have been damaged substantially;

(5)

The assets have been or will be left unused, or terminated for use, or disposed ahead of schedule;

(6)

Any evidence in the internal report of the enterprise shows that the economic performance of the assets have been or will be lower
than the expected performance, for example, the net cash flow created by assets or the operating profit (or loss) realized is lower
(higher) than the excepted amount, etc.; and

(7)

Other evidence indicates that the impairment of assets has probably occurred.

Chapter III Measurement of Recoverable Amount of Assets

Article 6

Where any evidence shows that there is possible assets impairment, the recoverable amount of the assets shall be estimated.

The recoverable amount shall be determined in light of the higher one of the net amount of the fair value of the assets minus the
disposal expenses and the current value of the expected future cash flow of the assets.

The disposal expenses shall include the relevant legal expenses, relevant taxes, truckage as well as the direct expenses for bringing
the assets into a marketable state.

Article 7

When either of the net amount of the fair value of an asset minus the disposal expenses or the current value of the expected future
cash flow of the asset exceeds the carrying value of the asset, it shows that no asset impairment has occurred, and it does not need
to estimate another amount of the asset.

Article 8

The net amount of the fair value of an asset minus the disposal expenses shall be determined in light of the amount of the basis of
the price as stipulated in the sales agreement in the fair transaction minus the disposal expenses directly attributable to the asset.

Where there is no sales agreement but there is an active market of assets, the net amount of the fair value of an asset minus the
disposal expenses shall be determined in light of the amount of the market price of the asset minus the disposal expenses. Generally
the market price of the asset shall be determined according to the price bidden by the buyer of the asset.

Where there is no sales agreement and no active market of assets, the net amount of estimated fair value of an asset minus the disposal
expenses shall be estimated in light of the best information available. The said net amount may be estimated by reference to the
latest transaction prices or results of similar assets among the counterparts.

Where the net amount of the fair value of an asset minus the disposal expenses cannot be estimated reliably according to the provisions
as described above, the enterprise shall regard the current value of the expected future cash flow of the asset as the recoverable
amount of the asset.

Article 9

The current value of the expected future cash flow of an asset shall be determined by the discounted cash with an appropriate discount
rate, on the basis of the expected future cash flow generated during the continuous use or final disposal of an asset.

To predict the current value of the future cash flow, the enterprise shall take into comprehensive consideration the expected future
cash flow, service life, discount rate, and other factors.

Article 10

The expected future cash flow of an asset shall include the following items:

(1)

The cash inflow generated during the continuous use of the asset.

(2)

The necessary expected cash outflow for realizing cash inflow generated during the continuous use of the asset (including the cash
outflow for bring the asset to the expected conditions for use).

The outflow of cash shall be the outflow cash that is directly attributable to, or that may be distributed to the asset on reasonable
and consistent basis.

(3)

At the end of the service life of an asset, the net cash flow received or paid for the disposal of the asset. The cash flow shall
be, during the process of fair transaction between parties that are familiar with the situation on their own free will, the amount
expected to obtain from or pay for the disposal of the asset minus the expected disposal expenses.

Article 11

When making an estimate of the future cash flow of an asset, the managers of the enterprise shall make a best estimate of the entire
economic status of the asset in its remaining service life in a reasonable and well-grounded manner.

The expected future cash flow of an asset shall base on the latest financial budget or forecast data as well as the stable or regressive
growth rates after the year of the aforesaid budget or forecast. Where the managers can prove that the progressive growth rates are
reasonable, the expected future cash flow of the asset may base on the progressive growth rates.

The expected cash flow set forth on the basis of the budget or forecast can cover 5 years at most. Where the managers can prove that
a longer period is reasonable, it may cover longer time.

When making estimate of the cash flow after the year of the budget or forecast, the growth rates adopted shall not, unless the enterprise
can prove that it is reasonable to adopt higher growth rates, exceed the long-term average growth rate of the products, or the market,
or the industrial field which the enterprise belongs to, or the country or region where the enterprise is located, or the long-term
average growth rate of the market where the asset is situated.

