For trading enterprise: Their chief feature is that they mainly carry on commodity or service exchange using some kind of currency. Generally, its operation pattern is a buying and selling.

For service enterprise: They provide certain invisible services, such as consultation, technology, patent and so on. Generally there is no trading of physical commodities.

Tax affairs:
Manufacturing enterprise: they have to pay Value Added Tax (output tax payable minus input tax), where there are generally two different tax rates: 13% and 17% (For some special industry the rates will be different).  Instead of VAT invoice, small taxpayers can issue plain invoice with the tax rate of 5% based on sales revenue. Enterprise income tax rate is 25% based on net profit at the year end.

Trading enterprise: they have to pay Value Added Tax (output tax payable minus input tax), where there are generally two different tax rates: 13% and 17% (For some special industry the rates will be different). Tax refund with rates from 4% to 13% is available for companies engaged in international trading. Enterprise income tax rate is 25% based on net profit at the year end.

Service enterprise: generally use plain invoice with the tax rate of 5% (few companies such as advertisement service and so on are exposed to different tax rate). Enterprise income tax rate is 25% based on net profit at the year end.

Registration request:
According to the new Corporation law, the minimum registered capital for an enterprise is 30,000 RMB (except sole proprietorship and industry with special permission). Considering respective operating environment and convenience for registration, we suggest as follows:

Manufacturing enterprise: The minimum registered capital is 500,000 US dollars. It shall have at least 1 executive director and 1 supervisor if it doesn’t have a board of director or a board of supervisor. The executive director is the legal representative, and may hold a concurrent post of general manager. The registration procedure needs the enterprise to provide leasing contract of manufacturing location (it should be the contract of factory location, instead of office location), the environmental protection examination opinion and the Fire service opinion.

Trading enterprise: The minimum registered capital is 200,000 US dollars. It shall have at least 1 executive director and 1 supervisor if it doesn’t have a board of director or a board of supervisor. The executive director is the legal representative, and may hold a concurrent post of general manager.  The registration procedure needs the enterprise to provide leasing contract of office (or building) location.

Service enterprise: The minimum registered capital is 100,000 US dollars. It shall have at least 1 executive director and 1 supervisor if it doesn’t have a board of director or a board of supervisor. The executive director is the legal representative, and may hold a concurrent post of general manager.  The registration procedure needs the enterprise to provide leasing contract of office (or building) location.

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Chapter II Basic Rules

Chapter III Examination, Approval and Registration

Chapter IV Foreign Investors' Merger with and Acquisition of Domestic Companies Based on the Payment of Equities

Section 1 Conditions for Equity M&A

Section 2 Application documents and procedures
Section 3 Special provisions for the company with special purpose

Chapter V Anti-monopolization Examination

Chapter VI Supplementary Provisions

Chapter I General Principles

Article 1　These Provisions are formulated in accordance with the laws and administrative regulations concerning foreign-invested enterprises, Company Law

and other relevant laws and administrative regulations in order to promote and standardize foreign investors' investment in China, introduce foreign advanced

technology and management experience, enhance the level of utilizing foreign investment, realize reasonable allocation of resources, ensure employment,

safeguard fair competition and national economic security.

Article 2 "Merger with and acquisition of domestic enterprises by foreign investors" in terms of these Regulations means a foreign investor purchases the

stock right of a shareholder of a non-foreign-invested enterprise in China (domestic company）or capital increase of a domestic company so as to convert and

re-establish a domestic company as a foreign-invested enterprise (equity merger and acquisition); or, a foreign investor establishes a foreign-invested

enterprise and purchases and operates the assets of a domestic enterprise by the agreement of that enterprise, or, a foreign investor purchases the assets of

a domestic enterprise by agreement and uses this asset investment to establish a foreign-invested enterprise and operate the assets （Asset Merger and

Acquisition）.

Article 3　Foreign investors' merger with and acquisition of domestic enterprises shall comply with the laws, administrative regulations and rules of China

and follow the principles of fairness and reasonableness, consideration for equal value and good faith, shall not result in excessive concentration,

exclusion or restriction of competition, and shall not interfere with social economic order or harm social public interests.

Article 4　Foreign investors' merger with and acquisition of domestic enterprises shall comply with the requirements stipulated by laws, administrative

regulations and rules of China, and policies concerning industry, land and environment.

According to the Guiding Catalogue of Foreign Invested Industry, to an industry that is not allowed to be operated by a sole foreign investor, its merger and

acquisition shall not result in foreign investor holding the enterprise's entire equity. To an industry that needs Chinese party to have the holdings or have

relative holdings, and the Chinese party shall maintain its holdings or relative holdings in the enterprise after the enterprise in that industry is merged

and acquired. To an industry that is forbidden to be operated by a sole foreign investor, the foreign investor shall not merge with or acquire any enterprise

in that industry.

The business range of the original invested enterprise of the merged or acquired domestic enterprise shall accord with the requirements of the policy

concerning foreign-invested industry. Whichever does not meet the requirements shall be readjusted.

Article 5 A foreign investor's merger with or acquisition of domestic enterprises involving the transference of state owned equity and management of state

owned equity of listed companies shall abide by corresponding regulations concerning the management of state owned assets.

Article 6 A foreign investor establishes a foreign-invested enterprise by merging or acquiring a domestic enterprise shall be approved by the examination and

approval organ in accordance with the provisions of these Regulations and register for changes or establish a registration to the registration management

authority.

Article 7　The persons concerned of all parties concerning foreign investor's merger with and acquisition of domestic enterprises shall pay tax and accept

the supervision of taxation authority in accordance with Taxation Law of China.

Article 8 The persons concerned of all parties concerning foreign investor's merger with and acquisition of domestic enterprises shall abide by the laws and

administrative regulations of China concerning the administration of foreign exchange, go through the formalities of foreign exchange examination and

approval, registration, record and changes in time to foreign exchange authority.

Chapter II Basic Rules

Article 9 If the ratio of financial contribution of a foreign investor in the registered capital of the foreign-invested enterprise established after the

merger and acquisition (M&A) is more than 25 percent, this enterprise shall enjoy the treatment of a foreign-invested enterprise.

If the ratio of financial contribution of the foreign investor in the registered capital of the foreign-invested enterprise established after merger and

acquisition is less than 25%, this enterprise shall not enjoy the treatment of a foreign-invested enterprise except for separate provisions stipulated by

laws and administrative regulations. Its Borrowing external debts shall be handled according to relevant provisions relating to domestic non-foreign-invested

enterprises' borrowing external debts. The examination and approval organ shall issue to it the Approval Certificate of Foreign-invested Enterprises with

annotations "ratio of foreign investment less than 25%" (Approval Certificate). The registration administration authority and foreign exchange
administration authority shall issue separately to it the Business License for foreign-invested enterprises with annotations "ratio of foreign investment

less than 25%" and Foreign Exchange Registration Card.

If domestic companies, enterprises or natural persons merge or acquire the domestic companies that have something to do with them in the name of the

companies legally established or controlled by them in foreign countries, the established foreign-invested enterprises shall not enjoy the treatment of

foreign-invested enterprises except that if the company in foreign countries offers to buy the capital increase of domestic companies, or increase capital to

the enterprises established by this company in foreign country after merger, the sum of capital increase takes more than 25 per cent of the enterprise's

registered capital. To the foreign-invested enterprise established according to the way as prescribed in this section, except for the actual controller, the

foreign investor provide funds more than 25 per cent of the enterprise's registered capital, it may enjoy the treatment of foreign-invested enterprises.
The treatment for the Foreign-invested enterprises established after foreign investor's merger with or acquisition of the domestic listed companies shall be

handled in accordance with relevant regulations of the state.

Article 10 In terms of these Regulations, the examination and approval organ is the Ministry of Commerce of the People's Republic of China or provincial

commercial authority, the registration authority is State Administration for Industry and Commerce or its authorized local administration for industry and

commerce, foreign exchange administrative authority is State Administration of Foreign Exchange and its branches.

If the foreign-invested enterprises established after merger and acquisition are, according to the provisions of laws, administrative regulations and rules,

the foreign-invested enterprises of special type or industry that shall be approved by the Ministry of Commerce, provincial examination and approval organ

shall submit the applications to the Ministry of Commerce for approval, the Ministry of Commerce will make the decision whether or not to approve it.

Article 11 The domestic companies. Enterprises or natural persons shall, when they merge or acquire domestic companies having something to do with them in

the name of the companies in foreign countries legally established or controlled by them, be submitted to the Ministry of Commerce for approval.

The person concerned shall not evade above requirements by domestic investment of the foreign-invested enterprises or by other means.

Article 12 If a foreign investor merges or acquires a domestic enterprise and obtains the actual right to control it, and it involves major industry, has or

may have the influence on the state security or caused the transference of the actual right of the domestic enterprise owning famous trademark or having a

name of long history, the person concerned shall submit a report on it to the Ministry of Commerce.

