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LAW OF THE PEOPLE’S REPUBLIC OF CHINA ON SECURITIES INVESTMENT FUND






Standing Committee of the National People’s Congress

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

No.9

The Law of the People’s Republic of China on Securities Investment Fund, which was adopted at the fifth meeting of the Standing Committee
of the Tenth National People’s Congress on October 28, 2003, is hereby promulgated and shall take effect as of June 1, 2004.

Hu Jintao, the President of the People’s Republic of China

October 28, 2003

Law of the People’s Republic of China on Securities Investment Fund ContentsChapter I General Provisions

Chapter II Fund Managers

Chapter III Fund Trustees

Chapter IV Raising of Fund

Chapter V Trading of Fund Shares

Chapter VI Subscription to and Redemption of Fund Shares

Chapter VII Fund Operations and Information Disclosure

Chapter VIII Alteration and Termination of the Fund Contract and Liquidation of Fund Property

Chapter IX Rights of the Fund Share Holders and the Exercise thereof

Chapter X Supervision and Administration

Chapter XI Legal LiabilitiesChapter XII Supplementary Provisions

Chapter I General Provisions

Article 1

The present Law is enacted with a view to regulating the activities concerning securities investment fund, to protect the legitimate
rights and interests of the investors and other relevant parties, and to promote the healthy development of securities investment
fund and securities market.

Article 2

The present Law shall apply to the securities investment activities conducted through the method of portfolio and through public offering
of fund shares to raise securities investment fund (hereinafter referred to as fund), which is managed by fund managers and entrusted
to fund trustees for the benefits of the fund share holders; the matters not covered by the present Law shall be governed by the
Trust Law of the People’s Republic of China, the Securities Law of the People’s Republic of China, and other relevant laws and administrative
regulations.

Article 3

The rights and obligations of the fund managers, fund trustees and fund share holders shall be stipulated in the fund contracts in
accordance with the present Law.

The fund managers and fund trustees shall perform the duties of trusteeship in accordance with the present Law and the fund contract.
A holder of fund shares shall enjoy the benefits and bear the risks to the extent of the fund shares it holds.

Article 4

Those engaging in the activities involving securities investment fund shall adhere to the principles of free will, fairness and good
faith, and may not impair the state and public interests.

Article 5

A fund contract shall stipulate the operation method of the fund. A fund can be operated in a closed, open, or any other way.

A fund operated in a closed way (hereinafter referred to as closed fund) refers to the fund of which the ratified total fund shares
remains fixed during the valid term of the fund contract and of which the fund shares can be traded on the securities exchanges established
according to law, but can not be redeemed by the fund share holders through application.

A fund operated in an open way (hereinafter referred to as open fund) refers to the fund of which the total fund shares are unfixed
and of which the fund shares may be subscribed to or redeemed at the time and place stipulated in the fund contract.

The methods of offering, trading, subscription and redemption of the fund shares of other funds operated through other methods shall
be separately formulated by the State Council.

Article 6

Fund property shall be independent from the property owned by the fund manager and fund trustee. The fund manager and fund trustee
may not attribute any of the fund property into their own property.

The property and benefits obtained by the fund manager and fund trustee as a result of the management, utilization or any other use
of the fund shall be included into the fund property.

Where the fund manager or fund trustee goes into liquidation as a result of dissolution, cancellation, or declared bankruptcy according
to law, the fund property shall not be taken as their liquidation property.

Article 7

The credit rights of fund property may not be set off against the debts of the property owned by the fund manager and fund trustee;
and the credit rights and debts of different fund properties may not be set off against each other.

Article 8

The debts not arising out of the fund property may not be enforced against such fund property.

Article 9

The fund manager and fund trustee shall, in managing and utilizing the fund property, devote themselves to their duties and perform
the obligations of good faith, prudence and diligence.

Fund practitioners shall have obtained the qualifications for practice relating to funds, and shall abide by the laws, administrative
regulations, professional ethics, and code of conduct.

Article 10

Fund managers, fund trustees and fund share offering institutions may establish trade associations to strengthen self-regulation,
coordinate trade relationship, provide trade services, and promote the development of the trade.

Article 11

The securities regulatory department under the State Council shall supervise and regulate the activities concerning securities investment
fund according to law.

Chapter II Fund Managers

Article 12

Fund managers shall be assumed by the fund management companies established according to law.

To be a fund manager, the ratification of the securities regulatory department under the State Council is required.

Article 13

For establishment of a fund management company, the following conditions shall be satisfied and the approval of the securities regulatory
department under the State Council is required:

1)

Having the articles of association which are in conformity with the present Law and the Company Law of the People’s Republic of China;

2)

Having a registered capital of no less than 100 million RMB and all of the capital being paid-in monetary capital;

3)

Principal shareholders having good business performance and public reputation in the securities business, securities investment consultation,
trust assets management or other financial assets management, having no record of violation of law within the last 3 years, and having
a registered capital of no less than 300 million RMB;

4)

The number of persons with fund practice qualification reaching the statutory requirement;

5)

Having business sites, security facilities and other facilities relating to fund management business that comply with the requirements;

6)

Having sound internal auditing and monitoring system and risk control system;

7)

Other conditions provided for by laws and administrative regulations and those provided for by the securities regulatory department
under the State Council and approved by the State Council.

Article 14

The securities regulatory department under the State Council shall, within 6 months from accepting the application for establishment
of a fund management company, make the examination pursuant to the conditions specified in Article 13 hereof and the principle of
prudent regulation, make the decision whether to grant the approval or not, and notify the applicant, and shall explain the reasons
if no approval is granted.

Where a fund management company is to establish any branch, modify its articles of association, or alter any other major matters,
it shall apply to the securities regulatory department under the State Council for approval. The securities regulatory department
under the State Council shall, within 60 days from the day of accepting the application, make the decision whether to grant approval
or not, and notify the applicant, and shall explain the reasons if no approval is granted.

Article 15

None of the following personnel may be a securities practitioner of a fund manager:

1)

Those being given criminal penalties for the crime of bribery and embezzlement, malfeasance, or encroachment of property, or the crime
of undermining the socialist market economic order;

2)

The directors, supervisors, factory directors, mangers and other senior executives who are personally liable for the bankruptcy and
liquidation due to poor management or the revocation of business license due to violation of law of the companies and enterprises
in which they hold office, provided that it has been less than 5 years since the day of the end of the bankruptcy liquidation or
of the revocation of business license;

3)

Those with large amount of outstanding personal debts;

4)

The practitioners of fund managers, fund trustees, securities exchanges, securities companies, securities registration and settlement
institutions, futures exchanges, futures brokerage companies and other institutions, and the state functionaries that have been dismissed
due to violations of law;

5)

The lawyers, certified accountants, practitioners of assets evaluation institutions and assets verification institutions, and practitioners
of investment consultation institutions whose practice licenses have been revoked or who have been disqualified due to violations
of law;

6)

Other personnel that may not engage in the fund business as provided for by any law or administrative regulation.

Article 16

The managers and other senior managerial personnel of a fund manager shall be familiar with the laws and administrative regulations
concerning securities investment, have the qualification for fund practice, and have worked in the field relevant to the position
they hold for more than 3 years.

Article 17

The selection or change of the managers and other senior managerial personnel of a fund manager shall be submitted to the securities
regulatory department under the State Council for examination in accordance with the conditions for holding such office provided
for by the present Law and other relevant laws and administrative regulations.

Article 18

The directors, supervisors, managers and other practitioners of a fund manager may not hold any position in the fund trustee or other
fund managers, and may not conduct any securities transactions and other activities that impair the fund property and the interests
of the fund share holders.

Article 19

A fund manager shall perform the following duties:

1)

Raising the fund according to law and handling or entrusting other institutions recognized by the securities regulatory department
under the State Council to handle the offering, subscription, redemption and registration of fund shares;

2)

Making fund records;

3)

Applying separate management and separate account books to different fund properties it manages to make securities investment;

4)

Determining the scheme on distribution of fund proceeds according to the stipulations of the fund contract and distributing profits
to the holders of fund shares in good time;

5)

Making fund accounting and preparing the fund financial accounting report;

6)

Preparing midterm and annual fund reports;

7)

Calculating and publicizing the net value of the fund assets and determining the prices for subscription and redemption of the fund
shares;

8)

Handling the relevant information disclosures related to the management of the fund property;

9)

Convening the fund share holders’ meeting;

10)

Keeping the records, account books, statements and other relevant materials of the fund property management;

11)

Exercising litigation rights or carrying out other legal action in the name of the fund manager for the interests of the fund share
holders;

12)

Other duties provided for by the securities regulatory department under the State Council.

Article 20

A fund manager may not conduct any of the following acts:

1)

Mixing its own property or the property of others with the fund property to make securities investment;

2)

Treating different fund properties it manages unfairly;

3)

Seeking benefits for any third party other than the fund share holders by using the fund property;

4)

Unlawfully promising the fund share holders to make benefits or bear losses;

5)

Any other acts prohibited by the securities regulatory department under the State Council in accordance with the relevant provisions
of the laws and administrative regulations.

Article 21

With respect to a fund manager under any of the following circumstances, the securities regulatory department under the State Council
shall, according to its powers, order that fund manager to make rectification or disqualify it as a fund manager:

1)

Having committed any serious violations of laws or rules;

2)

No longer meeting the conditions provided for in Article 13 hereof;

3)

Other circumstances provided for by laws and administrative regulations.

Article 22

Under any of the following circumstances, the duties of a fund manager shall terminate:

1)

Being disqualified for fund management;

2)

Being dismissed by the fund share holders’ meeting;

3)

Being dissolved, or cancelled, or declared bankruptcy according to law;

4)

Other circumstances stipulated in the fund contract.

Article 23

Where the duties of a fund manager terminate, the fund share holders’ meeting shall appoint a new fund manager within 6 months; before
the appointment of the new fund manager, the securities regulatory department under the State Council shall designate a temporary
fund manager.

A fund manager shall, upon termination of its duties, keep in good conditions the materials of fund management and process the formalities
for handover of the business in good time, the new fund manger or temporary fund manager shall take over the business in good time.

Article 24

A fund manager shall, upon termination of its duties, retain an accounting firm to audit the fund property, publicize the auditing
results and put on record with the securities regulatory department under the State Council.

Chapter III Fund Trustees

Article 25

Fund trustee shall be assumed by a commercial bank which was established according to law and has obtained the qualification for fund
trust.

Article 26

To apply for the qualification for fund trust, a commercial bank shall satisfy the following conditions and be ratified by the securities
regulatory department and the banking regulatory department under the State Council:

1)

Its net assets and capital adequacy complying with the relevant provisions;

2)

Having set up a specialized department of fund trust;

3)

The number of the full-time personnel with fund practice qualification reaching the statutory requirement;

4)

Having the conditions for safe keeping of the fund property;

5)

Having safe and high efficient clearing and settlement system;

6)

Having business sites, security facilities and other facilities relating to fund trust business that meet the requirement;

7)

Having sound internal auditing and monitoring system and risk control system;

8)

Satisfying other conditions provided for by laws and administrative regulations and the conditions provided for by the securities
and banking regulatory departments under the State Council and approved by the State Council.

Article 27

Articles 15 and 18 shall apply to the practitioners of the specialized fund trust department of a fund trustee.

Articles 16 and 17 shall apply to the managers and other senior managerial personnel of the specialized fund trust department of a
fund trustee.

Article 28

A fund trustee and a fund manager may not be the same party, and may not make capital contribution to or hold the shares of each other.