Article 12

The expected future cash flow of an asset shall base on the current status of the asset. It shall not include any possible and uncommitted
recombination items or any expected future cash flow related to the asset improvement.

The expected future cash flow of an asset shall not include the cash inflow or outflow generated by financing activities, or the cash
flow related to the receipt or payment of income taxes.

Where an enterprise has made a commitment of recombination, when determining the current value of the future cash flow of assets,
the amounts of the expected future cash inflow and outflow shall reflect the expenses that can be saved in the recombination, other
benefits to be brought about by the recombination, and the estimated amount of the future cash outflow that may result from the recombination.
Generally, the expenses that can be saved in the recombination and other benefits that could be brought about by the recombination
shall be estimated on the basis of the latest financial budget or forecast data as approved by the management of the enterprise.
The amount of future cash outflow that may result from the recombination shall be estimated according to the expected amount of liabilities
incurred due to the recombination as described in the Accounting Standard for Business Enterprises – Contingencies.

Article 13

The discount rate is the pre-tax interest rate, which can reflect the time value of money in the present market and the specific risks
of the asset. The discount rate is the necessary return rate as required by an enterprise when it purchases or invests in the asset.

Where an adjustment has been made to the specific risks of the asset when an estimate of the future cash flow of an asset is made,
it does not need to take into consideration these specific risks when making an estimate of the discount rate. Where the estimate
of the discount rate is based on the post-tax factors, it shall be adjusted to the pre-tax discount rate.

Article 14

Where the expected future cash flow of an asset involves any foreign currency, the current value of the asset shall, on the basis
of the settlement currency of the future cash flow to be generated by the asset, be calculated with a discount rate applicable to
this currency. Then the current value of the foreign currency shall be converted at the spot exchange rate of the current day when
the future cash flow of the asset is calculated.

Chapter IV Determination of Losses of Asset Impairment

Article 15

Where the measurement result of the recoverable amount indicates that an asset’s recoverable amount is lower than its carrying value,
the carrying value of the asset shall be recorded down to the recoverable amount, and the reduced amount shall be recognized as the
loss of asset impairment and be recorded as the profit or loss for the current period. Simultaneously, a provision for the asset
impairment shall be made accordingly.

Article 16

After the loss of asset impairment has been recognized, the depreciation or amortization expenses of the impaired asset shall be adjusted
accordingly in the future periods so as to amortize the post-adjustment carrying value of the asset systematically (deducting the
expected net salvage value) within the residual service life of the asset.

Article 17

Once any loss of asset impairment is recognized, it shall not be switched back in the future accounting periods.

Chapter V Recognition of Group Assets and Treatments of Impairment

Article 18

Where there is any evidence indicating a possible impairment of assets, the enterprise shall, on the basis of single item assets,
estimate the recoverable amount. Where it is difficult to do so, it shall determine the recoverable amount of the group assets on
the basis of the asset group to which the asset belongs.

The recognition of an asset group shall base on whether the main cash inflow generated by the asset group is independent of those
generated by other assets or other group assets. Simultaneously, when recognizing an asset group, the enterprise shall take into
consideration how its managers manage the production and business activities (for example, according to the production lines, business
varieties or according to the regions or areas), and the ways of decision-making for the continuous use or disposal of the assets,
etc.

Where there is an active market for the products manufactured by (or other outputs of) a combination of several assets, even if some
or all of these products (or other outputs) are provided for the internal use, the enterprise shall also recognize this combination
of assets as an asset group on the condition that the provisions of the preceding paragraph are accorded with.

Where the cash inflow of the asset group is affected by the internal transfer price, the future cash flow of the asset group shall
be determined on the basis of the best available estimate made by the managers of the enterprise for the future price in the fair
transaction.