If a person concerned fails to submit a report, and its merger or acquisition does cause or may cause serious influence on the state economic security, the

Ministry of Commerce may, together with corresponding departments, ask the person concerned to stop the deal or transfer corresponding stock ownership,

assets or take other effective measures in order to eliminate the influence of the merger or acquisition on the state security.

Article 13 Once a foreign investor annexes stock rights, the foreign invested enterprise established after the annexation shall inherit the creditor's rights

and debt of the merged or acquired company.

As for the annexation of foreign investor's assets, the domestic enterprise that sold the assets shall bear the original creditor's rights and debt.

The foreign investor, merged and acquired enterprise, creditor and other persons concerned may reach an agreement on the treatment of the creditor's rights

and debt of the merged and acquired domestic enterprise, but they shall not harm the third party's interests and social public interests. The treatment

agreement on the creditor's rights and debt shall be submitted to the examination and approval organ for approval.

The domestic enterprise selling its assets shall, at least 15 days before the investor submits the applications to the examination and approval organ, send

the notice to the creditor and publish an announcement in a nationwide newspaper at the level of province and higher.

Article 14 The parties concerned relating to an M&A shall take the value of the stock right to be transferred and the assessment result of the assets to be

sold that are made by the assets evaluation institution as the basis of determining the transaction price. The parties concerned relating to an M&A may agree

on an asset assessment institution lawfully established within China. The international used assessment method shall be adopted for the asset assessment. It

is prohibited to divert any capital abroad in any disguised form by transferring any equities or selling assets at a price which is obviously lower than the

assessment result.

If a foreign investor's M&A of a domestic enterprise causes the modification of any equity formed by the investments of state-owned assets or transference of

the property right of state-owned assets, it shall satisfy the relevant provisions of the administration of state-owned assets.

Article 15 The parties concerned relating to a M&A shall make clear whether or not there is a connected relationship between the parties concerned. If two

parties belong to a same actual controller, the parties concerned shall disclose their actual controller to the examination and approval organ and make an

explanation about whether the purpose of M&A and the assessment result accord with the sound value of the market. The parties concerned shall not evade the

aforesaid requirements by trust, holding shares on behalf of others, or other means.

Article 16 A foreign investor shall, to establish a foreign-invested enterprise by merging and acquiring a domestic enterprise, pay all the considerations to

the shareholders who transfer the equities or to the domestic enterprise which sells the assets within 3 months from the date of issuing the business license

to the foreign-invested enterprise. If it needs to extend the time limit due to any case under special circumstances, the foreign investor shall, upon the

approval of the examination and approval organ, pay 60 per cent or more of the whole consideration within 6 months as of the date of issuing the business

license to the foreign-invested enterprise, and pay off the consideration within one year, and distribute the earnings according to the proportion of the

actually contributed investments.

Where a foreign investor offers to buy the capital increase of a domestic company, the shareholders of the limited liability company and the domestic joint

stock limited company established by the way of initiation shall pay no less than 20% of the newly registered capital when the company applies for a business

license for foreign-invested enterprise. The time to pay the rest financial contribution shall be in line with the provisions of the Company Law, the laws

relating to foreign investments and the Regulations on the Administration of Company Registration. Provided there are any other provisions stipulated by any

other laws or administrative regulations, such provisions shall prevail. Where a limited-liability company issues new stocks for increasing the registered

capital, the shareholders shall offer to buy new stocks in accordance with the relevant provisions relating to the share payment for establishing a limited-

liability company.

Where a foreign investor carries out an M&A, it shall stipulate the time limit for financial contribution in the contract and articles of the foreign-

invested enterprise to be established. Where the foreign investor establishes a foreign-invested enterprise, and through the agreement of this enterprise

purchases the assets of a domestic enterprise and operates such assets, it shall pay the contribution of the consideration of the asset within the time limit

for the payment of consideration as stipulated in Paragraph 1 of the present Article. The remaining financial contribution shall satisfy the corresponding

provisions relating to the capital contribution for establishing a foreign-invested enterprise.

Where a foreign investor establishes a foreign-invested enterprise by merging and acquiring a domestic enterprise, if the proportion of its contribution is

less than 25 per cent of the enterprise's registered capital and if it provides funds in cash, it shall pay up it within 3 months from the day when a

business license is issued to the foreign-invested enterprise; if it provides funds in kind or industrial property, it shall pay up it within 6 months from

the day when a business license is issued to the foreign-invested enterprise.

Article 17 The means of the consideration payment shall accord with the provisions of relevant laws and administrative regulations of the state. If a foreign

investor uses the RMB assets it lawfully owns as a means of payment, it shall obtain the approval of the foreign exchange administrations. If a foreign

investor uses the shares which are at its disposition as a means of payment, it shall handle it according to Chapter IV of these Regulations.

Article 18 After a foreign investor purchases the equities of a domestic company by agreement, and the domestic company has been converted into a foreign-

invested enterprise, the registered capital of this foreign-invested enterprise shall be the registered capital of the original domestic company, and the

proportion of the foreign investor's contribution shall be the proportion of its purchased equities in the original registered capital.

Where a foreign investor offers to buy the capital increase of a domestic limited-liability company, the registered capital of the foreign-invested

enterprise established after the M & A shall be the sum of the amount of the registered capital and the capital increase of the former domestic company. The

foreign investor and other former shareholders of the merged and acquired domestic company shall, on the basis of the assets evaluation of the domestic

company, determine their respective proportion of capital contributions in the foreign-invested enterprise.

Where a foreign investor offers to buy the capital increase of a domestic limited-liability company, the registered capital shall be determined under the

Company Law.

Article 19 As for M&A of the equity by a foreign investor, the foreign-invested enterprise established after the M & A shall determine the upper limits of

the total investments according to the following rates except for any other provisions stipulated by the state:

(1)If the registered capital is less than US$ 2.1 million, the total investments shall not exceed 10/7 of the registered capital;
(2)If the registered capital is more than US$ 2.1 million to US$ 5 million, the total investments shall not exceed two times the registered capital;
(3) If the registered capital is more than US$ 5 million to US$ 12 million, the total investments shall not exceed 2.5 times the registered capital; and
(4)If the registered capital is more than US$ 12 million, the total investments shall not exceed 3 times the registered capital.

Article 20 For a foreign investor's M&A of assets, the investor shall, according to the transaction price for purchasing the assets and the actual production

and operation scale, determine the total investments of the foreign-invested enterprise to be established. The proportion between the registered capital and

total investments of the foreign-invested enterprise to be established shall conform to the relevant provisions.

Chapter III Examination, Approval and Registration

Article 21 If a foreign investor merges and acquires equity, the investor shall, according to the total investments of the foreign-invested enterprise

established after the M&A, the type of the enterprise and the industry it engages in, and in accordance with the provisions of laws, administrative

regulations and rules relating to the establishment of foreign-invested enterprises, submit following documents to the examination and approval organ with

corresponding authority:

(1) A resolution of the shareholders of the merged domestic limited-liability company on unanimous agreement with the foreign investor's merger with and

acquisition of the equity or the resolution of the merged and acquired domestic limited-liability company at the shareholders' conference on agreement with

the foreign investor's merger with and acquisition of the equity.
(2) An application of the merged domestic company for converting into a foreign-invested enterprise;
(3) An contract and the articles of the foreign-invested enterprise established after M&A;
(4) An agreement on the foreign investor's acquisition of the shareholders' equities of the domestic company or the foreign investor's purchase of the

capital increase of the domestic company;
(5) The financial audit report of the merged domestic company in the previous financial year;
(6) The investor's identity, registration and credit certification that have been notarized and certified according to law;
(7) The descriptions about the enterprises invested by the merged domestic enterprise;
(8) The (duplicates) of the business licenses of the merged domestic company and its invested enterprises;
(9) The plan for the settlement of the employees of the merged domestic enterprise;
(10) The documents to be submitted as required by Articles 13, 14 and 15 of these Regulations.
If the business scope, scale, right of using a land of the foreign-invested enterprise established after M & A are subject to the license of other

corresponding governmental departments, the relevant license shall be submitted along with the foresaid documents.

Article 22 An equity purchase agreement, or capital increase agreement of the domestic company shall apply to Chinese law and contain the following contents:
(1) The status of each party reaching the agreement, including the appellation (name) location, name, occupation and nationality of each legal

representative;
(2) The proportion of price of the purchased equities or subscribed capital increase;
(3) The term and method of execution of the agreement;
(4) The rights and obligations of each party reaching the agreement;
(5) The liabilities for breach of contract, and settlement of disputes; and
(6) The time and place for conclusion of the agreement.