Article 29

A fund trustee shall perform the following duties:

1)

Keeping the fund property safely;

2)

Opening capital accounts and securities accounts of the fund property pursuant to the provisions;

3)

Setting up separate accounts for different fund properties under its trust and ensuring the completeness and independence of the fund
properties;

4)

Keeping the records, account books, statements and other relevant materials of the fund trust business;

5)

Handling the clearing and settlement at the investment orders of the fund manager pursuant to the stipulations of the fund contract;

6)

Handling the information disclosures relating to the fund trust business activities;

7)

Presenting opinions on the fund financial accounting report and the midterm and annual fund reports;

8)

Checking and examining the net value of the fund assets and the subscription and redemption prices of the fund shares calculated by
the fund manager;

9)

Convening the fund share holders’ meeting pursuant to the provisions;

10)

Supervising the investment operations of the fund manager pursuant to the provisions;

11)

Other duties provided for by the securities regulatory department under the State Council.

Article 30

Where a fund trustee finds out that any investment order of a fund manager is in violation of any of the laws, administrative regulations
or other relevant provisions, or the stipulations of the fund contract, it shall refuse to execute such order, notify the fund manager
immediately and report to the securities regulatory department under the State Council in good time.

Where a fund trustee finds out that any investment order of a fund manager which has taken effect according to the transaction procedures
is in violation of the laws, administrative regulations or other relevant provisions, or the stipulations of the fund contract, it
shall notify the fund manager immediately and report to the securities regulatory department under the State Council in good time.

Article 31

The provisions of Article 20 hereof shall apply to fund trustees.

Article 32

With respect to a fund trustee under any of the following circumstances, the securities and banking regulatory departments under the
State Council shall, according to their powers, order it to make rectification or disqualify it as a fund trustee:

1)

Having committed any serious violation of laws and rules;

2)

No longer meeting the conditions provided for in Article 26 hereof;

3)

Other circumstances provided for by laws and administrative regulations.

Article 33

The duties of a fund trustee shall be terminated under any of the following circumstances:

1)

Being disqualified as a fund trustee;

2)

Being dismissed by the fund share holders’ meeting;

3)

Being dissolved, cancelled, or declared bankruptcy according to law; or

4)

Other circumstances stipulated in the fund contract.

Article 34

Upon termination of the duties of a fund trustee, the fund share holders’ meeting shall appoint a new fund trustee within 6 months;
and before the appointment of the new fund trustee, the securities regulatory department under the State Council shall designate
a temporary fund trustee.

A fund trustee shall, upon termination of its duties, keep in good conditions the fund property and fund trust business materials
and process the formalities for handover of the property and business in good time, the new fund trustee or temporary fund trustee
shall take over the property and business in good time.

Article 35

A fund trustee shall, upon termination of its duties, retain an accounting firm to audit its fund property pursuant to the provisions,
publicize the auditing results, and report to the securities regulatory department under the State Council for archival purposes
at the same time.

Chapter IV Raising of Fund

Article 36

A fund manager shall, when offering fund shares and raising fund pursuant hereto, submit the following documents to and get ratification
from the securities regulatory department under the State Council:

1)

An application report;

2)

A draft fund contract;

3)

A draft fund trust agreement;

4)

A draft prospectus;

5)

Qualification certificates of the fund manager and fund trustee;

6)

Financial accounting reports, which have been audited by accounting firms, of the fund managers and fund trustees of the last 3 years
or since their establishment;

7)

Letters of legal opinion issued by law firms; and

8)

Other documents to be submitted as provided for by the securities regulatory department under the State Council.

Article 37

A fund contract shall include the following contents:

1)

Purpose for raising the fund and the name of the fund;

2)

Names and domiciles of the fund manager and fund trustee;

3)

Method of fund operation;

4)

Total fund shares and the valid term of the fund contract in the case of a closed fund, or the minimum total shares to be raised in
the case of an open fund;

5)

Principles for determining the date of offering of fund shares, the prices and expenses;

6)

Rights and obligations of the fund share holders, fund manager and fund trustee;

7)

Procedures and rules for the convening of, and deliberation and voting on the fund share holders’ meeting;

8)

The procedures, time and place of the offering, trading, subscription and redemption of fund shares, the calculation method of expenses,
and the time and method of payment of redemption price;

9)

Principles for the distribution of fund proceeds and the method of execution of such principles;

10)

Methods of drawing and paying and proportions of the administrative fees and trust fees as the remuneration of the fund manager and
fund trustee;

11)

Methods of drawing and paying other expenses relating to the management and utilization of fund property;

12)

Directions of and restrictions on investment of fund property;

13)

Calculation method and publicizing method of the net value the fund assets;

14)

Methods of handling where the fund raised fails to meet the statutory requirements;

15)

Causes and procedures for avoidance and termination of the fund contract, as well as the liquidation method of the fund property;

16)

Dispute settlement methods;

17)

Other matters agreed upon by the parties.

Article 38

The prospectus of a fund shall include the following contents:

1)

Name of the ratification document for the application for fund raising and the date of ratification;

2)

Basic information of the fund manager and fund trustee;

3)

Summary of the fund contract and fund trust agreement;

4)

Date of offering, prices, expenses, and period of offering of the fund shares;

5)

Method of offering the fund shares and the names of the offering institution and registration institution;

6)

Names and domiciles of the law firms issuing letters of legal opinion and the accounting firms auditing the fund property;

7)

Methods of drawing and paying and proportions of the remuneration of the fund manager and fund trustee and other relevant expenses;

8)

Contents of risk warning; and

9)

Other contents provided for by the securities regulatory department under the State Council.

Article 39

The securities regulatory department under the State Council shall, within 6 months from the day of accepting an application for fund
raising, make the examination pursuant to the laws and administrative regulations, the provisions of the securities regulatory department
under the State Council, and the principle of prudence, make the decision to grant ratification or not and notify the applicant;
and shall explain the reasons if ratification is not granted.

Article 40

Fund shares may be offered only after the application for fund raising has been ratified.

Article 41

The offering of fund shares shall be the responsibility of the fund manager; and the fund manager may entrust another agency recognized
by the securities regulatory department under the State Council to handle the offering on its behalf.

Article 42

A fund manager shall publicize the prospectus, fund contract and other relevant documents 3 days prior to the offering of the fund
shares.

The documents specified in the preceding paragraph shall be true, accurate and complete.

Publicity and promotion of the fund raising shall be in conformity with the relevant laws and administrative regulations and shall
not involve any acts specified in Article 64 hereof.

Article 43

A fund manager shall start raising fund within 6 months from the day of receiving the ratification document. If the fund raising starts
after that 6 months and no substantial alterations have happened to the ratified matters, the fund manager shall report to the securities
regulatory department under the State Council for archival purposes; and if there is any substantial alteration, it shall file a
new application with the securities regulatory department under the State Council.

The fund raising shall be finished within the fund raising period ratified by the securities regulatory department under the State
Council. The fund raising period shall be calculated starting from the day of offering the fund shares.

Article 44

Upon expiration of the fund raising period, in the case of a closed fund, if the total amount of fund shares raised reaches 80% or
more of the ratified scale, or in the case of an open fund, if the total amount of fund shares raised reaches the minimum amount
ratified, and if the number of the fund share holders meets the provisions of the securities regulatory department under the State
Council, the fund manager shall, within 10 days from the expiration of the fund raising period, retain a statutory capital verification
agency to make capital verification, and shall, within 10 days from receiving the capital verification report, submit the report
to the securities regulatory department under the State Council, put on record the fund and make a public announcement.

Article 45

The capital raised during the fund raising period shall be deposited in a special account, and nobody may use such capital before
the end of the fund raising.

Article 46

The fund contract is concluded when an investor pays for the fund shares it subscribes to; and the fund contract takes effect after
the fund manager put on record the fund with the securities regulatory department under the State Council pursuant to Article 44
hereof.

Upon the expiration of the fund raising period, if the conditions specified in Article 44 are not satisfied, the fund manager shall
assume the following liabilities:

1)

Covering with its own property the debts and expenses incurred as a result of the fund raising;

2)

Returning the money that the investors have paid, plus the interest accruing thereon at the current deposit rate, within 30 days after
the expiration of the fund raising period.

Chapter V Trading of Fund Shares

Article 47

Fund shares of a closed fund may be traded on the securities exchange upon application of the fund manager and ratification of the
securities regulatory department under the State Council.

The securities regulatory department under the State Council may authorize the securities exchange to ratify the trading of fund shares
on the market pursuant to the statutory conditions and procedures.

Article 48

The following conditions shall be satisfied for the listing and trading of fund shares:

1)

The raising of fund complies with the provisions hereof;

2)

The valid term of the fund contract is 5 years or more;

3)

The capital raised is no less than 200 million RMB;

4)

There are no less than 1,000 fund share holders;

5)

Other conditions set forth in the listing rules of fund shares.

Article 49

The listing and trading rules of fund shares shall be formulated by the securities exchange and be submitted to the securities regulatory
department under the State Council for ratification.

Article 50

After the listing of fund shares, if any of the following circumstances occurs, the securities exchange shall terminate its listing
and report to the securities regulatory department under the State Council for archival purposes:

1)

The conditions for listing prescribed in Article 48 hereof are not long met;

2)

The fund contract expires;

3)

The fund share holders’ meeting decides to terminate the listing prior to the due date;

4)

Other circumstances under which the listing shall be terminated as stipulated in the fund contract or provided for in the listing
rules of fund shares.

Chapter VI Subscription and Redemption of Fund Shares

Article 51

The subscription, redemption and registration of an open fund shall be handled by the fund manager; and the fund manager may entrust
another agency recognized by the securities regulatory department under the State Council to handle the matters on its behalf.

Article 52

A fund manager shall handle the subscription and redemption of fund shares every workday; if there are otherwise stipulations in the
fund contract, such stipulations shall be observed.

Article 53

A fund manager shall pay for the redemption on time, except under any of the following circumst

THE DECISION OF THE MINISTRY OF JUSTICE ON AMENDING THE ADMINISTRATIVE MEASURES FOR THE REPRESENTATIVE OFFICES OF THE LAW FIRMS OF HONG KONG, MACAO BASED IN THE MAINLAND

Ministry of Justice

Order of the Ministry of Justice of the People’s Republic of China

No. 84

The Decision of the Ministry of Justice on Amending the Administrative Measures for the Representative Offices of the Law Firms of
Hong Kong, Macao Based in the Mainland was adopted at the ministerial executive meeting on November 27th, 2003. It is hereby promulgated
and shall enter into force as of January 1st, 2004.

Zhang Fusen, Minister of the Ministry of Justice

November 30th, 2003

The Decision of the Ministry of Justice on Amending the Administrative Measures for the Representative Offices of the Law Firms of
Hong Kong, Macao Based in the Mainland

With a view to promoting the Hong Kong and Macao to establish closer economic and trade relationship with the Mainland, encouraging
and regulating the legal practitioners of Hong Kong and Macao to offer the prescribed legal services, the Administrative Measures
for the Representative Offices of the Law Firms of Hong Kong, Macao Based in the Mainland (hereinafter referred to as the Administrative
Measures) are amended and supplemented, in accordance with the Mainland and Hong Kong Closer Economic Partnership Arrangement and
the Mainland and Macao Closer Economic Partnership Arrangement and their attachments approved by the State Council, as follows:

I.

A paragraph is added after the second paragraph in Article 15 of the Administrative Measures, the content of which is supplemented
as: “A representative office and the representatives may, in accordance with the joint operation agreement reached between the law
firm of Hong Kong or Macao that it belongs to and a law firm in the mainland, cooperate with the lawyers of the law firm in the mainland
and engage in relevant joint businesses.” The third paragraph in the original text is changed as the fourth paragraph, the content
of which is amended as: “No representative office or representative may engage in any legal service or profit-making activity other
than those as provided for in Paragraphs 1 through 3 of this Article.”

II.