Once an asset group is recognized, it shall be kept consistent during different accounting periods, and not be changed at will.

Where it is necessary to make any change, the managers of the enterprise shall prove that this change is reasonable, and shall make
an explanation pursuant to Article 27 of these Standards in its annotation.

Article 19

The basis for the determination of the carrying value of an asset group shall be the same as that for the determination of the recoverable
amount.

The carrying value of an asset group shall include the carrying value that may be directly attributed to or may be reasonably and
consistently distributed to the asset group. Generally it shall not include the carrying value of liability that has already been
recognized, unless it is unable to determine the recoverable amount of the asset group if not considering the amount of liability.

The recoverable amount of an asset group shall be determined on the basis of the higher one of the net amount of the fair value of
the asset minus the disposal expenses and the current value of the expected future cash flow of the asset.

Where the purchaser is required to bear a liability (such as environment resumption liability, etc.) when an asset group is disposed
of, the amount of liability has been recognized and has been recorded in the carrying value of the relevant assets, and the enterprise
can only obtain the net amount of the unitary fair value of the assets and liability aforesaid minus the disposal expenses, the amount
of liability that has been recognized shall be deducted from the liability when determining the carrying value and the current value
of expected future cash flow of the asset group, so as to compare the carrying value with the recoverable amount of the asset group.

Article 20

The assets of the headquarter of an enterprise shall include the office buildings, electronic data processing equipments of the enterprise
group or its business departments. A conspicuous character of the assets of the headquarters is that it is difficult to generate
independent cash inflow when it is separated from other assets or asset group and difficult to attribute its carrying value completely
to a certain group.

Where any evidence shows any possible impairment of a particular asset of the headquarter, the enterprise shall calculate and determine
the recoverable amount of the asset group to which the asset group or the combination of group assets belongs to, then compare it
with the corresponding carrying value of the asset so as to decide whether it is necessary to confirm the impairment loss.

The term “combination of group assets” refers to the minimum combination of group assets formed by several asset groups, including
the asset groups or combination of group assets, and the proportion of the assets of the headquarter allocated by a reasonable method.

Article 21

When an enterprise conducts an impairment test on a certain asset group, it shall first determine all the assets of the headquarter
which are related to the asset group, then treat it according to the following circumstances respectively by taking into consideration
whether the assets of the headquarter can be apportioned to this asset group on a reasonable and consistent basis:

(1)

For the part of the relevant assets of the headquarter that can be apportioned to this asset group on a reasonable and consistent
basis, the enterprise shall apportion the carrying value of this proportion to this asset group, then compare the carrying value
of the asset (including the carrying value of the headquarters’ assets which have been apportioned to) with its recoverable amount
and treat it in pursuance of Article 22 of these Standards.

(2)

Where it is difficult to apportion some assets of the related assets of the headquarter to this asset group on a reasonable and consistent
basis, the enterprise shall take the following steps to treat these assets:

First, without taking into consideration the relevant assets of the headquarter, estimating and comparing the carrying value with
its recoverable amount of the asset group, and treating it in accordance with Article 22 of these Standards.

Second, deciding the minimum combination of asset groups formed by several asset groups. This combination of asset groups shall include
the asset groups that have been tested, and the proportion of the carrying value of the headquarters’ assets that can be apportioned
to this combination on a reasonable and consistent basis.

Finally, comparing the carrying value of the combination of asset groups it has determined (including the proportion of the headquarter’
assets that have been apportioned to) with the recoverable amount of the combination, and treats it according to Article 22 of these
Standards.

Article 22

Where the recoverable amount of an asset group or a combination of asset groups is lower than its carrying value (where the headquarter’
assets and business reputation are apportioned to a certain asset group or a combination of asset groups, the carrying value of the
asset group or the combination of asset groups shall include the amount of the relevant assets of the headquarter and business reputation
that have been apportioned to), it shall be recognized as the corresponding impairment loss. The amount of the impairment loss shall
first charge against the carrying value of the headquarter’ assets and business reputation which are apportioned to the asset group
or combination of asset groups, then charge it against the carrying value of other assets in proportion to the weight of other assets
in the asset group or combination of asset groups with the business reputation excluded.