Article 23 For an M&A based on assets, the foreign investor shall, according to the total investments of the foreign-invested enterprise to be established,

the type of the enterprise and the industry it engages in, and in accordance with the provisions of the laws, administrative regulations and rules relating

to the establishment of foreign-invested enterprises, submit the following documents to the examination and approval organ with corresponding authority:
(1) A resolution of the property right holders or power mechanism of the domestic enterprise on agreeing with the sale of assets;
(2) An application for the establishment of a foreign-invested enterprise;
(3) A contract and the articles of the foreign-invested enterprise to be established;
(4) An asset purchase agreement signed by the foreign-invested enterprise to be established and the domestic enterprise, or by the foreign investor and the

domestic enterprise;
(5)The articles and business license (duplicate) of the merged and acquired domestic enterprise;
(6) The notice of the merged and acquired domestic enterprise, certifications of the announced creditors, and statement about whether the creditors have

raised any objections;
(7) ) The investor's identity, or certificate of opening a business, and relevant credit certificates that have been notarized and certified according to

law;
(8) The plan on the settlement of employees of the merged and acquired domestic enterprise; and
(9) The documents as prescribed in Articles 13, 14 and 15 of these Regulations.
If the assets purchased and operated in accordance with previous paragraph involves in the license of other corresponding governmental departments, the

relevant licenses shall be submitted along with the preceding documents.
Where a foreign investor purchases the assets of a domestic enterprise by agreement and invests such assets in establishing a foreign-invested enterprise, it

shall not, prior to the establishment of the foreign-invested enterprise, use such assets to do any business.

Article 24 The assets purchase agreement shall apply to Chinese law and contain the following main contents:
(1) The status of each party reaching the agreement, including the appellation (name), and location, and the name, occupation and nationality of each legal

representative;
(2) The term and method for the execution of the agreement;
(3) The rights and obligations of each part reaching the agreements;
(4) The liabilities for breach of contract, and settlement of disputes;
(6)The time and place for the conclusion of the agreement.

Article 25 Where a foreign investor establishes a foreign-invested enterprise by taking over a domestic enterprise, provided there are any other provisions

in these Regulations, the examination and approval organ shall, within 30 days after receipt of all documents as stipulated to be submitted, make a decision

of approval or disapproval. If it decides to make a decision of approval, an approval certificate shall be issued by the examination and approval organ.
Where a foreign investor purchases the equities of a domestic company by agreement, and the examination and approval organ makes a decision of approval, the

investor shall simultaneously send a copy of the approval documents separately to the party that transfers the equities, the foreign exchange administrations

in the area where the domestic company is located. The foreign exchange administrations in the area where the party that transfers the equities is located

shall handle the registration for foreign funds and foreign exchange based on equity-transfer and foreign exchange collection and issue corresponding

certificates, which is an effective document proving that the consideration for equity M&A paid by the foreign investor has been in place.

Article 26 Where a foreign investor merges and acquires assets, the investor shall, within 30 days after receipt of the approval certificate, apply to the

registration administrations for registration and get the business license for foreign invested enterprises.

Where a foreign investor merges and acquires equities, the merged and acquired domestic company shall, in accordance with these Regulations, apply to the

original registration administration for modifying its registration and get the business license for foreign-invested enterprises. If the original

registration administration has no authority for registration, it shall, within 10 days after receipt of the application documents, transfer these

application documents to the registration administration with authority and simultaneously enclosed the registration files of the domestic company. When

applying for registration modification, the merged and acquired domestic company shall submit the following documents and be responsible for their

authenticity and effectiveness:
(1) An application for registration modification;
(2) An agreement on the foreign investor's purchase of equities of the domestic company or subscription of capital increase of a domestic company ;
(3) The revised regulations of the company or the amendment of the original regulations, and the contract of the foreign-invested enterprise which shall be

submitted in accordance with law;
(4) The approval certificate for foreign-invested enterprises;
(5) The certification for the foreign investor's subject qualification or the identity of natural person;
(6) The revised name list of the members of the board of directors, the documents with the name and domicile of the new directors, and the appoint documents

for the new directors;
(7) Other relevant documents and certificates as stipulated by the State Administration for Industry and Commerce.

The investor shall, within 30 days after receipt of the business license for foreign-invested enterprises, go through the registration formalities in the

taxation, customs, land administration and foreign exchange administration authorities.

Chapter IV Foreign Investors' M&A of Domestic Companies Based on the Payment of Equities

Section 1 Requirements for Equity M&A

Article 27 "Foreign Investors' M&A of Domestic Companies Based on the Payment of Equities" in terms of these Regulations means that the shareholders of an

overseas company purchase the equities or increased shares of a domestic company by paying its equities or the increased shares.

Article 28 "Overseas company" in terms of this Chapter shall be established lawfully and there is a perfect system of company law in its registration place,

and the company and its management level have no record of punishment made by the supervision administration in recent 3 years. Except for the companies with

special-purpose as mentioned in Section 3 of this Chapter, an overseas company shall be a listed company and there shall be a perfect system for dealing in

securities in the place where it gets listed.

Article 29 The equities of a domestic company involving in a foreign investor's M&A of equities shall meet the following conditions:
(1) Lawfully held by the shareholders and may be transferred in accordance with the law;
(2) No dispute over their ownership, no hypothecation and any other restrictions on rights;
(3) The equities of an overseas company shall be listed publicly in an overseas open and lawful securities exchange market (excluding the over-counter

exchange market); and
(4)The transaction price of the equities of the overseas company in recent one year remains stable.
The Items (3) and (4) of the preceding Paragraph is inapplicable to the companies with special-purpose as mentioned in Section 3 of this Chapter.

Article 30 Where a foreign investor merges and acquires a domestic company based on the equities, the domestic company or its shareholders shall engage an

intermediary institution registered within China to serve as a consultant (hereinafter referred to as the "M&A consultant"). The M&A consultant shall make

duteous investigations on the genuineness of the application documents for M&A, the financial status of the overseas company and whether the M&A meets the

requirements of Articles 14, 28 and 29 of these Regulations, and provide a M&A consultant report and put forward clear-cut professional comments on each of

the aforesaid items.

Article 31 A M&A consultant shall satisfy the following requirements:
(1) Having a good reputation and corresponding experiences;
(2) No record of serious violation of any law or regulation; and
(3) Being capable of investigating and analyzing the legal systems of the registration place of the overseas company and the place where the overseas company

is get listed, and the financial status of the overseas company.
Section 2 Application Documents and Procedures

Article 32 An equity M&A of a domestic company by a foreign investor shall be submitted to the Ministry of Commerce for the examination and approval The

domestic company shall not only submit the documents as required in Chapter III of these Regulations but also the following documents:
(1) A statement of the equity changes and major assets changes of the domestic company in recent one year;
(2) A M&A consultant's report;
(3) The business opening certifications or identity certification of the domestic and overseas companies involved and their shareholders;
(4) Descriptions about the equities held by the shareholders of the overseas company, and the name list of the shareholders holding 5 % or more of the

equities of the overseas company;
(5) The Regulations of the overseas company and a description about external guaranties; and
(6) The financial paper audited in the past annual year and a report on the stock dealings in the past half year of the overseas company.

Article 33  The Ministry of Commerce shall, within 30 days after receipt of all submitted documents as stipulated, examine the application for M&A. If the

application meet the requirements, an approval certificate shall be issued, on which the remark that "A foreign investor's equity M&A of a domestic company"

shall be given, and the business license shall be valid for 6 months as of the day when it is issued."

Article 34  A domestic company shall, within 30 days after receiving the foresaid certificate, it shall go through the formalities for changes in the

registration administration and the foreign exchange administration. The registration administration and the foreign exchange administration shall

respectively issue to it a business license for foreign-invested enterprises and a foreign exchange registration card with annotations that "Valid for 8

months as of the date of issuance".

When a domestic company goes through the formalities for registration modification in the registration administration, it shall, in advance, submit an

application for equity conversion, amendment of the company's regulation, agreement of equity transference and other documents signed by the legal

representative of the domestic company for the purposes of resuming the equity structure.

Article 35  Within 6 months as of the date of issuance of a business license, the domestic company or its shareholders shall, in regard to the matters

relating to holding the equities of the overseas company, apply to the Ministry of Commerce and the foreign exchange administrations for going through the

formalities of the examination, approval and registration for investing in an enterprise abroad .

Besides the documents as stipulated in the Rules on the Examination and Approval of Investing in Enterprises Abroad, the parties concerned shall submit to

the Ministry of Commerce the approval certificate for foreign-invested enterprises with the said annotation and a the business license for foreign-invested

enterprises with the said annotation. After the examination and approval of the overseas company's equities held by the domestic company or its shareholders,

the Ministry of Commerce shall issue the approval certificate of Chinese enterprise investment overseas and replace the approval certificate of foreign-

invested enterprises with no annotation by a one with annotation.

