Provisional Regulations Concerning Investment In and Establishment of Investment

Companies by Foreign Business Entities (Promulgated by the Ministry of Foreign

Trade and Economic Cooperation on, and efective from, April 4, 1995.) In order to
promote investment in China by foreign investors and to atract advanced foreign
technology and management experience, foreign investors are permited to establish
investment companies in China in accordance with the foreign investment laws and
regulations of China and these Regulations. Article 1. For the purposes of these
Regulations, the term "investment companies" shal mean companies that engage in
direct investment and are established in China by foreign investors in the form of
wholy foreign-owned enterprises or equity joint ventures with Chinese investors.
The corporate form shal be that of a limited liability company. Article 2. To apply
for approval to establish an investment company, the folowing conditions shal be
met: 1 a) the foreign investor's creditworthiness is good; the investor has the
economic strength necessary for the establishment of the investment company; its
total assets during the year immediately preceding the application are not less
than US$400 milion; the investor has established (a) foreign investment
enterprise(s) in the People's Republic of China and the amount of paid-up
contributions to the registered capital thereof exceeds US$10 milion and, in
addition, the project proposals for at least three of the investor's proposed
investment projects have been approved; or b) the foreign investor's
creditworthiness is good; the investor has the economic strength necessary for the
establishment of the investment company; and the investor has established at least
10 foreign investment enterprises in the People's Republic of China that are
engaged in production or infrastructure construction, and the total amount of paid-
up contributions to the registered capital thereof exceeds US$30 milion; 2. if the
investment company is to be established in the form of an equity joint venture,
theChinese investor's creditworthiness shal be good; it shal have the economic
strength necessary for the establishment of the investment company and its total
assets shal not be less than RMB��100 milion; and 3. the registered capital of the
investment company is not less than US$30 milion. Article 3. To apply for approval
to establish an investment company, the investor shal submit the folowing documents
to the Ministry of Foreign Trade and Economic Cooperation for examination and
approval, after the same have been examined and approved by the authorities for
foreign economic relations and trade of the province, autonomous region,
municipality directly under the central government or municipality with independent
development plans in which the proposed investment company is to be located:

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1. if the investment company is to be established in the form an equity joint

venture: the project proposal for the investment company, and the feasibility
study, contract and articles of association signed by the investing parties; if the
investment company is to be established in the form of a wholy-owned company: the
project proposal, wholy foreign-owned enterprise application form, feasibility
study and articles of association signed by the foreign investor; 2. documents in
support of the creditworthiness of each investing party, and (photocopies of) the
registration certificates and (photocopies of) the legal person representative
certificates of each investing party; 3. (photocopy of) the approval certificate
and (photocopy of) the business license of, and (photocopy of) the investment
verification report issued by a Chinese registered accountant for, each enterprise
already invested in by the foreign investor; 4. balance sheets of each investing
party for the past three years; and 5. other documents required by the Ministry of
Foreign Trade and Economic Cooperation. Al of the above-mentioned documents shal be
originals, except for those that have been specified to be photocopies. Documents
that are not signed by the legal representative shal require the submission of a
power of atorney from the legal representative. If a lawfuly established
intermediary organization is entrusted with carrying out the application procedures
on behalf of the applicant, a power of atorney signed by the investor's legal
representative shal be submitted. Article 4. The foreign investor must make its
contribution to the registered capital of the investment company in freely
convertible currency. The Chinese investor may make its capital contribution in
Renminbi. The entire capital contribution shal be made in ful within two years
after the date of issuance of the business license. Article 5. Folowing approval,
an investment company may engage in part or al of the folowing business: 1. to
invest in sectors such as industry, agriculture, infrastructure, energy, etc. in
which foreign investment is encouraged or permited by the state; 2. upon writen
entrustment by enterprises invested in by it (with the unanimous approval of their
boards of directors), an investment company may furnish the folowing services to
such enterprises: i. assisting the enterprises invested in by it with, or acting as
such enterprises��agent for, (i) the purchase in and outside China of machinery,
equipment and ofice equipment for such enterprises��own use and raw materials,
components and parts to be used in such enterprises��production, and