The charges against the carrying value of the assets above shall be treated as the impairment loss of the assets (including the business
reputation) and recorded as profit or loss for the current period. The carrying value of each asset after charging against shall
not be lower than the highest one of the following three: the net amount of the fair value of the asset minus the disposal expenses
(if determinable), the current value of the expected future cash flow of the asset (if determinable), and zero.

The amount of impairment loss that cannot be apportioned incurred thereby shall be apportioned on the basis of the weight of the carrying
value of other assets in the relevant asset group or combination of the asset groups.

Chapter VI Treatment of Impairment of Business Reputation

Article 23

The business reputation formed by merger of enterprises shall be subject to an impairment test at least at the end of each year. The
business reputation shall, together with the related asset group or combination of asset group, be subject to the impairment test.

The related asset group or combination of asset groups shall be the asset group or combination of asset groups that can benefit from
the synergy effect of enterprise merger, and shall be smaller than the reporting segments as determined according to Accounting Standard
for Business Enterprises No. 35 – Segment Reporting.

Article 24

When an enterprise makes an impairment test of assets, it shall, as of the purchasing day, apportion the carrying value of the business
reputation formed by merger of enterprises to the relevant asset groups by a reasonable method. Where it is difficult to do so, it
shall be apportioned to the relevant combinations of asset groups.

When apportioning the carrying value of the business reputation to the relevant asset groups or combinations of asset groups, it shall
be apportioned on the basis of the proportion of the fair value of each asset group or combination of asset groups to the total fair
value of the relevant asset groups or combinations of asset groups. Where it is difficult to measure the fair value reliably, it
shall be apportioned on the basis of the proportion of the carrying value of each asset group or combination of asset groups to the
total carrying value of the relevant asset groups or combinations of asset groups.

Where the report structure is changed due to enterprise recombination or for any other reason, which thus has affected the structure
of one or several asset group(s) or combination(s) of asset groups to which the business reputation has already been apportioned,
the business reputation shall be reapportioned to the affected asset group(s) or combinations of the asset group(s), with the apportion
method similar to that as provided for in the preceding paragraph of this Article.

Article 25

When making an impairment test on the relevant asset groups or combination of asset groups containing business reputation, if any
evidence shows that the impairment of asset groups or combinations of asset groups is possible, the enterprise shall first make an
impairment test on the asset groups or combinations of asset groups not containing business reputation, calculate the recoverable
amount, compare it with the relevant carrying value and recognize the corresponding impairment loss. Then the enterprise shall make
an impairment test of the asset groups or combinations of asset groups containing business reputation, and compare the carrying value
of these asset groups or combinations of asset groups (including the carrying value of the business reputation apportioned thereto)
with the recoverable amount. Where the recoverable amount of the relevant assets or combinations of the asset groups is lower than
the carrying value thereof, it shall recognize the impairment loss of the business reputation, and treat them according to Article
22 of these Standards.

Chapter VII Disclosure

Article 26

An enterprise shall disclose the following information relevant to the impairment of assets in its annotation:

(1)

The amount of impairment loss of each asset recognized at the current period;

(2)

The accumulative amount of provision for the impairment of each asset; and

(3)

The amount of impairment loss recognized in each reporting segment of the current period, if segment reporting information is provided.

Article 27

Where any serious asset impairment loss has been incurred, the enterprise shall, in its annotation, disclose the reasons why each
of the serious asset impairment losses has occurred, and the amount of serious asset impairment losses recognized in the current
period.

(1)

Where a serious impairment loss has been incurred for a single item asset, the enterprise shall disclose the nature of the single
item asset. Where any segment of the reporting information is provided, the enterprise shall also disclose the segment of the main
reporting to which this asset belongs to.