After a domestic company obtains the approval certificate of foreign-invested enterprise without annotation, it shall, within 30 days, apply to the

registration administration and the foreign exchange administration for replacing the business license of foreign-invested enterprise and the foreign

exchange registration card without annotation by a one with annotation.

Article 36  Within 6 months as of the date of issuance of a business license, if the domestic and overseas companies fail to go through the formalities of

equity modification, the approval certificate with annotation and approval certificate of Chinese enterprise overseas investment shall be invalid

automatically. The registration administration shall, according to the application documents for registration of equity modification submitted by the

domestic company in advance, examine and approve the modification registration and resume the equity structure of the domestic company to the status before

the equity M&A.

If a domestic company fails to increase shares, before the registration administration examines and approves the modification registration according to the

preceding Paragraph, the domestic company shall, in accordance with the provisions of the Company Law, reduce the registered capital correspondingly and make

an announcement in a newspaper.

If a domestic company fails to go through the corresponding registration formalities according to the preceding Paragraph, it shall be punished by the

registration administration in accordance with relevant provisions of the Regulations on the Administration of Company Registration.

Article 37  Before obtaining the approval certificate of foreign-invested enterprise and a foreign exchange registration certificate without annotation, it

shall not distribute its profits to its shareholders, provide a guarantee to any connected company, pay the capital items such as the equity transfer,

capital decrease or liquidation.

Article 38  A domestic company or its shareholders shall go through the tax modification registration in the taxation administration by the approval document

and business license without annotation issued by the Ministry of Commerce and the registration administration.

Section 3 Special provisions for the company with special purpose

Article 39  "The company with special-purpose" in terms of these Regulations refers to an overseas company directly or indirectly controlled by a domestic

company or a natural person for the purpose of making the equities of its actual owned domestic company to be listed abroad.

The provisions of this Section shall apply to the company with special purpose that purchases the equities of the shareholders of a domestic company or the

additionally issued shares of a domestic company by paying its equities or its additionally issued shares in order to be listed abroad.

If the parties concerned makes an overseas company holding the equities of a the company with special purpose as a subject to get listed abroad, this

overseas company shall satisfy corresponding requirements for the company with special purpose as prescribed in this Section.

Article 40 The listing transaction abroad of the company with special-purpose shall be approved by the securities regulatory administration of the State

Council.

The country or region where the company with special purpose shall have perfect laws and supervision system and the securities supervision administration of

this country or region shall have signed a memorandum of understanding for supervision cooperation with the securities supervision administration of the

State Council and keep an effective supervision cooperation.

Article 41 A domestic company with its equities listed abroad as mentioned in this Section shall satisfy the following requirements:
(1) Its property right is clear. No dispute or potential dispute over its property right;
(2) Having a complete business system and good sustainable operation capacity;
(3) Having a sound corporate governance structure and internal management system; and
(4) The company and its main shareholders have no record of serious violation of any law or regulations in recent three years.

Article 42 Where a domestic company set up a company with special purpose abroad, it shall apply to the Ministry of Commerce for going through the

examination and approval formalities. When going through such formalities, the domestic company shall, besides the documents as required in the Rules on the

Examination and Approval of Investing in Enterprises Abroad, submit the following documents simultaneously:
(1) The identity of the final controller of the company with special purpose;
(2) The business plan on the overseas listing of the company with special purpose; and
(3) The assessment report made by the M&A consultant on the issuing price of the stock to be listed abroad in the future.
After obtaining the approval document of the investment abroad for Chinese enterprise, the person who establishes or controls the company shall apply to the

foreign exchange administration in the area where the company is located for going through the formalities relating to the registration of foreign exchange

for overseas investments.

Article 43 The total value of issuing the stocks listed abroad of the company with special purpose shall not be lower than the value of the equities M&A of

the domestic company assessed by the relevant asset assessment institution.

Article 44 Where a company with special purpose merges and acquires a domestic company by equities, the domestic company shall, besides the documents as

required in Article 32 of these Regulations, submit to the Ministry of Commerce the following documents:
(1) The approval documents and certificate for the investment in an enterprise abroad when the company with special purpose is established;
(2) Registration Form of foreign exchange for the investments abroad of the company with special purpose;
(3) The identity or the business opening certification or regulations of the final controller of the company with special purpose;
(4) The business plan on listing abroad of the company with special purpose; and
(5)The assessment report made by the M&A consultant on the issuing price of the stock to be listed abroad in the future.
If the overseas company holding the equities of the company with special purpose serves as a subject to be listed abroad, the domestic company shall also

submit the following documents:
(1) The business opening certification and the regulations of the overseas company; and
(2) The detailed descriptions by the company with special purposes and the overseas company to the equities transaction arrangement and the discount method.

Article 45 If the Ministry of Commerce approves the documents as required in Article 44 of these Regulations after preliminary examination, it shall issue a

letter of principle approval letter. The domestic company shall, by the principle approval letter, submit the documents for listing application to the

securities supervision administration of the State Council. The securities supervision administration of the State Council shall make a decision on approval

or disapproval within 20 working days.

After the domestic company obtains the approval, it shall apply for the approval certificate to the Ministry of Commerce. The Ministry of Commerce shall

issue to it an approval certificate with the annotation "Equities holding by the overseas company with special purpose, and valid for 1 year as of the

issuance of a business license".

If the M&A causes the change of equities of company with special purpose, the domestic company or natural person holding the equities of the company with

special purpose shall, by approval certificate for foreign-invested enterprises with annotation, apply to the Ministry of Commerce for going through the

examination and approval formalities for the changes of the investment in an enterprise abroad on corresponding items.

Article 46 The domestic company shall, within 30 days after receipt of the approval certificate with annotation, apply for the modification registration to

the registration administration and the foreign exchange administration for modifying the registration. The registration administration and the foreign

exchange administration shall respectively issue business license and foreign exchange registration card for foreign-invested enterprises with annotation "

Be valid for 14 months as of the date of issuance".

When the domestic company handles the modification registration in the registration administration, it shall, in advance, submit the equity change

application, the amendment of the company's regulations, the equity transfer agreement and other documents signed by the legal representative of the domestic

company for the purposes of resuming the equities structure.

Article 47 The domestic company shall, within 30 days after the company with special purpose or its connected overseas company realizes the overseas listing,

report to the Ministry of Commerce the information about the overseas listing and its plan on the repatriation of financial income, and apply for a the

replacement of an approval certificate for foreign-invested enterprises with annotation. At the same time, the domestic company shall, within 30 days after

the realization of overseas listing, report to the securities supervision administration of the State Council the information about the overseas listing and

provide with corresponding documents for the record. It shall also submit its plan on repatriation of financial income to the foreign exchange administration

and execute this plan under the supervision of the foreign exchange administration. It shall, within 30 days after receiving the approval certificate without

annotation, apply for the replacement of the business license and foreign exchange registration card to the registration administration and foreign exchange

administration with annotation.

If the domestic company fails to report to the Ministry of Commerce within the aforesaid time limit, the approval certificate of the domestic company with

annotation shall be invalid automatically, its equities structure will resume to the state before the equity M&A, and it shall go through the formalities for

modifying the registration in accordance with Article 36 of these Regulations.

Article 48 The financial income from overseas listing of the company with special purpose shall, according to the repatriation plan submitted to the foreign

exchange administration for the record, be repatriated according to current regulations for administration of foreign exchange. The financial income may be

repatriated by following means:
(1) providing commercial loans to the domestic company;
(2) setting up a new foreign-invested enterprise within the territory of China; and
(3) M & A of a domestic enterprise.

To repatriate the financial income of a company with special purpose under the aforesaid circumstances, the person concerned shall abide by the laws and

administrative regulations of China on the administration of foreign investments and foreign debts. If the repatriation of the overseas financial income of a

company with special purpose causes the domestic company and natural person to hold more equities of the company with special purpose or increase the net

assets of the company with special purpose, the persons concerned shall disclose the relevant information and report for approval according to the fact, and

go through corresponding formalities for the registration of foreign exchange of foreign investments and registration modification of overseas investments .
The foreign exchange income from profit, bonus and capital change obtained by the domestic company or natural person from the company with special purpose

shall be repatriated within 6 months after the date of obtainment. The profit or bonus may enter into current account for foreign exchange or be converted

into RMB. The foreign exchange income from capital change may, with the examination and approval of the foreign exchange administration, be deposited in the

special capital account or be converted into RMB.

Article 49  Within 1 year after the date of issuance of a business license, if the domestic company fails to obtain the approval certificate without

annotation, the approval certificate with annotation shall be invalid automatically, and modification registration shall be handled in accordance with

Article 36 of these Regulations.

Article 50 After the company with special purpose realizes the overseas listing and the domestic company obtains the approval certificate and business

license without annotation, if the person concerned continues to M&A this domestic company by paying its equities, it shall apply to the provisions of

Sections 1 and 2 of this Chapter.