Article 19 of the Administrative Measures is amended as: “A representative of a representative office shall have resided in the mainland
for no less than 2 months each year. Whoever fails to do so shall not be registered next year.” A paragraph is added as the second
paragraph, the content of which is supplemented as: “Where a representative is established in Guangzhou or Shenzhen, its representatives
aren’t subject to the limitations on the minimum residence period in the mainland as prescribed in the preceding paragraph.”

III.

The present Decision shall enter into force as of January 1st, 2004.

 
Ministry of Justice
2003-11-30

 



SUPPLEMENTARY PROVISIONS TO THE PROVISIONS ON THE ADMINISTRATION OF FOREIGN-FUNDED MUNICIPAL PLANNING ENTERPRISES

e03037

Ministry of Construction, Ministry of Commerce

Decree of the Ministry of Construction and the Ministry of Commerce

No. 123

Supplementary Provisions to the Provisions on the Administration of Foreign-funded Municipal Planning Enterprises were adopted after
deliberation at the 24th executive meeting of the Ministry of Construction and the executive meeting of the Ministry of Commerce,
which are hereby promulgated and shall come into force as of January 1st, 2004.

Wang Guangtao, Minister of the Ministry of Construction

Lv Fuyuan, Minister of the Ministry of Commerce

December 19th, 2003

Supplementary Provisions to the Provisions on the Administration of Foreign-Funded Municipal Planning Enterprises

With a view to promoting the development of the economic & trade relations between the Mainland and Hong Kong/Macao and to encouraging
Hong Kong service providers and Macao service providers to establish urban planning service enterprises, the following supplementary
provisions are formulated in accordance with the Mainland and Hong Kong Closer Economic Partnership Arrangement and the Mainland
and Macao Closer Economic Partnership Arrangement and the Provisions on the Administration of the Foreign-funded Municipal Planning
Enterprises (Decree No. 116 issued by the Ministry of Construction and the Ministry of Foreign Trade and Economic Cooperation):

1.

Hong Kong service providers and Macao service providers are allowed to establish solely funded urban planning service enterprises
in the Mainland as of January 1, 2004.

2.

Other provisions governing the establishment of urban planning service enterprises in the Mainland by Hong Kong or Macao service providers
shall be implemented in accordance with the Provisions on the Administration of Foreign-funded Urban Planning Service Enterprises.

3.

The terms “Hong Kong service providers” and “Macao service providers” as mentioned in the present Supplementary Provisions shall be
consistent with the definitions and meet the relevant requirements as respectively provided in the Mainland and Hong Kong Closer
Economic Partnership Arrangement and the Mainland and Macao Closer Economic Partnership Arrangement.

4.

The responsibility to interpret the present Supplementary Provisions shall remain with the Ministry of Construction and the Ministry
of Commerce according to their respective functions.

5.

The present Supplementary Provisions shall come into force as of January 1st, 2004.



 
Ministry of Construction, Ministry of Commerce
2003-12-19

 






AMENDMENT OF THE STANDING COMMITTEE OF THE NATIONAL PEOPLE’S CONGRESS TO THE CONSTITUTION

Amendment of the Standing Committee of the National People’s Congress to the Constitution of the PRC

     (Effective Date:–Ineffective Date:)

At its Seventh meeting, the Standing Committee of the Ninth National People’s Congress, having discussed the proposal of the Central
Committee of the Communist Party of China on amending parts of the Constitution of the People’s Republic of China, has worked out
in accordance with the provisions in Article 64 of the Constitution the present Draft Amendment to the Constitution and hereby submits
it to the Second Session of the Ninth National People’s Congress for examination:

The seventh paragraph of the Preamble to the Constitution, which reads: “Both the victory in China’s New-Democratic Revolution and
the successes in its socialist cause have been achieved by the Chinese people of all nationalities, under the leadership of the Communist
Party of China and guidance of Marxism-Leninism and Mao Zedong Thought, by upholding truth, correcting errors and surmounting numerous
difficulties and hardships. China is at the primary stage of socialism. The basic task of the nation is to concentrate its effort
on socialist modernization in line with the theory of building socialism with Chinese characteristics. Under the leadership of the
Communist Party of China and the guidance of Marxism- Leninsm and Mao Zedong Thought, the Chinese people of all nationalities will
continue to adhere to the people’s democratic dictatorship and the socialist road, persevere in reform and opening to the outside
world, steadily improve socialist institutions, develop socialist democracy, improve the socialist legal system and work hard and
self-reliantly to modernize the country’s industry, agriculture, national defense and science and technology step by step to turn
China into a socialist country that is prosperous, powerful, democratic and culturally advanced,” is revised as follows: “Both the
victory in China’s New- Democratic Revolution and the successes in its socialist cause have been achieved by the Chinese people of
all nationalities, under the leadership of the Communist Party of China and guidance of Marxism- Leninism and Mao Zedong Thought,
by upholding truth, correcting errors and surmounting numerous difficulties and hardships. China will be in the primary stage of
socialism for a long time to come. The basic task of the nation is to concentrate its effort on socialist modernization along the
road of building socialism with Chinese characteristics. Under the leadership of the Communist Party of China and the guidance of
Marxism-Leninism, Mao Zedong Thought and Deng Xiaoping Theory, the Chinese people of all nationalities will continue to adhere to
the people’s democratic dictatorship and the socialist road, persevere in reform and opening to the outside world, steadily improve
socialist institutions, develop the socialist market economy, develop socialist democracy, improve the socialist legal system and
work hard and self- reliantly to modernize the country’s industry, agriculture, national defense and science and technology step
by step to turn China into a socialist country that is prosperous, powerful, democratic and culturally advanced.”

2. A new paragraph is added to Article 5 of the Constitution as the first paragraph, which provides: “The People’s Republic of China
governs the country according to law and makes it a socialist country ruled by law.”

3. Article 6 of the constitution, which reads: “The basis of the socialist economic system of the People’s Republic of China is socialist
public ownership of the means of production, namely, ownership by the whole people and collective ownership by the working people.
The system of socialist public ownership supersedes the system of exploitation of man by man; it applies the principle of ‘From each
according to his ability, to each according to his work'”, is revised as follows: “The basis of the socialist economic system of
the people’s Republic of China is socialist public ownership of the means of production, namely, ownership by the whole people and
collective ownership by the working people. The system of socialist public ownership supersedes the system of exploitation of man
by man; it applies the principle of ‘from each according to his ability, to each according to his work’.” “In the primary stage of
socialism, the state upholds the basic economic system under which the public ownership is dominant and diverse forms of ownership
develop side by side and keeps to the distribution system under which distribution according to work is dominant and diverse modes
of distribution coexist.”

4. The first paragraph of Article 8 of the Constitution, which reads: “In rural areas the responsibility system, the main form of
which is household contract that links remuneration to output, and other forms of cooperative economy, such as producers, supply
and marketing, credit and consumers’ cooperatives, belong to the sector of socialist economy under collective ownership by the working
people. Working people who are members of rural economic collectives have the right, within the limits prescribed by law, to farm
plots of cropland and hilly land allotted for their private use, engage in household sideline production and raise privately owned
livestock”, is revised as follows: “The rural collective economic organizations apply the dual operation system characterized by
combination of centralized operation with decentralized operation on the basis of operation by households under a contract. In rural
areas, all forms of Cooperative economy, such as producers’ supply and marketing, credit and consumers’ cooperatives, belong to the
sector of socialist economy under collective ownership by the working people. Working people who are members of rural economic collectives
have the right, within the limits prescribed by law, to farm plots of cropland and hilly land allotted for their private use, engage
in household sideline production and raise privately owned livestock.”

5. Article 11 of the Constitution, which reads: “The individual economy of urban and rural working people, operating within the limits
prescribed by law, is a complement to the socialist public economy. The state protects the lawful rights and interests of the individual
economy.” “The state guides, assists and supervises the individual economy by administrative control.” “The state permits the private
sector of the economy to exist and develop within the limits prescribed by law. The private sector of the economy is a complement
to the socialist public sector of the economy. The State protects the lawful rights and interests of the private sector of the economy,
and exercises guidance, supervision and control over the private sector of the economy”, is revised as follow:” The Non-public sectors
of the economy such as the individual and private sectors of the economy, operating within the limits prescribed by law, constitute
an important component of the socialist market economy.” “The state protects the lawful rights and interests of the individual and
private sectors of the economy, and exercises guidance, supervision and control over the individual and private sectors of the economy.”

6. Article 28 of the Constitution, which reads: “The state maintains public order and suppresses treasonable and other counter- revolutionary
activities; it penalizes criminal activities that endanger public security and disrupt the socialist economy as well as other criminal
activities; and it punishes and reforms criminals”, is revised as follows: “The State maintains public order and suppresses treasonable
and other criminal activities that endangers state security; it penalizes criminal activities that endanger public security and disrupt
the socialist economy as well as other criminal activities; and it punishes and reforms criminals.”

    





REGULATION ON THE CUSTOMS’ PROTECTION OF INTELLECTUAL PROPERTY RIGHT

Regulation of the PRC on the Customs’ Protection of Intellectual Property Right

     CHAPTER I GENERAL PRINCIPLE CHAPTER II RECORD CHAPTER III APPLICATION CHAPTER IV PROCEDURE FOR INVESTIGATION AND PUNISHMENT CHAPTER
V LEGAL RESPONSIBILITY CHAPTER VI ATTACHMENT

   Article 1 This regulation is formulated in accordance with concerned laws of the People’s Republic of China, in order to enforce the customs’
Protection of intellectual property right, promote exchange of foreign economy, trade, technology and culture, safeguard social public
interests.

   Article 2 This regulation is applicable to intellectual property including copyright, patent and the right to exclusive use of Trade Marks,
which is relating to imported or exported goods and protected by the laws and administrative regulations of the people’s Republic
of China.

   Article 3 Import or export of the goods is forbidden, as long as they infringe the intellectual property right protected by the laws and administrative
regulations of the people’s Republic of China (called infringing goods for short following).

   Article 4 The customs of the People’s Republic of China enforce the protection of the intellectual property right relating to imported or exported
goods, exercise concerned power stimulated by the customs law of the People’s Republic of China.

   Article 5 Consignees of imported goods or consigners of exported goods and their agent (called consignees or consigners by a joint name following)
shall declare honestly to the Customs the state of intellectual property relating to imported or exported goods and submit concerned
documents for verifying.

   Article 6 If intellectual property right owners and their agents (called intellectual property owners by a joint name following) require the
customs to enforce the protection of their intellectual property relating to imported or exported goods, they shall report their
intellectual property right to the Customs for the record and file an application with the Customs to take protection measures when
they consider it necessary.

   Article 7 When the Customs enforce the protection of intellectual property right, they shall keep the trade secrets of concerned parties.

   Article 8 Intellectual property right owners shall submit written applications to the Customs when they apply for the records of the Customs’
protection of intellectual property right.

The application shall include:

(1) The name or the surname and personal name, registration place or nationality, domicile, legal representative and principal business
place of intellectual property owners.

(2) Registrative number, content and period of validity of registered trademark, number, content and period of validity of patent
of concerned content of copyright.

(3) Name and place of production of the goods relating to intellectual property.

(4) Persons authorized or licensed to use the intellectual property.

(5) The circumstances of principal importing or exporting customs, importer or exporter, principal features, prices of the goods relating
to intellectual property.

(6) The circumstances of the producer, importer or exporter, principal importing or exporting customs principal features, prices of
the known infringing goods.

(7) Other circumstances that the Customs General considers necessary to illustrate.

When the application is submitted, following documents shall be enclosed:

(1) Copy of identification card, transcript of registration certificate or copy attested by registration organs of intellectual property
owner.

(2) Copy of registration certificate of registered trademark, copy of announcement of transfer of registered trademark approved by
Trademark Bureau or use of trademark license contract entered in the records of Trademark Bureau, copy of patent certificate, transcript
of transfer of patent contract registered and announced by Patent Bureau, copy of use of patent license contract or certificate or
proof of copyright.