(2)

Where a serious impairment loss has been incurred to an asset group (or combination of asset groups, the same below), it shall disclose:

(a)

The basic information of the asset group;

(b)

The amounts of impairment loss of each asset of the asset group as recognized in the current period; and

(c)

Where the formation of the asset group is deferent from those in the previous period, the enterprise shall disclose the reasons for
the change, as well as the constitution of the asset group in the previous period and the current period.

Article 28

With regard to any serious impairment of assets, the enterprise shall disclose the method for the determination of the recoverable
amount of the assets (or asset group, the same below) in its annotation:

(1)

Where the recoverable amount is determined on the basis of the net amount of the fair value of the asset minus the disposal expenses,
the enterprise shall disclose the basis for the estimate of the net amount of the fair value minus the disposal expenses.

(2)

Where the recoverable amount is determined on the basis of the expected future cash flow of the assets, the enterprise shall disclose
the discount rate it adopts for estimating the current value of the assets, as well as the discount rate it adopted in the previous
period when the recoverable amount of the asset in the previous period was also determined on the basis of the expected future cash
flow of the asset.

Article 29

The information as described in Paragraph 1,2 of Article 26 and Item 2 of Paragraph 2 of Article 27 shall be disclosed according
to different sorts of the assets. The sorts of assets shall be determined by considering whether the nature or function of the assets
in production and business operation are identical or similar.

Article 30

Where the carrying value of the business reputation apportioned to a particular asset group (or intangible asset with uncertain service
life, the same below) accounts for a large portion of the total carrying value of the business reputation, the enterprise shall disclose
the following information in its annotation:

(1)

The carrying value of the business reputation apportioned to the asset group;

(2)

The method for the determination of the recoverable amount of the asset group.

(a)

Where the recoverable amount is determined on the basis of the net amount of the fair value of the asset group minus the disposal
expenses, the enterprise shall disclose the method for the determination of the net amount of the fair value minus the disposal expenses.
Where the net amount of the fair value of the asset group minus the disposal expenses is not determined on the basis of the market
price, the enterprise shall disclose:

(i)the crucial assumptions adopted by the managers of the enterprise for the determination of the net amount of the fair value minus
the disposal expenses, and the basis for these assumptions;

(ii)whether or not the values of the crucial assumptions as determined by the managers of the enterprise are consistent with the experiences
of the enterprise or its external information; if not, the reasons shall be accounted for.

(b)

Where the recoverable amount is determined according to the current value of future cash flows as predicted by the asset group, the
enterprise shall also disclose:

(i)the assumptions for predicting the cash flows in the future and the grounds thereof made by the managers of the enterprise;

(ii)when the managers of the enterprise determine the values relating to the relevant assumptions, whether they are in consistence
with the experiences of the enterprise or the external information; if not, the reasons shall be accounted for;

(iii)the discount rate adopted for the estimate of the current value.

Article 31

Where the total or partial carrying value of the business reputation is apportioned to several asset groups, and the proportion apportioned
to each asset group to the total carrying value of the business reputation is not large, the enterprise shall describe it and offer
the aggregate amount of the business reputation apportioned to the above-mentioned asset groups in its annotation.

Where the carrying value of the business reputation is apportioned to the above-mentioned asset groups according to the same crucial
assumptions, and the amount of business reputation apportioned to each assets group accounts for a large proportion of the total
carrying value of the business reputation, the enterprise shall describe it and disclose the following information in its annotation:

(1)

The aggregate carrying value of the business reputation apportioned to the above-mentioned asset groups;

(2)

The crucial assumptions adopted, and the grounds thereof; and

(3)

Whether or not the values of the crucial assumptions as determined by the managers of the enterprise are consistent with the experiences
of the enterprise or the source of its external information; if not, the reasons shall be accounted for.

Ministry of Finance
2006-02-15

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