Chapter V Anti-monopolization Examination

Article 51 If a foreign investor merges and acquires a domestic company under any of the following circumstances, the investor shall report the information

involved to the Ministry of Commerce and the State Administration for Industry and Commerce:
(1) The business volume of any party of the M&A in Chinese market in current year o exceeds RMB 1.5 billion yuan;
(2) Merging and acquiring more than 10 enterprises in the domestic connective industries within 1 year;
(3) The market share of any party relating to the M&A has reached 20% in Chinese market; and
(4)The M&A leads to the fact that the market share of the party to the M&A has reached 25% in China.
Though failing to meet foresaid requirements, but at the request of the domestic enterprise with competition relationship, the relevant functional department

or industrial association, the Ministry of Commerce or the State Administration for Industry and Commerce believes that the market share of the foreign

investor M&A is huge, or there are other major factors which seriously impact the market competition, it may demand the foreign investor to provide a report.
The aforesaid persons concerned include the enterprises being related to the foreign investor.

Article 52 If the M&A of a domestic company by a foreign investor is under any of the circumstances as prescribed in Article 51 and if the Ministry of

Commerce and the State Administration for Industry and Commerce believe that it may lead to excessive concentration, hamper fair competition or harm the

consumer's interests, they shall, within 90 days as of the date of receipt of all the submitted documents as stipulated, either jointly or solely convene

through negotiation the relevant departments, institutions, enterprises and other interested parties to hold a hearing, and make a decision on approval or

disapproval in accordance with the law.

Article 53 If an overseas M&A is under any of the following circumstances, the parties that carry out the M&A shall, before announcing the M&A plan or when

submitting it to, the competent authority in the country where it is located, submit the M&A plan to the Ministry of Commerce and the State Administration

for Industry and Commerce. The Ministry of Commerce and the State Administration for Industry and Commerce shall examine whether it will lead to excessive

centralization in the domestic market, hinder domestic fair competition, or harm domestic consumers' benefits, and then make a decision on approval or

disapproval:
(1) The overseas party of the M&A owns assets of more than RMB 3 billion Yuan in the territory of China;
(2) The business volume of the overseas party of the M&A in the Chinese market is more than RMB 1.5 billion yuan in the current year;
(3) The market share of the overseas party of the M&A and its connected enterprises in Chinese Market has reached 20%;
(4) Due to overseas M&A, the market share of the overseas party of the M&A and its connected enterprises in China has reached 25%; or
(5) Due to overseas M&A, there will be more than 15 foreign-invested enterprises participating directly or indirectly in equities of corresponding domestic

industries.

Article 54 Where a M&A is under any of the following circumstances, any party of the M&A may apply for examination exemption to the Ministry of Commerce and

the State Administration for Industry and Commerce:
(1) May improve the conditions for market fair competition;
(2) Re-organizing losing enterprises and ensure outplacement;
(3) Introduce advanced technology and qualified management personnel and be able to improve the enterprise's international competitiveness; or
(4) May improve the environment.

Chapter VI Supplementary Provisions

Article 55 These Regulations is applicable to the case that an investment company established by a foreign investor within China merges and acquires a

domestic enterprise.

Where a foreign investor purchases the equities of the shareholder of a foreign-invested enterprise in China or offer to buy the capital increase of a

foreign-invested enterprise in China, it shall be applicable to current laws, administrative regulations on foreign-invested enterprises as well as

corresponding provisions on equities changes of the investors of foreign-invested enterprise. If any case is not covered by the aforesaid laws,

administrative regulations or provisions, it shall be handled according to these Regulations.

Where a foreign investor merges or acquires a domestic enterprise through a foreign-invested enterprise established by it within China, it shall apply to

corresponding provisions on the combination and split-up of foreign-invested enterprises and corresponding provisions on domestic investment of foreign-

invested enterprise. If any case is not covered by the aforesaid provisions, it shall be handled according to these Regulations.
Where a foreign investor merges and acquires a domestic limited liability company and transforms it into a joint stock limited company, or if the domestic

company is a joint stock limited company, it shall be applicable to the corresponding provisions on the establishment of a joint stock limited company; if

any case is not covered by the aforesaid provisions, it shall be applicable to these Regulations.

Article 56 An applicant or declarer shall submit the documents after classifying the documents into different categories and the catalogue is enclosed in

accordance with these Regulations. All documents required to be submitted shall be written in Chinese.

Article 57 A Chinese natural-person shareholder of a domestic company taken over by equities may, after obtaining the approval, continue to be a Chinese

investor of the foreign-invested enterprise established after modification.

Article 58 If a natural-person shareholder of a domestic company changes his nationality, the enterprise nature of the company shall not be changed.

Article 59 The staffs of corresponding governmental authorities shall be devoted to their duties, perform their duties in accordance with the law, and shall

not seek any improper benefit by taking the advantage of their positions, and shall keep confidential the commercial secrets they have known.

Article 60 Where an investor from Hong Kong Special Administrative Region, Macao Special Administrative Region or Taiwan Region mergers and acquires a

enterprise of any other region in China, it shall be handled according to these Regulations.

Article 61 These Regulations shall come into force as of September 8, 2006.

Article 1
With a view to expanding economic cooperation and technical exchange with foreign countries and promoting the development of China's national economy, the

People's Republic of China permits foreign enterprises, other foreign economic organizations and individuals (hereinafter collectively referred to as foreign

investors") to set up enterprises with foreign capital in China and protects the lawful rights and interests of such enterprises.

Article 2
As mentioned in this Law, "enterprises with foreign capital" refers to those enterprises established in China by foreign investors, exclusively with their

own capital, in accordance with relevant Chinese laws. The term does not include branches set up in China by foreign enterprises and other foreign economic

organizations.

Article 3
Enterprises with foreign capital shall be established in such a manner as to help the development of China's national economy; they shall use advanced

technology and equipment or market all or most of their products outside China. Provisions shall be made by the State Council regarding the lines of business

which the state forbids enterprises with foreign capital to engage in or on which it places certain restrictions.

Article 4
The investments of a foreign investor in China, the profits it earns and its other lawful rights and interests are protected by Chinese law.Enterprises with

foreign capital must abide by Chinese laws and regulations and must not engage in any activities detrimental to China's public interest.

Article 5
The state shall not nationalize or requisition any enterprise with foreign capital. Under special circumstances, when public interest requires, enterprises

with foreign capital may be requisitioned by legal procedures and appropriate compensation shall be made.

Article 6
The application to establish an enterprise with foreign capital shall be submitted for examination and approval to the department under the State Council

which is in charge of foreign economic relations and trade, or to another agency authorized by the State Council. The authorities in charge of examination

and approval shall, within 90 days from the date they receive such application, decide whether or not to grant approval.

Article 7
After an application for the establishment of an enterprise with foreign capital has been approved, the foreign investor shall, within 30 days from the date

of receiving a certificate of approval, apply to the industry and commerce administration authorities for registration and obtain a business licence. The

date of issue of the business licence shall be the date of the establishment of the enterprise.

Article 8
An enterprise with foreign capital which meets the conditions for being considered a legal person under Chinese law shall acquire the status of a Chinese

legal person, in accordance with the law.

Article 9
An enterprise with foreign capital shall make investments in China within the period approved by the authorities in charge of examination and approval. If it

fails to do so, the industry and commerce administration authorities may cancel its business licence. The industry and commerce administration authorities

shall inspect and supervise the investment situation of an enterprise with foreign capital.

Article 10
In the event of a separation, merger or other major change, an enterprise with foreign capital shall report to and seek approval from the authorities in

charge of examination and approval, and register the change with the industry and commerce administration authorities.

Article 11
The production and operating plans of enterprises with foreign capital shall be reported to the competent authorities for the record.Enterprises with foreign

capital shall conduct their operations and management in accordance with the approved articles of association, and shall be free from any interference.

Article 12
When employing Chinese workers and staff, an enterprise with foreign capital shall conclude contracts with them according to law, in which matters concerning

employment, dismissal, remuneration, welfare benefits, labour protection and labour insurance shall be clearly prescribed.

Article 13
Workers and staff of enterprises with foreign capital may organize trade unions in accordance with the law, in order to conduct trade union activities and

protect their lawful rights and interests.The enterprises shall provide the necessary conditions for the activities of the trade unions in their respective

enterprises.

Article 14
An enterprise with foreign capital must set up account books in China, conduct independent accounting, submit the fiscal reports and statements as required

and accept supervision by the financial and tax authorities.

If an enterprise with foreign capital refuses to maintain account books in China, the financial and tax authorities may impose a fine on it, and the industry

and commerce administration authorities may order it to suspend operations or may revoke its business licence.

Article 15
Within the scope of the operations approved, enterprises with foreign capital may purchase, either in China or from the world market, raw and semi-processed

materials, fuels and other materials they need. When these materials are available from both sources on similar terms, first priority should be given to

purchases in China.