(3) Other documents that the Customs General consider necessary to be enclosed.

   Article 9 The Customs shall notice the applicant whether the application is admitted to enter in the records within thirty days after receiving
all of the applying documents. If the Customs admit the record, they shall give record certificate of the customs’ protection of
intellectual property; If not, they should illustrate the reasons.

   Article 10 The period of validity of the Customs’ protection of intellectual property right shall be seven years, counted from the day the record
is admitted by the Customs General.

Subject to the validity of intellectual property, intellectual property owner may apply for a renewal of record within six months
before the period of validity of the record the customs’ protection of intellectual property right expires. The period of validity
for each renewal of record shall be seven years.

The record of the customs’ protection of intellectual property right shall be invalid of no application for renewal has been filed
before the period of validity of the record of the customs’ protection of intellectual property expires or the legal protection period
of the right to exclusive use of trademark, patent or copyright expires.

   Article 11 If the circumstances of the recorded intellectual property have changed, the intellectual property owner shall go through the formalities
of the change or cancel of record within ten days after the day when the authorities of intellectual authorities approve the change.

   Article 12 Intellectual property right owners who have entered in the record of the Customs may submit to the Customs located in importing or
exporting place the application to take protection measures of intellectual property right when they find that the goods which are
suspected of infringing is to enter or leave the country.

   Article 13 One shall submit written application of he require the customs to take protection measures of intellectual property.

The application shall include:

(1) Name of the intellectual property applied for protection, number of the Customs’ record.

(2) Name of the suspected infringer domicile legal representative, principal business place.

(3) Circumstances of the name, size of the suspected infringing goods.

(4) Circumstances of the port time, conveyance and consignee or consignor.

(5) concerned infringing proof.

(6) Measures the applicant requires the Customs to take.

(7) Other circumstances that the Customs consider necessary to submit.

   Article 14 If the applicant requires the Customs to detain the suspected infringing goods, the applicant should submit guarantees equal to C.I.F.
of imported goods or F.O.B. of exported goods.

   Article 15 If the intellectual property owner who requires the Customs to take protection measures of the intellectual property right hasn’t
enter in the records of the Customs General, he shall go through the formalities of the record of intellectual property in accordance
with Article 8 of these regulations when he applies with the customs.

   Article 16 If the application isn’t in conformity with the relevant provisions of this chapter, the Customs will not accept it.

CHAPTER IV PROCEDURE FOR INVESTIGATION AND PUNISHMENT

   Article 17

17. 1 If Customs, upon the petition of trademark or patent holder, decides to seize goods suspected of infringing the trademark or
patent, Customs must file a Customs Detaining Receipt and serve it on either the consignee or consignor of the goods and also notify
the petitioner in writing.

17. 2 The consignee or consignor of the seized goods has seven (7) days from the date of being served the Customs Detaining Receipt
to raise an objection to the customs seizure. The objection must be submitted in writing and explain the reasons they feel that their
goods do not violate any intellectual property rights. If no objection is filed within this seven (7) day period, the Customs Department
may conduct an investigation and depending on the outcome of the investigation, is enpost_titled to treat the seized goods as violating
a trademark or patent and deal with the goods accordingly. If the consignee or consignor submits an objection, Customs must immediately
notify the petitioner in writing that an objection has been made.

17. 3 The petitioner has fifteen (15) days from the date the written notification from the Customs Department is served, (as per Article
17. 1), to apply to the appropriate agency to deal with and commence an intellectual property infringement action in the People’s
Court.

   Article 18

18. 1 Customs has the right to detain goods suspected of infringing intellectual property rights registered with them. If goods are
detained, the Customs Department must serve either the consignee or consignor with a Customs Detaining Receipt and also notify the
intellectual property owner in writing. If the intellectual property owner submits a written petition for intellectual property protection
within three (3) days following the Customs Department’s written notification of the detained goods, the matter will be handled in
accordance with Article 17 of this regulation.

   Article 19

19. 1 A consignee or consignor of detained goods who maintains that his goods do not infringe any intellectual property rights, may
apply for clearance of the goods. A bailment bond in the amount equal to two (2) times the CIA import value of the goods or two (2)
times the FOB export value of the goods.

   Article 20

20. 1 If Customs detains goods suspected of violating intellectual property rights under the procedure described in Articles 17

    





MEASURES FOR THE HANDLING OF INCOME TAXES IN THE DEBT RESTRUCTURING OF ENTERPRISES

The State Administration of Taxation

Measures for the Handling of Income Taxes in the Debt Restructuring of Enterprises

Decree [2003] No.6 of State Administration of Taxation

January 23, 2003

Article 1

In order to strengthen the administration of income tax in the debt restructuring of enterprises, and to prevent the loss of tax revenue,
these Measures are enacted in accordance with the Provisional Regulations of the People’s Republic of China on Enterprise Income
Tax and the implementation rules thereof.

Article 2

Debt restructuring as used in these Measures refers to all the mattes involving modification of debt terms between the creditor (enterprise)
and the debtor (enterprise).

Article 3

Debt restructuring can be done in any or all of the following methods:

1)

Paying off the debts by cash lower than the assessable cost of the debts;

2)

Paying off the debts by non-cash assets;

3)

Transferring the debts to capital, including debt-equity swap of state-owned enterprises;

4)

Modifying other debt terms, such as extending the repayment period, extending the repayment period and collecting extra interests,
extending the repayment period and reducing the capital or interest of the debts etc;

5)

Mixed restructuring by combining two or more of the aforesaid methods.

Article 4

Where the debtor (enterprise) pays off the debts by non-cash assets, except that the enterprise is restructured or there are otherwise
liquidation provisions, the handling of income tax shall be divided into two economic operations, namely, the transferring of the
non-cash assets at fair value, and the paying off of debts with the amount equivalent to the fair value of the non-cash assets. The
debtor (enterprise) shall confirm the transfer income (or loss) of the relevant assets; for the non-assets acquired by the creditor
(enterprise), the assessable cost shall be determined according to the fair value of the relevant assets (including the taxes relating
to the transfer of assets), and thus to calculate the expenses for depreciation of fixed assets, the expenses for amortization of
intangible assets or the sale cost carried forward etc that shall be deducted before payment of the enterprise income tax.

Article 5

In the debt restructuring of transferring debts to capital, except that the enterprise is restructured or there are otherwise liquidation
provisions, the debtor (enterprise) shall confirm the balance between the book value of the restructured debts and the fair value
of the equity enjoyed by the creditor for giving up the creditor’s rights as the income of debts restructuring, and include that
income in the taxable income of the current period. The creditor (enterprise) shall confirm the fair value of the equity it enjoyed
as the assessable cost of the investment.

Article 6

In the debt restructuring in which the creditor’s concessions to the debtor include paying off the debts by cash or non-cash assets
lower than the assessable cost of the debts etc, the debtor shall confirm the balance between the assessable cost of the restructured
debts and the amount of the cash paid or the fair value of the non-cash assets as the income of debt restructuring, and include that
income in the taxable income of the current period. The creditor shall confirm the balance between the assessable cost of the restructured
debts and the cash or fair value of the non-cash assets received as the loss of debt restructuring of the current period to offset
the taxable income.

Article 7

In the debt restructuring by modifying other debt terms, the debtor shall write down the assessable cost of the restructured debts
to future payable amount, and the amount written down shall be confirmed as the income of debt restructuring of the current period.
The creditor shall write down the assessable cost of the credits to future receivable amount, and the amount written down shall be
confirmed as the loss of debt restructuring of the current period.

Article 8

If an enterprise’s income of asset transfer or of debt restructuring confirmed as a result of paying off debts by non-case assets
or of the creditor’s concessions is of considerably large amount, and it is really difficult to pay the tax once-off, the tax may
be evenly included in the payable income of each year within a period no longer than 5 tax years.

Article 9

In debt restructuring between associated parties that include such concession terms as one party shall transfer profits to the other
party, if there are reasonable business needs and any of the following conditions is met, the tax may be handled respectively pursuant
to Articles 4 to 8 of these Measures upon approval of the tax authorities:

1)

As supported by a court ruling;

2)

There is an agreement of consent all of the creditors;

3)

In case of approved debt-equity swap of state-owned enterprise.

Article 10

If the debt restructuring including concession terms between associated parties is not in conformity with the conditions provided
in Article 9 of these Measures, the creditor may not, as a general principle, confirm the concession as restructuring loss, but
as donation, and the debtor shall confirm the donation income. If the debtor is a shareholder of the creditor, the concession of
the creditor shall be assumed as the distribution to the shareholders by the enterprise, and be handled according to Item 2) of Article
1 of the Notice of the State Administration of Taxation on Several Issues of Income Tax on Equity Investment of Enterprises (GuoShuiFa
[2002] No.118).

Article 11

The fair value as used in these Measures refers to the fair purchase value of the transactions between independent enterprises.

Article 12

These Measures shall enter into force on March 1, 2003.



 
The State Administration of Taxation
2003-01-23

 






CIRCULAR OF THE STATE ADMINISTRATION OF FOREIGN EXCHANGE ON IMPROVING THE ADMINISTRATION OF FOREIGN EXCHANGE IN FOREIGN DIRECT INVESTMENTS

The State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange on Improving the Administration of Foreign Exchange in Foreign Direct Investments

HuiFa [2003] No.30

March 3, 2003

Branches and foreign exchange administration departments under the State Administration of Foreign Exchange in provinces, autonomous
regions and municipalities directly under the Central Government, and branch administrations of Shenzhen, Dalian, Qingdao, Xiamen,
Ningbo; and headquarters of Chinese-capital designated banks of foreign exchange:

In order to adapt to the new international investment trend, introduce overseas investments through multiple channels, continuously
perfect the administration on foreign exchanges in foreign investments and further improve the environment for foreign investments,
some issues concerning the administration of foreign exchange in foreign direct investments is hereby circularized:

I.

Administration of the Accounts of and Capital Contributions by Foreign Investors

1.

A foreign investor who makes direct investment or engages in activities relevant to direct investment in China without establishing
enterprise with foreign investment in China may apply to the administration of foreign exchange in the locality of the project to
open a special foreign investor’s foreign exchange account in the name of the investor. A foreign investor is permitted to open only
one special foreign exchange account of multiple currencies at a bank except for otherwise approved by administration of foreign
exchange. This kind of accounts shall be classified into following four categories based on the uses:

(1)

Investment accounts. After obtaining non-legal person business license, foreign investors who engage in construction contracting,
joint exploration, development and exploitation of natural resources or venture capital investment may apply to open investment accounts
to deposit foreign exchange funds relevant to payment therefor.

(2)

Acquisition accounts. Foreign investors who plan to establish enterprises with foreign investment in China may, if it is necessary
to purchase land use right and attached real properties thereon, machinery and equipment or other assets in China at initial stage,
apply to open the acquisition accounts after the asset purchase contracts come into force, in order for depositing funds for paying
for acquisition.

(3)

Expense accounts. Foreign investors who plan to establish enterprises with foreign investment in China may, if it is necessary to
conduct market research, planning and preparatory works for establishment of institutions in China at initial stage, open the expense
account upon obtaining the notice for advance examination and approval of the company name from the administrations of industry and
commerce, in order for depositing foreign exchange funds for payments.