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(i) the sale in and outside China of products produced by the enterprises invested
in by it, and providing after-sales service; i. balancing foreign exchange revenue
and expenditure among the enterprises invested in by it, with the consent and under
the supervision of the exchange control authorities; i. assisting the enterprises
invested in by it with the recruitment of personnel and providing technical
training, market development and advice; and iv. assisting the enterprises invested
in by it with the obtaining of loans, and providing guarantees; and 3. to act as
consultant to its investors. Article 6. For the purposes of item (2) of Article 5
hereof, an enterprise shal be deemed invested in by an Investment Company if: 1.
the enterprise is invested in directly by the investment company or jointly by the
investment company and (an)other foreign investor(s) and/or (a) Chinese
investor(s), and the capital contribution of the investment company or of the
investment company and the other foreign investor(s) accounts for at least 25
percent of the registered capital of the enterprise invested in and established; 2.
the investment company has acquired part or al of the equity of enterprises already
established in the People's Republic of China by the investors in the investment
company or affiliates thereof and by (an)other foreign investor(s), thereby causing
the capital contribution of the investment company and the other foreign
investor(s) to account for at least 25 percent of the registered capital of the
said enterprises already established. Absent special approval from the Ministry of
Foreign Trade and Economic Cooperation, an investment company may furnish the
services specified in item (2) of Article 5 hereof only to those enterprises
invested in and established by it as defined above. An investment company may not
act as a trade intermediary in China in place of any of its investors. Article 7.
Subject to the approval of the People's Bank of China, an investment company may
provide financial support to the enterprises invested in and established by it.
Article 8. The term of operation of an investment company shal be examined and
approved in accordance with state regulations concerning the term of operation of
foreign investment enterprises, on the basis of the nature of the projects that the
investment company intends to establish.

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Article 9. Enterprises to be invested in and established by an investment company

shal be separately submited for approval in accordance with the limits of authority
and procedures for the examination and approval of foreign investment enterprises.
Article 10. If, when an investment company invests in and establishes an
enterprise, the foreign exchange investment of the investment company or of the
investment company and (an)other foreign investor(s) accounts for not less than 25
percent of the registered capital of the enterprise invested in and established by
it, the enterprise invested in by it shal be treated as a foreign investment
enterprise and be issued a foreign investment enterprise approval certificate and
foreign investment enterprise business license. Article 11. A foreign investor that
meets the conditions set forth in item (1)(i) of Article 2 hereof may contribute
capital to and establish an investment company in the name of its wholy-owned
subsidiary. Article 12. An investor that applies for approval to establish an
investment company must issue a leter to the examination and approval authority in
which it guarantees the contribution of registered capital and the transfer of
technology by such investment company when it invests in the People's Republic of
China. The parent company of an investment company to be established in the name of
a wholy-owned subsidiary must issue a leter to the examination and approval
authority in which it guarantees (i) the completion by its subsidiary of the
contribution of capital to such investment company upon such conditions as approved
by the examination and approval authority and (i) the contribution of registered
capital and the transfer of technology by such investment company when it invests
in the People's Republic of China. Article 13. The investment activities inside the
People's Republic of China of an investment company shal not be restricted by its
place of registration. Article 14. The taxation of investment companies shal be
handled in accordance with the relevant laws and regulations of China. Article 15.
An investment company shal conscientiously implement its project investment plan
and shal report each year's investments during the first three months of the next
year to theMinistry of Foreign Trade and Economic Cooperation for the record.
Article 16. An investment company and the enterprises invested in and established
by it shal be legal persons or entities that are independent from each other, and
the business dealings between them shal be conducted on an arm's length basis.
Article 17. An investment company and the enterprises invested in and established
by it shal abide by the laws and regulations of China and may not evade control or
taxation by any means.

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Article 18. These Regulations may be applied to the investment in and establishment
of investment companies in the mainland by investors from Taiwan, Hong Kong and
Macao. Article 19. The Ministry of Foreign Trade and Economic Cooperation shal be
responsible for the interpretation of these Regulations. Article 20. These
Regulations shal be implemented as from the date of promulgation.