Article 16
Enterprises with foreign capital shall apply to insurance companies in China for such kinds of insurance coverage as are needed.

Article 17
Enterprises with foreign capital shall pay taxes in accordance with relevant state provisions for tax payment, and may enjoy preferential treatment for

reduction of or exemption from taxes.

An enterprise that reinvests its profits in China after paying the income tax, may, in accordance with relevant state provisions, apply for refund of a part

of the income tax already paid on the reinvested amount.

Article 18
Enterprises with foreign capital shall handle their foreign exchange transactions in accordance with the state provisions for foreign exchange control.

Enterprises with foreign capital shall open an account with the Bank of China or with a bank designated by the state agency exercising foreign exchange

control. Enterprises with foreign capital shall manage to balance their own foreign exchange receipts and payments. If, with the approval of the competent

authorities, the enterprises market their products in China and consequently experience an imbalance in foreign exchange, the said authorities shall help

them correct the imbalance.

Article 19
The foreign investor may remit abroad profits that are lawfully earned from an enterprise with foreign capital, as well as other lawful earnings and any

funds remaining after the enterprise is liquidated.Wages, salaries and other legitimate income earned by foreign employees in an enterprise with foreign

capital may be remitted abroad after the payment of individual income tax in accordance with the law.

Article 20
With respect to the period of operations of an enterprise with foreign capital, the foreign investor shall report to and secure approval from the authorities

in charge of examination and approval. For an extension of the period of operations, an application shall be submitted to the said authorities 180 days

before the expiration of the period. The authorities in charge of examination and approval shall, within 30 days from the date such application is received,

decide whether or not to grant the extension.

Article 21
When terminating its operations, an enterprise with foreign capital shall promptly issue a public notice and proceed with liquidation in accordance with

legal procedure. Pending the completion of liquidation, a foreign investor may not dispose of the assets of the enterprise except for the purpose of

liquidation.

Article 22
At the termination of operations, the enterprise with foreign capital shall nullify its registration with the industry and commerce administration

authorities and hand in its business licence for cancellation.

Article 23
The department under the State Council which is in charge of foreign economic relations and trade shall, in accordance with this Law, formulate rules for its

implementation, which shall go into effect after being submitted to and approved by the State Council.

Article 24
This Law shall go into effect on the day of its promulgation.

been examined and approved at the sixth excutive meeting of the Ministry of Commerce of the People''s Republic of China and shall be promulgated. It shall be

implemented as of June 1,2004. Bo Xilai, Minister

April 16, 2004

Measures for the Administration on Foreign Investment in Commercial Fields

Article 1 In order to further expand the open-up to the outside world and improve the construction of market circulation system. The present Measures are

hereby formulated in accordance with the Law of the People''s Republic of China on Sino-foreign Equity JointVentures, the Law of the People''s Republic of

China on Sino-foreign Contractual Joint Ventures, Law of the People''s Republic of China on Wholly Foreign-owned Enterprises, and the Company Law, and other

relevant laws and administrative regulations.

Article 2 Where a foreign company, enterprise and other economic organization or individual (hereinafter referred to as "foreign investors") establishes

foreign-funded commercial enterprises within the China territory and undertakes business activities, the presentMeasures shall be observed.

Article 3 The "foreign-funded commercial enterprises" shall refer to the enterprises with foreign investment which undertake the following business

activities:

1. Commission agency: selling agents, brokers, auctioneers or other wholesalers for goods, who sell goods of other people and provide relevant attaching

services through collecting fees on the basis of contract;

2. Wholesale: Selling goods to retailers, customers of industry, commerce and organizations, or to other wholesalers or providing relevant attaching

services;

3. Retail: providing goods for consumption and use of individuals or groups or offering relevant attaching services in the fixed places or through

television, telephone, mail order, internet, and automats; or

4. Franchising: authorizing other people with using its trademark, trade firm, or mode of management through signing contract for gaining remunerations or

franchising fees.

Foreign companies, enterprises, and other economic organs or individuals shall carry out the business activities as prescribed in items 1, 2, 3, and 4 of the

preceding paragraph through foreign-funded enterprises established within China.

Article 4 Foreign-funded commercial enterprises shall abide by laws, administrative regulations and the relevant rules of the People''s Republic of China.

Their proper business activities and legal rights and interests shall be subject to the protection of the Chinese laws.

Article 5 The competent commerce departments of the state shall make supervision over and administration on foreign investment in commercial fields and the

business activities of foreign-funded commercial enterprises according to law.

Article 6 The foreign investors of the foreign-funded commercial enterprises shall have good credit standing, and have no acts in violation of Chinese laws,

administrative regulations and the relevant rules. Foreign investors who have stronger economic power, advance experiences and marketing technology in

business management, and broad international marketing networks shall be encouraged to establish foreign-funded commercial enterprises.

Article 7 A foreign-funded commercial enterprise shall meet the following requirements:
1. The minimum registered capital shall conform to the relevant provisions of the Company Law.
2. Conforming to the relevant provisions on the registered capital and total investment of the enterprises with foreign investment. And
3. The term of operation of a foreign-funded commercial enterprise shall not exceed 30 years in general, and the term of operation of a foreign-funded

commercial enterprise that is established in the middle and western areas shall not exceed 40 years in general.

Article 8 A foreign-funded commercial enterprise shall meet the following requirements when opening a store:

1. Where it applies for establishing a store at the same time when applying for establishing a commercial enterprise, it shall follow the relevant provisions

on city development and urban commercial development.

2. Where a foreign-funded commercial enterprise whose establishment has been approved applies for establishing additional stores, it shall, in addition to

meeting the requirements of item 1, meet the following conditions:
(1) Taking part in the joint annual examination on enterprises with foreign investment and having passed the annual examination; and
(2) The registered capital of the enterprise has been fully paid.

Article 9 Foreign-funded enterprises may operate the following business upon approval:

1. For the foreign-funded commercial enterprises that undertake retailing business:
(1) Retailing of commodities;
(2) Importing of self-managed commodities;
(3) Purchasing domestic products for export; and
(4) Other relevant matching businesses. And

2. For the foreign-funded commercial enterprises that undertake wholesaling business:
(1) Wholesaling of commodities;
(2) Commission agency (excluding auction);
(3) Importing and exporting of goods; and
(4) Other relevant matching businesses.
　　A foreign-funded commercial enterprise may authorize others to open stores by way of franchising.
　　A foreign-funded commercial enterprise may, upon approval, undertake one kind or several kinds of sales businesses. The kinds of commodities it manages

shall be specified in the contents regarding business scope as prescribed in the contract or articles of association.

Article 10 The following procedures shall be followed when handling the establishment and opening of stores by a foreign-funded commercial enterprise:

1. The project initiation, feasibility study report of the foreign-funded enterprise, and the report and verification on the establishment of the enterprises

once altogether.

2. Except the provisions in items (3) and (4) of paragraph one of the present Article, the investors of the foreign-funded commercial enterprises to be

established and the already established foreign-funded commercial enterprises that apply for opening stores shall submit respectively the application

documents as prescribed in Article 12 and Article 13 to the competent commerce department at the level of the province where the foreign-funded commercial

enterprise makes registration. The said competent commerce department at the provincial level shall, after making preliminary examination on the document

ssubmitted, report to the Ministry of Commerce within one month from the date of receiving all the application documents.　　The Ministry of Commerce shall

make decision on whether to approve the application within 3 months from the date of receiving all the application documents. If it approves the

establishment, the Certificate of Approval for Foreign-funded Enterprises shall be issued; if it does not approve it, the reasons thereof shall be explained.
The Ministry of Commerce may authorize the competent commerce departments at the provincial level to examine and approve the foregoing applications in

accordance with the present Measures.

3. Where a foreign-funded commercial enterprise, which undertakes the retail business opens stores within the administrative region at the level of the

province of its locality, and meets the following conditions and its business scope does not concern the sale of television, telephone, mail order, internet,

or automats, and the commodities as enumerated in Articles 17 and 18 of the present Measures, the said competent commercedepartment of the province shall

examine and approve it within the power of its examination and approval and report it to and put it on records at the Ministry of Commerce.
(1) The business area of a single store does not exceed 3,000 square meters, and the number of stores does not exceed 3, and the total number of the similar

stores established by foreign investors of the stores within China through the foreign-funded commercial enterprises they have established does not exceed

30; and
(2) The business area of a single store does not exceed 300 square meters, and the number of stores does not exceed 30, the total number of similar stores

opened in China by foreign investors of these stores through the foreign-funded commercial enterprises they have established does not exceed 300. And

4. Where the owners of the trademark or business name of a Sino-foreign equity joint venture or cooperative commercial enterprise are Chinese-funded

enterprises or Chinese natural persons, and the Chinese investors have the controlling shares in the foreign-funded commercial enterprise, and the business

scope of the foreign-funded commercial enterprise does not concern the commodities as enumerated in Articles 17 and 18 of the present Measures, its

applications for establishment and opening stores shall be examined and approved by the competent commercedepartment at the level of the province where the

enterprise is located.　　If a store is opened in a different province, the opinions of the competent commerce department at the level of the province where

the planned store is located shall also be consulted.　　The competent commerce department at the provincial level shall not transfer the power for

examination and approval as prescribed in items (3) and (4) of paragraph 1 of the present Article by itself to a lower level without the authorization of the

Ministry of Commerce.