(4)

Security accounts. Prior to making investments in China, if the foreign investors are required to provide to domestic institutions
security funds in accordance with relevant stipulations and contract provisions, they may apply to open security fund accounts within
the time period prescribed by the contracts in order to deposit and pay foreign exchange security funds. In applying to open special
foreign exchange accounts, the foreign investors shall provide to the administrations of foreign exchange documents certifying the
truthfulness and legality of the investments, and the administrations of foreign exchange shall decide upper limits on the amounts
at the relevant accounts, the extended deposit duration and scope of settlements, etc. and shall conduct routine supervision (see
Attachment 1). Funds to the special foreign exchange accounts of the foreign investors shall be input in the form of exchange instead
of cash deposit. Settlements and transfers of funds in the accounts shall be verified by the administrations of foreign exchange
on a case-by-case basis (see Attachment 2 and 3). Where a foreign investor has established an enterprise with foreign investment
in China, any balance remained in the special foreign exchange account in the form of acquisition, expense and security accounts
may be transferred to the capital account of the enterprise. On strength of relevant approval documents issued by the administration
of foreign exchange, funds settled and transferred under the above accounts shall be regarded as the capital contribution of the
foreign investor and capital verification may be conducted accordingly. Where the foreign investor has not established an enterprise
with foreign investment in China, the foreign investor may go through the procedures for sales/purchases of foreign exchange in respect
of the balance and remit it abroad on strength of relevant approval documents issued by the administration of foreign exchange.

2.

Where foreign investors make capital contributions to enterprises with foreign investment in China from funds in offshore accounts
opened with banks authorized by People’s Bank of China to conduct offshore businesses, the transfers of foreign exchange funds from
offshore accounts to the capital accounts of the enterprises in China shall not require approvals of administration of foreign exchange.
However, when the enterprises with foreign investment go through the procedures for capital verification inquiry, the banks receiving
the remittances shall mark with “offshore funds” in the response letter to the inquiry letter in respect of the funds. Where a foreign
investor makes capital contribution to an enterprise with foreign investment from non-resident individual exchange account opened
at a bank in China, the administration of foreign exchange shall issue relevant approval documents (see Attachment 4) on foreign
exchange businesses under capital items after verifying relevant submitted documents inerrant. Based on the approval documents, the
bank shall carry out transfer of the fund from the non-resident individual exchange account to the capital account of enterprise
with foreign investment in China, and the enterprise shall go through the procedures of capital verification as well as registration
of foreign investment/exchange. Upon obtaining consent from the State Administration of Foreign Exchange, a branch with large business
volume may grant the power of examination and approval on transfer of the above funds to designated foreign exchange banks that shall
perform relevant duties such as examination, statistics, supervision and report for the record etc. Designated foreign exchange banks
authorized with the above power shall implement strict internal control system and shall have been no record of grossly violating
foreign exchange regulations in latest three years. When the enterprise with foreign investment go through the capital verification
inquiry procedures, the bank receiving the fund shall mark with “non-resident individual transfer in China” in the response letter
to the inquiry letter in respect of the fund.

3.

In addition to making capital contributions in a way of freely convertible currencies, imported equipments and other material items,
intangible properties and RMB-denominated profits etc., foreign investors may contribute to the registered capitals of enterprises
with foreign investment in the following ways with approval from administrations of foreign exchange:

(1)

The enterprises with foreign investment increase the enterprise capitals by transferring the development funds and reserve funds
(or capital public reserves and surplus reserves) etc. into the registered capitals;

(2)

The enterprises with foreign investment increase the enterprise capitals by transferring their unallocated profits, dividends payable
and interests accrued therefrom etc. to registered capitals;

(3)

The enterprises with foreign investment increase capitals by transferring of the principals and current interests of registered foreign
debts of the foreign parties into registered capitals; or

(4)

The foreign investors make reinvestments in the way of properties gained through early recouped investments or assets derived from
liquidation, stock equity transfer or reduction of registered capitals from enterprises with foreign investment in which they have
invested. Where the foreign investors make capital contributions in any of the above ways, the administrations of foreign exchange
shall issue relevant approval documents (see Attachment 5 and 6) on foreign exchange businesses under capital item after verifying
relevant submitted documents and their authentications. Based on the approval documents, the banks shall carry out relevant transfers
of the funds in China, and the enterprises shall go through the procedures for capital verification inquiry as well as registrations
of foreign investments and foreign exchanges.

4.

Where foreign investors and investment-type enterprises with foreign investment acquire stock equities of domestic enterprises, they
shall pay considerations (i.e. the prices paid by foreign parties to Chinese parties for buying the stock equities of the latter
which may be in form of foreign exchange funds owned by the foreign investors and investment-type enterprises with foreign investment,
RMB-denominated profits from other enterprises with foreign investment in which they have invested and other assets legally obtained)
for purchases of the stock equities in accordance with the provisions of laws, regulations and stipulations of transfer contracts
reached between the two parties, and make foreign investments and foreign exchange registrations on receipt of foreign exchange for
equity transfers with the administrations of foreign exchange at the localities of the transferors by themselves or by the transferors
under their authorizations. Where payment of considerations of equity purchases are made in a lump sum, the foreign investment and
foreign exchange registrations in respect of the proceeds earned through the transfers shall be made within 5 days of receipt of
the considerations and where payments thereof is made by installments, foreign investment and foreign exchange registrations shall
be made in respect of each of the installments within 5 days of receipt of each installment. Before foreign investors have paid in
full the considerations for share transfers, their ownership equity in the acquired enterprises shall be fixed in accordance with
the ratio that has actually been paid and foreign exchange businesses such as stock equity transfers, reduction of registered capitals,
liquidation and profit remittances shall be handled accordingly. The administrations of foreign exchange shall handle foreign investment
and foreign exchange registrations on receipt of foreign exchange for equity transfers and shall issue relevant certificates (see
Attachment 7) after verifying relevant documents submitted by foreign investors and their authentications. The certificates on foreign
investments and foreign exchange registrations on receipt of foreign exchange for equity transfers are valid documents certifying
that the considerations payable by foreign parties for stock equity transfers have been received, and they shall also serve as important
bases for the acquired enterprises to make foreign investment and foreign exchange registrations. All Branches and Foreign Exchange
Administration Offices shall summarize and report to the State Administration on monthly basis the data on foreign investments and
foreign exchange registrations on receipt of foreign exchange for equity transfers (including number and amount registered) and the
data on inflow of other types of foreign investments in the form of Report on Foreign Investment and Foreign Exchange Registration
(see Attachment 8) as newly issued. The former form o the Report on Foreign Investment and Foreign Exchange Registration shall cease
to be used from the date of entering into force of the Circular.

5.

Where non-investment type enterprises with foreign investment establish enterprises or acquire enterprises in China in accordance
with Interim Provisions on Investments in China by Enterprises with Foreign Investment promulgated jointly by the Ministry of Economic
and Trade Cooperation and the State Administration for Industry and Commerce, the invested enterprises with no foreign capitals are
permitted exempt from going through the procedures for foreign investment and foreign exchange registration and capital verification
and request for certificate for foreign exchange. The administration of foreign exchange shall on strength of Enterprise Legal Person
Business License, which has been issued by the administrations of industry and commerce to the invested enterprise and which is marked
with “with investment from enterprise with foreign investment”, treat the invested enterprise as an enterprise with foreign investment
in its raising of funds from abroad. The administrations of foreign exchange shall not approve transfers of foreign exchange funds
within China between the non-investment type enterprises with foreign investment and the enterprises they invested, and between different
enterprises invested by the non-investment type enterprises. In case of special circumstances in which this type of transfer within
China is necessarily required, the branches and the foreign exchange administration departments shall report to the State Administration.

6.

A domestic enterprise to which the ratio of foreign investor’s capital contribution is below 25% shall complete foreign exchange registration
of enterprise with foreign investment and go through the procedures for verification inquiry as well as foreign investment and foreign
exchange registration in accordance with relevant provisions on strength of an approval certificate for enterprise with foreign investment
which is issued by foreign economic and trade department and is mark with “ratio of foreign investment below 25%” as well as a foreign
investment business license issued by department in charge of administration of industry and commerce and marked with “ratio of foreign
investment below 25%”.

II.

Capital Verification Inquiry and Foreign Investment and Foreign Exchange Registration The capital verification inquiries of enterprise
with foreign investment and foreign investment and foreign exchange registrations shall be handled in accordance with the following
principles:

1.

In establishing enterprise with foreign investment, if the foreign exchange capital contributed by a foreign investor exceeds the
upper limit of the capital account of the enterprise, once such excess is no more than 1% of the upper limit and no more than $10,000
US equivalent in absolute value, the administration of foreign exchange shall handle the capital verification inquiry as well as
foreign investment and foreign exchange registration based on the actual amount contributed. If the amount of foreign exchange contributed
to the enterprise for stock equity participation is in excess of the sum reached by multiplying its ratio of equity with the amount
of registered capital of the enterprise due to appreciation of the enterprise’s capital, the excess shall be included into the upper
limit of the capital account of the enterprise. The principle set forth in the above paragraph shall still apply to the entry of
foreign exchange fund in excess of the limit.

2.

Where a foreign investor who contributes investment in tangible assets the enterprise with foreign investment entrusts an accounting
firm to make inquiry with administration of foreign exchange, if there is inconsistency between the value of such assets as appraised
by an appraisal institution under the commodities inspection administration and the value declared in the Customs Declaration when
importing such assets, the administration of foreign exchange shall adopt the value as appraised by the former for the purpose of
capital verification inquiry and foreign investment and foreign exchange registration.

3.

Where a foreign investor who contributes only intangible assets to an enterprise with foreign investment entrusts an accounting firm
to make inquiry with administration of foreign exchange, it shall list the contributed intangible assets in the Schedule attached
to the Letter of Inquiry on Foreign Party’s Capital Contribution, based on which the administration of foreign exchange shall make
foreign investment and foreign exchange registration for the contribution of the intangible assets and shall indicate in the Response
Letter to the Letter of Inquiry on Foreign Party’s Capital Contribution that “the intangible assets of the foreign party has been
registered with the number of registration XXXX. This letter is only valid for certificating that it has been registered.”

4.

Where a foreign investor makes investment or equity participation at a premium, or where the value of in-kind contribution made by
the foreign investor is appraised at a value higher than the declared value to the Customs, or where due to fluctuation of exchange
rate or other similar causes, the actual amount contributed to the enterprise with foreign investment exceeds the amount of registered
capital of the enterprise with foreign investment, the administration of foreign exchange shall register the registered capital of
the enterprise as well as its actual amount of contribution due to the premium.

5.

Where the enterprise that “processes raw documents on clients’ demands, assembles parts for the clients and process according to the
clients’ samples or engages in compensation trade” who intends to transform into enterprise with foreign investment entrusts accounting
firms to make inquiry with administration of foreign exchange, it shall submit relevant documents to the administration of foreign
exchange, and after examination and confirmation that the equipment to be invested for the transformation is imported goods for which
payment abroad has not been made, the administration of foreign exchange shall issue Response Letter to the Letter of Inquiry on
Foreign Party’s Capital Contribution in accordance with the value specified in the appraisal report on value of commodities and make
foreign investment and foreign exchange registration(see Attachment 9).

6.

Where the name of the foreign investor to a enterprise with foreign investment is inconsistent with the name of the overseas payer
who made payment for the investment, the administration of foreign exchange shall handle capital verification inquiry and make foreign
investment and foreign exchange registration for it but indicate that “there is inconsistency between the payer and the investor”
in the Response Letter to the Letter of Inquiry on Foreign Party’s Capital Contribution.

7.

For easy queries from different localities, the administration of foreign exchange shall indicate the names of relevant contract persons
and their telephone numbers when issuing approval documents for capital item foreign exchange business to enterprises with foreign
investment.

8.