Article 11 The investors shall, within one month after receiving the certificate of approval, go through the registration formalities at the administrative

department for industry and commerce upon the strength of the Certificate of Approval for Foreign-funded Enterprises.

Article 12 The following documents shall be submitted when applying for establishing a foreign-funded commercial enterprise:

1. Application letter;
2. Feasibility study report signed by all the investors together;
3. Contract, articles of association (for a foreign-funded commercial enterprise, only the articles of association should be submitted) and the attachment;
4. Bank credit certificates of all investors, registration certificate (photocopy), certificate of the legal representative (photocopy), if the foreign

investor is an individual, his/her identity certificate shall be provided;
5. The audit report of all investors in the recent one year, which is audited by accountant firms;
6. The evaluation report on state-owned assets invested into the Sino-equity joint venture or contractual joint venture commercial enterprises by Chinese

investors;
7. Catalogues of import and export commodities of the planned foreign-funded commercial enterprise;
8. Name list of the members of the board of directors of the planned foreign-funded commercial enterprise and the power of attorney for directors of each

investor;
9. Notice of pre-approval of the enterprise name as issued by the administrative department for industry and commerce;
10. The certificate documents (photocopy) of the use right of the land used for the planned store and (or) house lease agreement (photocopy), except when the

business area of the store to be opened is less than 3,000 square meters; and
11. The documents of statement in conformity with the requirements for city development and urban commercial development as issued by the competent commerce

department of the government at the locality of the store.

In case that the documents are signed by a person who is not the legal representative, the power of attorney of the legal representative shall be issued.

Article 13 Where an already established foreign-funded commercial enterprise applies for opening a store, it shall submit the following documents:
1. Application letter;
2. The revised contract or articles of association shall be submitted in case the amendments to the contract or articles of association are involved;
3. Feasibility study report on opening the store;
4. Resolutions of the board of directors on opening the store;
5. The audit report of the enterprise in the recent one year;
6. The capital verification report of the enterprise (photocopy);
7. Registration certificate (photocopy) of all the investors, and the certificate of the legal representative (photocopy);
8. Certificate documents of the use right of the land that is used for the store to be opened and (or) house lease agreement (photocopy), except when the

business area of the store opened is less than 3,000 square meters; and
9. The documents of statement in conformity with the requirements for city development and the commercial development of the city as issued by the government

where the planned store is located.

In case the document is signed by the person who is not the legal representative, the power of attorney of the legal representative shall be issued.

Article 14 The license contract for use of a trademark or a business name, technology transfer contract, management contract and service contract signed by a

foreign-funded commercial enterprise, and other legal documents shall be deemed as the attachment of the contract (for a foreign-funded commercial

enterprises, it shall be deemed as the attachment of the articles of association) and be submitted along with all the other documents.

Article 15 The foreign-funded commercial enterprises shall, when opening a store, obtain the land for commercial use by way of public invitation of bidding,

auction or listing in accordance with the provisions of the relevant laws and administrative regulations of the state on land management.

Article 16 Where a foreign-funded commercial enterprise manages the commodities on which the state has special provisions and the import and export goods

involving quota or license administration, it shall go through the formalities in accordance with the relevant state provisions.

Article 17 A foreign-funded commercial enterprise shall, when undertaking the following commodities, conform to the following prescriptions in addition to

the provisions of the present Measures:

Where a foreign-funded commercial enterprise undertakes books, newspapers orperiodicals, it shall conform to the Measures for the Administration of Foreign-

funded Distribution Enterprises of Books, Newspapers, or Periodicals;

Where a foreign-funded commercial enterprise undertakes gas station and deals with retail of refined oil, it shall have stable channel for supply of refined

oil, conform to the construction plan of the local oil station, with the business establishments thereof corresponding with the existing state standards and

the provisions on computation and checking procedures, and meet the requirements for fire control and environmental protection, etc. In addition, the

specific implementation measures shall be formulated by the Ministry of Commerce.

Where a foreign-funded commercial enterprise manages drugs, it shall conform to the relevant standards for the administration of the drug sale. In addition,

the specific implementation measures shall be formulated by the Ministry of Commerce.

Where a foreign-funded commercial enterprise manages automobiles, it shall manage within the approved business scope. In addition, the specific

implementation measures shall be formulated by the Ministry of Commerce.

Except the special provisions in Article 18 of the present Measures and the present Article, if foreign investors establish commercial enterprises of farm

products and by-products, and agricultural production materials, they shall not be restricted by the region, proportion of share, and the amount of

investment.

No wholesaling foreign-funded commercial enterprises may manage drugs, pesticides and agricultural films before December 11, 2004, nor shall they manage

fertilizers, refined oil and crude oil before February 11, 2006.

No retailing foreign-funded enterprises may manage drugs, pesticides, agricultural films and refined oil before December 11, 2004, nor shall they manage

fertilizers before December 11, 2006.

No wholesaling foreign-funded commercial enterprises may manage salt or tobacco, and no retailing foreign-funded commercial enterprises may manage tobacco.

Article 18 Under the circumstance that the same foreign investor opens more than 30 stores accumulatively within China, if the goods it manages include

books, newspapers, magazines, automobiles (this restriction shall be cancelled from December 11, 2006), drugs, pesticides, agricultural films, fertilizers,

refined oils, food, vegetable oil, sugar, cotton, and other commodities, and the above commodities are of different brands and come from different suppliers,

the proportion of capital contribution of the foreign investors shall not exceed 49%.

Article 19 Where a foreign-funded commercial enterprise authorizes others to open stores by way of franchising, it shall, in addition to observing the

provisions of the present Measures, observe the special provisions of the state on franchising if any.

Article 20 Where a foreign-funded commercial enterprise manages auction business, it shall accord with the Auction Law, Laws on Cultural Relics, and other

relevant laws, and shall be examined and approved by the Ministry of Commerce. The specific implementation measures shall be formulated additionally.

Article 21 The establishment of foreign-funded commercial enterprises shall be allowed from December 11, 2004.

Article 22 The regions where a foreign-funded retail commercial enterprise and its stores may be established shall be restricted to the provincial capital

cities, metropolis of autonomous regions, municipalities directly under the Central Government, cities directly under state planning, and special economic

zones before December 11, 2004, and the regional restrictions shall be cancelled after December 11, 2004.

Regional restrictions on foreign-funded wholesaling commercial enterprises shall be cancelled from the date of implementation of the present Measures.

Article 23 Where an enterprise with foreign investment invests in commercial fields within the territory of China, it shall accord with the Interim

Provisions on Investment of Foreign-funded Enterprises in China, and refer to the present Measures.

Article 24 Other foreign-funded enterprises undertaking the business activities as enumerated in Article 3 of the present Measures except the foreign-funded

commercial enterprises, shall conform to the provisions of the present Measures, and alter by law the business scope accordingly.

Article 25 Where investors from Hong Kong Special Administrative Region, Macao Special Administrative Region, and from Taiwan region, who invest to establish

commercial enterprises in other provinces, autonomous regions, and municipalities directly under the Central Government, shall refer to the present Measures

in addition to the following prescriptions:

1. From January 1, 2004, commercial service providers of Hong Kong and Macao may establish foreign-funded commercial enterprises in the Mainland.
2. The regional scope of retail enterprises established in the Mainland by Hong Kong and Macao commercial service providers shall be extended to cities at

the prefecture level, and the cities at the county level in Guangdong province.
3. From January 1, 2004, the commercial service providers of Hong Kong and Macao may apply according to the relevant articles of the present Measures to

establish commercial enterprises that undertake automobile retail business, but their average sales volume per annum in the past three years before

application shall be no less than one hundred million dollars; and the amount of capital in the previous year before application shall be no less than 10

million dollars; the minimum registered capital of an automobile retailing enterprise, which is established in the Mainland shall be RMB 10 million Yuan, and

the minimum registered capital of an automobile retailing enterprise, which is established in the middle and western districts shall be RMB 6 million Yuan.
4. The Chinese citizens among the Hong Kong and Macao permanent residents are allowed to establish individual business according to the relevant laws,

regulations and rules to undertake commercial retail activities (excluding franchising), the business areas thereof shall not exceed 300square meters.
5. The Hong Kong/Macao commercial service providers as mentioned in this Article shall conform to the definitions of and the relevant requirements for

"service providers" as prescribed in the "Mainland/Hong Kong Closer Economic Partnership Arrangements" and the "Mainland/Macao Closer Economic Partnership

Arrangements".