Where any designated foreign exchange bank is found to open accounts for enterprises without permission, making entry of capital in
excess of limits etc in violation of provisions on account administration, the administration of foreign exchange shall impose sanctions
on it in accordance with provisions of Provisions of Administration of Domestic Foreign Exchange Account. Where any enterprise is
found to forge or alter documents or documents such as approval documents for capital item foreign exchange business, letters of
response that administration of foreign exchange issues for designated foreign exchange banks, Customs declaration for imported goods
etc., the administration of foreign exchange shall transfer such case to judicial organs for handling. If it is found that the accounting
firm failed to make capital verification inquiry or the inquiry is made incompliant with prescribed procedures after it issues the
capital verification report to enterprises, the administration of foreign exchange shall order such accounting firm to go through
the capital verification inquiry procedures as remedial measures and notify its violation to the association of certified public
accountants of its locality. No further inquiries from such accounting firm shall be accepted before the association of certified
public accountants of its locality makes formal punishment decision to it. The Branches and Foreign Exchange Administration Offices
shall report the names of the accounting firms that acted in violation of regulations again after having been punished to the State
Administration who shall announce the names at the website of the State Administration of Foreign Exchange and other media and shall
make recommendations to enterprises to be prudent in their choice of accounting firms. In the course of going through capital verification
inquiry procedures as remedial measures by accounting firms failed to make the inquiry or the inquiry was made not in compliance
with prescribed procedures, if it is found that the capital verification report issued by it is a false verification report, the
administration of foreign exchange shall transfer the case to judicial organs to handle and shall notify the administration of industry
and commerce at its locality.

III.

Administration of Registered Capital Reduction of Enterprise with Foreign Investment and Adjustment to Some Administration Business

1.

Where a foreign investor’s capital contribution to a enterprise with foreign investment is reduced, which involves sale/purchase of
foreign exchange, the administration of foreign exchange shall issue approval document for foreign exchange business under capital
item (see Attachment 10) after examination on relevant documents submitted by the enterprise, based on which the foreign investor
shall go through the procedures of the purchase, payment and remittance abroad of exchanges in respect of the reduced capital. Where
the reduction is for the purpose of reducing losses on the accounting books of the enterprise with foreign investment, or that the
amount reduced is the unpaid capital contribution of the foreign investor, the administration of foreign exchange shall not grant
approval to the foreign investor to re-invest such amount in China or to pay the amount out of china by the enterprise with foreign
investment.

2.

The mechanism of paid-up capital prescribed by Company Law of the People’s Republic of China shall apply to the capital contributions
to be made by foreign parties in companies limited-by-shares with foreign investment and fund management companies with foreign participations.
When companies falling into the two categories makes application to administration of foreign exchange to open enterprise with foreign
investment capital account, they do not need to present the enterprise legal person business licenses for enterprises with foreign
investment issued by the administration of industry and commerce. By presenting respective approval certificates for companies limited-by-shares
with foreign investment issued by foreign economic and trade department, the enterprise with foreign investment approval certificate
issued by foreign economic and trade department and approval for commencement of business issued by CSRC, the company limited-by-shares
with foreign investment and fund management company with foreign participation may go through relevant procedures. Relevant provisions
on documents to be provided by companies falling into the above two categories for establishment of capital accounts and making enterprise
with foreign investment foreign exchange registrations shall still be implemented.

3.

During the course of handling foreign exchange business, if the administration of foreign exchange needs to examine capital verification
report of the enterprise with foreign investment, the Response Letter to the Letter of Inquiry on Foreign Party’s Capital Contribution
shall be examined simultaneously in the case that capital verification report is issued after May 1, 2002. If auditing report of
enterprise with foreign investment needs to be examined in the course of handling foreign exchange business, the administration of
foreign exchange shall simultaneously examine the Foreign Exchange Balance Sheet of the enterprise with foreign investment in the
case that the auditing report is issued after the year of 2002.

4.

In order to further improve the efficiency in supervision on capital settlement and facilitate the operation of investment capital
by enterprises, the documents required to be examined by banks in accordance with operating procedures to be followed by authorized
banks in settlement of capital in foreign exchange which is stipulated in the Circular of State Administration of Foreign Exchange
Concerning Reform on Ways of Management of Settlement of Capital by Foreign Investment (HuiFa [2002] No. 59) shall be simplified
into the following three ones:

(1)

A written application of the enterprise, indicating the account number of the capital account of the enterprise, situation of capital
entry, currency for settlement, amount and usage etc.);

(2)

The Foreign Exchange Registration Certificate;

(3)

Other supplementary documents required in light of the circumstances. Other examination requirements shall as usual be in accordance
with relevant provisions of the Circular of State Administration of Foreign Exchange Concerning Reform on Ways of Management of Settlement
of Capital by Foreign Investment (HuiFa [2002] No. 59) and the operating procedures.

5.

Where a Chinese-foreign cooperative enterprise pays in form of depreciation of fixed assets or amortization of intangible assets to
the foreign party for early recouping of its investment amount (including fixed returns), the examination on “guarantee letter” provided
in Operating Procedures for Management of Foreign Exchange Business under Capital Item (HuiFa [2001] No. 38) is hereby amended as
follows:

(1)

If the Chinese-foreign cooperative enterprise has outstanding debts (bank loan or shareholder’s loan from foreign investor), the
foreign investor shall provide guarantee letter in corresponding amount from a foreign-invested financial institution in China;

(2)

If the outstanding debt of the Chinese-foreign cooperative enterprise is shareholder’s loan provided by foreign investor, a guarantee
letter issued by the foreign investor stating that it unconditionally undertakes joint and severally liability with the contractual
joint venture may be in lieu of the above letter of guarantee issued by the financial institutions.

(3)

If the Chinese-foreign cooperative enterprise has no debts, no letter of guarantee shall be provided by the foreign investor. Other
examination requirements shall as usual be in accordance with relevant provisions of the Operating procedures for Administration
of Foreign Exchange Business under Capital Item.

IV.

Othe Matters

1.

The term “administration of foreign exchange ” mentioned in this Circular refers to the State Administration of Foreign Exchange,
various branches, foreign exchange administration departments and Sub-branches within their jurisdictions.

2.

All branches and foreign exchange administration departments are required to transmit the following parts involving bank operations
to the designated foreign exchange banks within their jurisdiction:

(1)

Article 1 , 2 and 3 of Part I, Administration of the Accounts of and Capital Contributions by Foreign Investors, as well as Attachments
1 to 6 of this Circular;

(2)

Article 1 and Paragraph 1, Article 8 of Part II, Capital Verification Inquiry and Foreign Investment and Foreign Exchange Registration;
and

(3)

Article 4 of Part III, Administration of Registered Capital Reduction of Enterprise with Foreign Investment and Adjustment to Some
Administration Business.

3.

This Circular shall enter into force as of April 1, 2003. If there is any question in the implementation, please contact the Capital
Item Administration Department of the State Administration of Foreign Exchange through the telephone number 010-68402254.

Attachments:

1. Examination and approval on open, alteration and cancellation of foreign investor’s special foreign exchange account(omitted);

2. Examination and approval on settlement of funds in foreign investor’s special foreign exchange account (four categories in all)
(omitted);

3. Examination and approval on transfer of funds from foreign investor’s special foreign exchange account (four categories in all)
to enterprise with foreign investment’s capital in China (omitted);

4. Examination and approval on transfer of foreign exchange funds from non-resident individual exchange account opened with banks
in China by foreign investors to capital account of enterprise with foreign investment (omitted);

5. Examination and approval on transferring of development fund, reserve fund (or capital public reserve and surplus reserve), unallocated
profits, dividends payable and interests accrued therefrom, principal and accrued interest of registered foreign debt of the foreign
parties etc. into registered capital of the enterprise (omitted);

6. Examination and approval on reinvestment to be made by foreign investors by property gained through early recouped investment or
assets derived from liquidation, stock equity transfer or reduction of registered capital from enterprise with foreign investment
in which they have invested (omitted);

7. Registration on foreign investment and foreign exchange in respect of proceeds of foreign exchange paid as consideration by foreign
investors for purchase stock equity of Chinese party (omitted);

8. Report on foreign investment and foreign exchange registration in the region on yearly and monthly basis (form) (omitted);

9. Examination and approval on capital verification inquiry and Examination and approval on for the enterprises that “process raw
documents on clients’ demands, assemble parts for the clients and process according to the clients’ samples or engage in compensation
trade” who intends to transform into enterprise with foreign investment (omitted);

10. Examination and approval on reduction of registered capital by foreign parties in the enterprise with foreign investment (omitted).



 
The State Administration of Foreign Exchange
2003-03-03

 






CIRCULAR OF THE STATE ADMINISTRATION OF FOREIGN EXCHANGE CONCERNING ADMINISTRATION OF FOREIGN EXCHANGE OF FUND MANAGEMENT COMPANIES WITH FOREIGN SHARES

Circular of the State Administration of Foreign Exchange Concerning Administration of Foreign Exchange of Fund Management Companies
with Foreign Shares

HuiFa [2003] No.44
March 29, 2003

Branches and foreign exchange administration departments under the State Administration of Foreign Exchange in provinces, autonomous
regions and municipalities directly under the Central Government, and branch administrations of Shenzhen, Dalian, Qingdao, Xiamen,
Ningbo:

For the purpose of regulating the administration on foreign exchange of fund management companies with foreign shares, this Circular
is hereby issued to you concerning administration of foreign exchange of the fund management companies with foreign shares:

I.

“Fund management companies with foreign shares” mentioned in this Circular shall include the fund management companies which corporate
form are changed through acquirement by transfer of or through subscribing stock equity of a domestic fund management company by
foreign shareholders, or the fund management companies established through joint capital contribution by foreign shareholders and
domestic shareholders.

II.

No fund management company with foreign shares shall open foreign exchange account before obtaining approval from the China Securities
Regulatory Commission (hereinafter referred to as the “CSRC”) for granting commencement of its business.

(I)

Where the CSRC has granted approval for commencement of business to a fund management company established through joint capital contribution
by domestic shareholders and foreign shareholders, the company may apply to local administration of foreign exchange for opening
foreign exchange capital account at a domestic designated bank of foreign exchange by presenting the following documents and materials:

1.

A written application to open account;

2.

Joint venture agreement/contract;

3.

The approval document from the CSRC for granting commencement of its business.

4.

The Approval Certificate of Foreign Investment Enterprise issued by the foreign economic and trade department;

5.

The Notice for Advance Examination and Approval of an Enterprise Name issued by the administration of industry and commerce of the
State; and

6.

Other documents and materials required by the Administration of Foreign Exchange.

(II)

A fund management company with foreign shares which corporate nature has been changed through subscribing the stock equity of an already
established domestic fund management company by foreign shareholders may apply to local administration of foreign exchange to open
foreign exchange capital account at a domestic-designated foreign exchange bank by presenting the necessary documents including subscription
agreement/contract, approval documents of CSRC and approval certificate of foreign economic and trade department.

III.

Verification on input of capital fund from foreign shareholders into a fund management company with foreign shares shall be conducted
in accordance with this Circular of Ministry of Finance and the State Administration of Foreign Exchange on Further Strengthening
Capital Verifications on Enterprises with Foreign Investment and on Improving the System of Foreign Investment and Foreign Exchange
Registration (CaiKuai [2002] No.1017).

IV.

The scope of income for a foreign exchange capital account of the fund management company with foreign shares shall be the capital
contribution remitted by foreign shareholders. The scope of expenditure shall be payment under current account and other foreign
exchange payments approved by the administration of foreign exchange.

V.

In case a fund management company with foreign shares needs to settle the exchange at the foreign exchange capital account, it shall
make application to the local administration of foreign exchange by presenting the following documents and materials, and handle
settlement procedures at a designated foreign exchange bank based on approval documents of the administration of foreign exchange:

(I)

A written application for settlement;

(II)

Vouchers representing usage of the settled fund or description of the same;

(III)

Bank statements of the foreign exchange capital account in current period of the company; and

(IV)

Other documents required by the administration of foreign exchange.

VI.

In the case a fund management with foreign shares needs to pay profits to foreign shareholders, it shall make applications to the
administration of foreign exchange at its locality by presenting the following documents and materials, and handle purchase and payment
of exchange procedures at designated foreign exchange bank on basis of approval documents of the administration of foreign exchange:

(I)

A written application for purchase and payment of exchange;

(II)

Tax payment receipt and tax declarations form;

(III)

Auditing report issued by an accounting firm on profits and profits distribution at the year of realization of profit of the company;

(IV)

Resolution passed by the board of directors of the company on profit distribution;

(V)

Bank statements of the foreign exchange capital account in current period of the company.

(VI)

Other materials required by the administration of foreign exchange.

ithin four months after the expiry of each fiscal year, the fund management with foreign shares that fails to purchase and remit outside
country the exchanges to pay profits to foreign shareholders due in that year shall report to the administration of foreign exchange
for record. The record documents of the administration of foreign exchange shall be the necessary document for purchase or remittance
of profits to foreign shareholders thereafter.

VII.

Where the corporate nature is changed through stock transfer from a domestic fund management company to foreign shareholders, such
fund management company shall report to the administration of foreign exchange for record at its locality within five working days
after obtaining formal approval documents from the CSRC. Where the transferor is a domestic organization, it shall make application
to the administration of foreign exchange at its locality, within five working days after receiving the foreign exchanges from the
transferee, and present the documents including written application, transfer agreement, approval document of the CSRC and approval
certificate of foreign economic and trade department.

VIII.

Where transfer of stock equity of a fund management company with foreign shares is approved by CSRC and foreign economic and trade
department, it shall report to the administration of foreign exchange at its locality record within five working days of obtaining
approval documents from the foreign economic and trade department. Where stock equity is transferred from foreign shareholders to
domestic organizations and the transferee needs to pay to the foreign investor for the transfer, it shall apply to the administration
of foreign exchange at its locality for approval of purchase and payment of exchange by presenting the following documents and materials:

(I)

A written application for purchase and payment of exchange;

(II)

The stock equity transfer agreement;

(III)

Approval documents from the CSRC and foreign economic and trade department granting approval to the transfer;

(IV)

Bank statements on all foreign exchange account of the transferee;

(V)

If proceeds are accrued by the transfer on part of the foreign party, the transferee shall present tax payment receipt on withholding
income tax.

(VI)

Other materials required by the administration of foreign exchange.

IX.

Where the foreign shareholder of a fund management company with foreign shares has obtained approval from the CSRC and foreign economic
and trade department to reduce or withdraw its investment therein, the company shall apply to the administration of foreign exchange
at its locality for approval of purchase and payment of exchange by presenting the following documents and materials:

(I)

A written application for purchase of exchange;

(II)

Resolution passed by the board of directors of the company on reduction (withdrawal) of investment by foreign party;

(III)

Approval documents from the CSRC and foreign economic and trade department granting approval to the reduction (withdrawal) of investment;

(IV)

Latest capital verification report and auditing report of the company issued by an accounting firm;

(V)

Bank statement of foreign exchange capital account of the company;

(VI)

If proceeds are accrued by the reduction (withdrawal) of investment on part of the foreign party, tax payment receipt on withholding
income tax shall be presented.

(VII)

Other materials required by the administration of foreign exchange.

X.

Fund management companies with foreign shares shall only conduct businesses specified by CSRC. Without approval of the State Administration
of Foreign Exchange, they shall not conduct any foreign exchange business under capital items such as financing from abroad or providing
guarantees to foreign parties etc.

XI.

The State Administration of Foreign Exchange and its branches shall have the power to make on-site investigations to the foreign exchange
capital account of fund management companies with foreign shares and to their settlement and payment of exchange. Fund management
companies with foreign shares shall actively render assistance to relevant investigations and shall not provide false information.

XII.

Where a fund management company with foreign shares acts in breach of this Circular and other regulations on administration of foreign
exchange, the State Administration of Foreign Exchange and its branches may impose sanctions on it in accordance with the Regulations
of the People’s Republic of China on Administration of Foreign Exchange and other regulations on foreign exchange control.

XIII.

This Circular shall enter into force as of May 1, 2003. The State Administration of Foreign Exchange shall be responsible for the
interpretation of this Circular.



 
The State Administration of Foreign Exchange
2003-03-29

 






CIRCULAR ON ADJUSTING THE WORKS RELATING TO JOINT ANNUAL EXAMINATION OF ENTERPRISES WITH FOREIGN INVESTMENT OF 2003

The Ministry of Commerce

Circular on Adjusting the Works Relating to Joint Annual Examination of Enterprises with Foreign Investment of 2003

ShangZiTongJinHan [2003] No.130

May 6, 2003

The Commissions (Departments, Bureaus) of Foreign Economic and Trade Cooperation, Economic and Trade Commissions (Economic Commissions),
Departments (Bureaus) of Finance, State Administrations of Taxes, Administrations of Local Taxes, State Administrations for Industry
and Commerce, and Administrations of Foreign Exchange of the provinces, autonomous regions, municipalities directly under the Central
Government, and municipality separately listed on the State plan, Guangdong Sub-Administration of the General Administration of Customs,
and the customs directly under the General Administration of Customs:

In order to ensure the smooth progress of the joint annual examination of enterprises with foreign investment during the period of
prevention and treatment of the SARS, the relevant adjustments of works relating to joint annual examination of enterprises with
foreign investment of 2003 are hereby notified as follows:

1.

In order to prevent the chances for increase of virus infection due to dense population and poor ventilation in the office places,
to improve the work efficiency of the joint annual examination and to alleviate the enterprises’ burden, it is suggested that the
localities shall actively promote on-line annual examination while carrying out the joint annual examination of enterprises with
foreign investment of 2003.

2.

The deadline for the joint annual examination of enterprises with foreign investment of 2003 is postponed to July 15, 2003.

This is hereby the notification.



 
The Ministry of Commerce
2003-05-06

 






MEASURES FOR COMPULSORY LICENSING OF PATENT IMPLEMENTATION

The State Intellectual Property Office

Order of the Director of the State Intellectual Property Office

No.31

The Measures for Compulsory Licensing of Patent Implementation has passed the review of the directorate meeting, which are hereby
promulgated and will come into force on as of July15, 2003.

The State Intellectual Property Office

June 13, 2003

Measures for Compulsory Licensing of Patent Implementation

Chapter I General Provisions

Article 1

In order to standardize implementing the granting, expenses determination and termination procedures for compulsory licensing of invention
patent or patent of utility models (hereinafter referred to as the compulsory licensing), the Measures are hereby formulated in accordance
with the Patent Law of the PRC (hereinafter referred to as the Patent Law), the Implementation Rules of the Patent Law of the PRC
(hereinafter referred to as the Implementation Rules of the Patent Law) and the relevant laws and regulations.

Article 2

The State Intellectual Property Office is in charge of the acceptance and investigation of the petitions and makes decisions on compulsory
licensing, the adjudication of the use fees of compulsory licensing and the termination of compulsory licensing.

Article 3

The petitions for granting compulsory licensing, for adjudication of the use fees of compulsory licensing and for termination of compulsory
licensing shall be handled with in Chinese in a written form.

In case the certificates, certification document submitted in compliance with the Measures are in foreign languages, the parties concerned
shall provide the translation version in Chinese at the same time, and failure to submit the Chinese version will be deemed as failure
to provide the relevant certificates or certification documents.

Article 4

When petitioning for the right holders of invention or patent of utility models to offer licenses in implementing their patents but
failing to obtain such licenses in a reasonable term, the unit eligible for such implementation may petition for granting of the
compulsory licensing in implementing the invention patent or patent of utility models according to the provision of Article 48 of
the Patent Law.

In case an invention or utility model obtaining patent is of material technological advancement in obvious economic significance as
compared with the previous one that has obtained patent and its implementation depends on the implementation of the previous invention
or utility model, the patent holder thereof may according to the provision of Article 50 of the Patent Law petition for granting
the compulsory licensing in implementing the former patent, and vise versa.

In emergency or irregular event of the state, or for the purposes of public interest, the competent department under the State Council
is enpost_titled to grant the compulsory licensing for implementing the invention patent or patent of utility models as per the petitions
based on the provisions of Article 49 of the Patent Law.

Article 5

When authorizing the patent agency to submit the petition for compulsory licensing, the petitioner shall provide the power of attorney
and the authority indicated.

When there are no less than two petitioners without authorized patent agency, unless otherwise stated in the petition, the first petitioner
indicated in the petition shall be deemed as the representative.

Chapter II Review and Decisions of Petitions for Compulsory Licensing

Article 6

When petitioning for grant of compulsory licensing, an application for compulsory licensing should be submitted to the State Intellectual
Property Office, indicating the following items:

(I)

Name and address of the petitioner;

(II)

Nationality of the petitioner or the country where the headquarters is located;

(III)

The name, patent number, date of application and date of authorized announcement of the invention patent or patent of utility models
relating to the petitioned compulsory licensing;

(IV)

Name of the right holders of the invention patent or patent of utility models relating to the petitioned compulsory licensing;

(V)

Reasons and facts for petitioning for grant of the compulsory licensing;

(VI)

When authorizing a patent agency, the petitioner shall indicate the relevant items; and in case there is no authorized patent agency,
name, address, postcode and contact telephone of the contact person should be indicated;

(VII)

The signature or stamp of the petitioner; and if there is an authorized agency, the stamp of the agency is required also;

(VIII)

List of the attached documents;

(IX)

Other items required to state.

The petition and attached documents should be executed in two copies.

Article 7

In case a petition for compulsory licensing relating to multiple invention patent or patent of utility models involves two or more
patent right holders, different petitions should be submitted to different patent right holders.

Article 8

In any of the following cases relating to the compulsory licensing, the State Intellectual Property Office will not accept the petition
with notification to the petitioner:

(I)

the patent number of the invention patent or patent of utility models relating to the petitioned compulsory licensing is not clear
or is hard to identify;

(II)

The petitioning documents without Chinese version;

(III)

Obviously no reason available for petitioning compulsory licensing.

Article 9

In case the petitioning documents do not meet the provisions of Articles 6 and 7 of the Measures, the petitioner shall within 15 days
upon receipt of the notice make up for the documents. In case of failure to making up for the documents required, the petition will
be deemed as no submission.

The petitioner shall within a month upon the petition for compulsory licensing pay the petitioning fees of compulsory licensing; and
in case of nonpayment or insufficient payment of such petitioning fees, the petition will be deemed as no submission.

Article 10

In terms of the petitions for compulsory licensing in compliance with the provisions of the Patent Law, the Implementation Rules of
the Patent Law and the Measures, the State Intellectual Property Office shall send the copy of the petition to the patent right holders.
The patent right holders shall state their opinions within the time schedule specified. In case of no reply beyond the time schedule,
the State Intellectual Property Office may make a decision as usual.

Article 11

The State Intellectual Property Office shall review the reasons stated by the petitioner and the relevant certification documents.
In case of field verification required, the State Intellectual Property Office shall assign no less than two persons to carry out
the field verification.

In case the reasons stated by the petitioner and the relevant certification documents are insufficient or false, the State Intellectual
Property Office may prior to the refusal to the petition of compulsory licensing send notification to the petitioner for providing
the latter with an opportunity for statement of its opinions.

Article 12

In case the petitioner or the patent right holders request for hearing, the State Intellectual Property Office may organize a hearing.

The State Intellectual Property Office shall seven days before the hearing send notification to the petitioner, patent right holders
and other persons of interest.

Except for involvement of state secrets, commercial secrets or personal privacy, the hearing should be held in open session.

When the State Intellectual Property Office is holding a hearing, the petitioner, patent right holders and other persons of interest
may defend and make cross-examination.

The hearing should be recorded in writing, which should be singed or stamped upon confirmation without error by the participants.

The hearing procedure is not applicable to the petitions for grant of compulsory licensing according to the provisions of Article
49 of the Patent Law.

Article 13

In any of the following cases, the State Intellectual Property Office shall made a decision on refusal to the petition for compulsory
licensing, with notification sent to the petitioner:

(I)

the petitioner is not an eligible subject as specified by Article 4 of the Measures;

(II)

The reasons for petitioning the grant of the compulsory licensing are not in compliance wit the provisions of Articles 48, 49 and
50 of the Patent Law;

(III)

The reasons are not in compliance with the provision of Article 72 of the Implementation Rules of the Patent Law when the petition
for compulsory licensing involves the invention and creation of semiconductor technologies.

If objecting to the decision of refusal to the petition of compulsory licensing, the petitioner may institute a lawsuit with the people￿￿s
court within three months upon receipt of the notice.

Article 14

The petitioner may withdraw its petitions for compulsory licensing from time to time, and in case the petitioner withdraw its petitions
prior to the decision by the State Intellectual Property Office, the review procedures for the petition of compulsory licensing terminates.

In case of reaching a licensing contract on patent implementation by and between the petitioner and the patent right holder prior
to the decision by the State Intellectual Property Office, timely notice should be given to the State Intellectual Property Office
and the petition for compulsory licensing should be withdrawn directly.

Article 15

In case of no reason for refusal to the petition of the compulsory licensing through review, the State Intellectual Property Office
shall make a decision on granting compulsory licensing, with the following items stated:

(I)

Name and address of the individual or unit obtaining the compulsory licensing for patent implementation;

(II)

The name, patent number, date of application and date of authorized announcement of the invention patent or patent of utility models
relating to the petitioned compulsory licensing;

(III)

Scope, scale and term of the compulsory licensing granted;

(IV)

Reasons, facts and legal basis for the decisions;

(V)

The stamp of the State Intellectual Property Office and the signature of the responsible persons;

(VI)

Date of decisions; and

(VII)

Other relevant matters.

The decisions on granting the compulsory licensing should be timely notified to the petitioner and the patent right holders.

Article 16

In case the patent right holders object to the decision of granting compulsory licensing, lawsuit may be brought at the people￿￿s
court in within three months upon the receipt of the notice.

Article 17

The decision that has come into force on granting compulsory licensing should be registered on the patent register and published on
the patent gazette of the State Intellectual Property Office, the government websites and China Intellectual Property News.

Chapter III Review and Finding of the Petitions for Adjudication of the Use Fees of the Compulsory Licensing

Article 18

The petitions for the State Intellectual Property Office to determine the use fees of the compulsory licensing shall be available
for the following conditions:

(I)

Publication of the decisions on granting the compulsory licensing;

(II)

The petitioner is the patent right holder or a unit or individual that obtains the compulsory licensing￿￿

(III)

Failure to reach an agreement through mutual consultation.

Article 19

In case of petitioning for determining the use fees of the compulsory licensing, an application should be submitted for adjudication
of the use fees of the compulsory licensing, indicating the following items:

(I)

Name and address of the petitioner;

(II)

Nationality of the petitioner or the country where the headquarters of the petitioner is located;

(III)

Document number that making the decisions on granting the compulsory licensing;

(IV)

Name and address of the petitioned;

(V)

Reasons for petition of the adjudication of the use fees of the compulsory licensing;

(VI)

When authorizing a patent agency, the petitioner shall indicate the relevant items; and in case there is no authorized patent agency,
name, address, postcode and contact telephone of the contact person should be indicated;

(VII)

The signature or stamp of the petitioner; and if there is an authorized agency, the stamp of the agency is required also;

(VIII)

List of the attached documents;

(IX)

Other items required to state.

The petition and attached documents should be executed in two copies.

Article 20

In any of the following cases relating to the petitions for the adjudication of the use fees of the compulsory licensing, the State
Intellectual Property Office may not accept the petitions, with notification sent to the petitioner:

(I)

The decisions involved on granting the compulsory licensing are not clear or not published;

(II)

The petitioning documents without Chinese version;

(III)

Obviously no reason available for petition for adjudication of the use fees of the compulsory licensing.

Article 21

In case the petitioning documents do not meet the provisions of Articles 49 of the Measures, the petitioner shall within 15 days upon
receipt of the notice make up for the documents. In case of failure to making up for the documents required, the petition will be
deemed as no submission.

The petitioner shall within a month upon the petition for compulsory licensing pay the petitioning fees of adjudication of the fsue
fees of the compulsory licensing; and in case of nonpayment or insufficient payment of such petitioning fees, the petition will be
deemed as no submission.

Article 22

In terms of the petitions for adjudication of the use fees of the compulsory licensing in compliance with the provisions of the Patent
Law, the Implementation Rules of the Patent Law and the Measures, the State Intellectual Property Office shall send the copy of the
petition to the counterpart. The counterpart shall state their opinions within the time schedule specified. In case of no reply beyond
the time schedule, the State Intellectual Property Office may make a decision as usual.

During the adjudication of the use fees of the compulsory licensing, the parties concerned may submit written opinions. The State
Intellectual Property Office may listen to the oral opinions of both parties as required by the actual circumstances of the case.

Article 23

The petitioner may withdraw its petitions for adjudication from time to time, and in case the petitioner withdraw its petitions for
adjudication prior to the decision by the State Intellectual Property Office, the adjudication procedures terminates.

Article 24

The State Intellectual Property Office shall within three months upon receipt of the petition make a decision on adjudication of the
use fees of the compulsory licensing.

Article 25

The decision on the adjudication of the use fees of the compulsory licensing shall indicate the following items:

(I)

Name and address of the individual or unit obtaining the compulsory licensing for patent implementation;

(II)

The name, patent number, date of application and date of authorized announcement of the invention patent or patent of utility models
relating to the petitioned compulsory licensing;

(III)

Reasons for the adjudication;

(IV)

The stamp of the State Intellectual Property Office and the signature of the responsible persons;

(V)

Date of decisions; and

(VI)

Other relevant matters.

The decisions on adjudication of the use fees of the compulsory licensing should be timely notified to both parties.

Article 26

In case the patent right holder and the unit or individual obtaining the compulsory implementation licensing objects to the decision
of the adjudication of the use fees of the compulsory licensing, lawsuit may be brought at the people￿￿s court in within three months
upon the receipt of the notice.

Chapter IV Review and Decision on Terminating the Petition for Compulsory Licensing

Article 27

The compulsory licensing automatically terminates upon the expiry of the valid term of the compulsory licensing specified by the decision
on granting the compulsory licensing.

When the compulsory licensing terminates automatically, announcement should be registered on the patent register and published on
the patent gazette of the State Intellectual Property Office, the government websites and China Intellectual Property News.

Article 28

In case the reasons for compulsory licensing are eliminated without reoccurrence prior to the expiry of the valid term of the compulsory
licensing specified in the decision on granting the compulsory licensing, the patent right holders may request for the State Intellectual
Property Office to make a decision on terminating the compulsory licensing.

In case of petitioning for terminating the compulsory licensing, an application should be submitted for terminating the compulsory
licensing, indicating the following items:

(I)

Name and address of the patent right holders;

(II)

Nationality of the patent right holders or the country where its headquarters is located;

(III)

Document number that makes the decisions on the compulsory licensing requested to terminate;

(IV)

Reasons for petition of terminating the compulsory licensing;

(V)

When authorizing a patent agency, the patent right holder shall indicate the relevant items; and in case there is no authorized patent
agency, name, address, postcode and contact telephone of the contact person should be indicated;

(VI)

The signature or stamp of the patent right holder; and if there is an authorized agency, the stamp of the agency is required also;

(VII)

List of the attached documents;

(VIII)

Other items required to state.

The patent right holder shall submit the petition application and attached documents in two copies.

Article 29

In any of the following cases relating to the petitions for terminating the compulsory licensing, the State Intellectual Property
Office may not accept the petitions, with notification sent to the petitioner:

(I)

The petitioner is not the right holders of the invention patent or the patent of utility model requested under the compulsory licensing;

(II)

The document number is not clear for the decision on granting the compulsory licensing requested to terminate are not clear or not
published;

(III)

The petitioning documents without Chinese version;

(IV)

Obviously no reason available for terminating the compulsory licensing.

Article 30

In case the petitioning documents do not meet the provisions of Articles 28 of the Measures, the petitioner shall within 15 days upon
receipt of the notice make up for the documents. In case of failure to making up for the documents required, the petition will be
deemed as no submission.

Article 31

In terms of the petitions for terminating the compulsory licensing in compliance with the provisions of the Measures, the State Intellectual
Property Office shall send the copy of the petition to the unit or individual that obtains the compulsory implementation licensing.
The unit or individual that obtains the compulsory implementation licensing shall state their opinions within the time schedule specified.
In case of no reply beyond the time schedule, the State Intellectual Property Office may make a decision as usual.

Article 32

The State Intellectual Property Office shall review the reasons stated by the patent right holder and the relevant certification documents.
In case of field verification required, the State Intellectual Property Office shall assign no less than two persons to carry out
the field verification.

In case the reasons stated by the patent right holder and the relevant certification documents are insufficient or false, the State
Intellectual Property Office may prior to making decision send notification to the patent right holder for providing the latter with
an opportunity for statement of its opinions.

Article 33

When holding that the reasons for petition of terminating the compulsory licensing do not hold water through review, the State Intellectual
Property Office shall make a decision on rejecting the petition of terminating the compulsory licensing.

If objecting to the decision on rejecting to the petition of terminating the compulsory licensing, the patent right holder may institute
a lawsuit with the people￿￿s court within three months upon receipt of the notice.

Article 34

The patent right holder may withdraw its petitions for terminating the compulsory licensing from time to time, and in case the patent
right holder withdraws its petitions prior to the decision by the State Intellectual Property Office, the relevant procedures terminates.

Article 35

In case of no reason for refusal to the petition of terminating the compulsory licensing through review, the State Intellectual Property
Office shall make a decision on terminating the compulsory licensing, with the following items stated:

(I)

Name and address of the patent right holder;

(II)

Name and address of the individual or unit obtaining the compulsory licensing for patent implementation;

(III)

The name, patent number, date of application and date of authorized announcement of the invention patent or patent of utility models
relating to the petitioned compulsory licensing;

(IV)

Document number of deciding the grant of the compulsory licensing;

(V)

Facts and legal basis for the decisions;

(VI)

The stamp of the State Intellectual Property Office and the signature of the responsible persons;

(VII)

Date of decisions; and

(VIII)

Other relevant matters.

The decision on the petition of terminating the compulsory licensing should be timely notified to the patent right holders and the
unit or individual obtaining the compulsory implementation licensing.

Article 36

In case the unit or individual obtaining the compulsory implementation licensing objects to the decision on terminating the compulsory
licensing, lawsuit may be brought forth at the people￿￿s court in within three months upon receipt of the notice.

Article 37

The decision that has come into force on terminating the compulsory licensing should be registered on the patent register and published
on the patent gazette of the State Intellectual Property Office, the government websites and China Intellectual Property News.

Chapter V Supplementary Provisions

Article 38

The interpretation of the Measures is vested with the State Intellectual Property Office.

Article 39

The Measures shall come into force as of July15, 2003.



 
The State Intellectual Property Office
2003-06-13

 






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CONSTITUTION ACT, 1982 – page 22

NOTES (1) The enacting clause was repealed by the Statute Law Revision Act, 1893, 56-57 Vict., c. 14 (U.K.). It read as...

CONSTITUTION ACT, 1982 – page 21

CONSTITUTION ACT, 1982 – page 20

CONSTITUTION ACT, 1982 – page 19

CONSTITUTION ACT, 1982 – page 18

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