Article 26 The foreign-funded commercial enterprises shall be encouraged to join in the relevant trade associations to strengthen self-discipline of the

enterprises.

Article 27 The responsibility to interpret the present Measures shall be remained with the Ministry of Commerce.

Article 28 The present Measures shall be implemented as of June 1, 2004.

Article 29 The Measures for Trial Implementation of the Foreign-funded Commercial Enterprises as promulgated jointly by the former State Economic and Trade

Commission and the Ministry of Foreign Trade and Economic Cooperation shall be abolished as of the date of the implementation of the present Measures.

No. 44

The Decision of the Standing Committee of the National People's Congress on Amending the Individual Income Tax Law of the People's Republic of China, adopted at the 18th Meeting of the Standing Committee of the Tenth National People's Congress of the People's Republic of China on October 27, 2005, is hereby promulgated and shall go into effect as of January 1, 2006.

Hu Jintao

President of the People's Republic of China

October 27, 2005

Decision of the Standing Committee of the National People's Congress on Amending the Individual Income Tax Law of the People's Republic of China

(Adopted at the 18th Meeting of the Standing Committee of the Tenth National People's Congress on October 27, 2005)

At its 18th Meeting, the Standing Committee of the Tenth National People's Congress decides to amend the Individual Income Tax Law of the People's Republic of China as follows:

1.Subparagraph (1) in the first paragraph of Article 6 is revised to read, “For income from wages and salaries, the amount of taxable income shall be the part remaining after deduction of 1,600 yuan for expenses from a monthly income.” At the same time, the Note attached to Schedule 1 on Individual Income Tax Rates shall be revised accordingly.

2.Article 8 is revised to read, “For individual income tax, the income earner shall be the taxpayer, and the paying unit or individual shall be the withholding agent. If a taxpayer’s individual income exceeds the amount specified by the State Council, or a taxpayer receives wages or salaries from two or more sources, or there is no withholding agent, or under other circumstances specified by the State Council, the taxpayer shall file returns and pay tax in accordance with State regulations. The withholding agent shall, in accordance with State regulations, file the returns of all the taxpayers and the full amount of the tax withheld.”

This Decision shall go into effect as of January 1, 2006.

The Individual Income Tax Law of the People's Republic of China shall be amended correspondingly in accordance with this Decision and promulgated anew.

Law of the People's Republic of China on Individual Income Tax

(Adopted at the Third Session of the Fifth National People's Congress on September 10, 1980, revised for the first time in accordance with the Decision on Amending the Individual Income Tax Law of the People's Republic of China adopted at the 4th Meeting of the Standing Committee of the Eighth National People's Congress on October 31, 1993, revised for the second time in accordance with the Decision on Amending the Individual Income Tax Law of the People's Republic of China adopted at the 11th Meeting of the Standing Committee of the Ninth National People's Congress on August 30, 1999, and revised for the third time in accordance with the Decision on Amending the Individual Income Tax Law of the People's Republic of China adopted at the 18th Meeting of the Standing Committee of the Tenth National People's Congress on October 27, 2005 )

Article 1 Individual income tax shall be paid in accordance with the provisions of this Law by individuals who have domiciles in the People's Republic of China, or who have no domicile in China but have resided in the country for one year or more on their income gained within or outside China.

Individuals who have no domiciles and do not reside in the People's Republic of China or who have no domiciles but have resided in China for less than one year shall, in accordance with the provisions of this Law, pay individual income tax on their income gained within China.

Article 2 Individual income tax shall be paid on the following categories of individual income:

(1) income from wages and salaries;

(2) income from production or business operation conducted by self-employed industrial and commercial households;

(3) income from contracted or leased operation of enterprises or institutions;

(4) income from remuneration for personal services;

(5) income from author's remuneration;

(6) income from royalties;

(7) income from interest, dividends and bonuses;

(8) income from the lease of property;

(9) income from the transfer of property;

(10) incidental income; and

(11) income from other sources specified as taxable by the department of finance under the State Council.

Article 3 Individual income tax rates:

(1) For income from wages and salaries in excess of the specified amounts, the progressive rates ranging from 5 percent to 45 percent shall apply (see the appended schedule of tax rates).

(2) For income of self-employed industrial and commercial households from production or business operation and income of enterprises or institutions from contracted or leased operation that are in excess of the specified amounts, the progressive rates ranging from 5 percent to 35 percent shall apply (see the appended schedule of tax rates).

(3) For income from author's remuneration, a flat rate, which is 20 percent, shall apply, and the amount of tax payable shall, however, be reduced by 30 percent.

(4) For income from remuneration for personal services, a flat rate, which is 20 percent, shall apply. Where income gained at one time from remuneration for personal services is extremely high, an additive tax may be levied. The specific measures in this regard shall be prescribed by the State Council.

(5) For income from royalties, interest, dividends, bonuses, lease of property or transfer of property, incidental income or income from other sources, a flat rate, which is 20 percent, shall apply.

Article 4 The following categories of individual income shall be exempted from individual income tax:

(1) awards for achievements in such fields as science, education, technology, culture, public health, sports and environmental protection granted by people's governments at the provincial level, ministries and commissions under the State Council, units of the Chinese People's Liberation Army at or above the corps level, or by foreign or international organizations;

(2) interest on national debts and financial debentures issued by the State;

(3) subsidies and allowances given according to the uniform regulations of the State;

(4) welfare benefits, pensions for the family of the deceased and relief payments;

(5) insurance indemnities;

(6) military severance pay and demobilization pay for army men;

(7) settlement pay, severance pay, retirement pay, as well as full-pay retirement pension for veteran cadres and their living allowances, received by cadres, staff and workers according to the uniform regulations of the State;

(8) income, exempted from tax according to the provisions of the relevant laws of China, of diplomatic representatives and consular officers and other personnel of foreign embassies and consulates in China;

(9) income exempted from tax as stipulated in the international conventions to which the Chinese Government has acceded or in agreements it has signed; and

(10) income exempted from tax with the approval of the department of finance under the State Council.

Article 5 In one of the following circumstances, individual income tax may be reduced upon approval:

(1) income of the disabled, the aged without families, or family members of martyrs;

(2) suffering great losses from serious natural disasters; or

(3) other cases where tax is reduced upon approval by the department of finance under the State Council.

Article 6 The amount of taxable income shall be computed as follows:

(1) For income from wages and salaries, the amount of taxable income shall be the part remaining after deduction of 1,600 yuan for expenses from a monthly income;

(2) For income from production or business operation gained by self-employed industrial and commercial households, the amount of taxable income shall be the part remaining after deduction of the costs, expenses and losses from the gross income in a tax year;

(3) For income from contracted or leased operation of enterprises or institutions, the amount of taxable income shall be the part remaining after deduction of the necessary expenses from the gross income in a tax year;

(4) For income from remuneration for personal services, author's remuneration, royalties and lease of property, the amount of taxable income shall be the part remaining after deduction of 800 yuan for expenses from the amount received in a single payment not exceeding 4,000 yuan; or after deduction of 20 percent from the amount for a single payment of 4,000 yuan or more;

(5) For income from the transfer of property, the amount of taxable income shall be the part remaining after deduction of the original value of the property and the reasonable expenses from the income gained from such transfer; and

(6) For interest, dividends, bonuses, incidental income and income from other sources, the amount of taxable income shall be the full amount received in each payment.

The part of individual income donated to educational and other public welfare undertakings shall be deducted from the amount of taxable income in accordance with the relevant regulations of the State Council.

For taxpayers who have no domiciles in China but obtain wages or salaries within China, or who have domiciles in China but obtain wages or salaries outside China, an additional deduction of expenses may be determined on the basis of the average income level, living standard and the changes in exchange rates. The applicable scope and standard of the additional deduction of expenses shall be prescribed by the State Council.

Article 7 For income gained by taxpayers from outside China, the amount of individual income tax paid outside China shall be permitted to be deducted from the amount of tax payable. The amount to be deducted, however, shall not exceed the amount of tax payable as calculated according to the provisions of this Law on income gained by the taxpayers from outside China.

Article 8 For individual income tax, the income earner shall be the taxpayer, and the paying unit or individual shall be the withholding agent. If a taxpayer’s individual income exceeds the amount specified by the State Council, or a taxpayer receives wages or salaries from two or more sources, or there is no withholding agent, or under other circumstances specified by the State Council, the taxpayer shall file returns and pay tax in accordance with State regulations. The withholding agent shall, in accordance with State regulations, file the returns of all the taxpayers and the full amount of the tax withheld.

Article 9 The tax withheld each month by a withholding agent and the tax paid each month by a taxpayer personally filing tax returns shall be turned in to the State Treasury within the first seven days of the following month and the tax returns submitted to the tax authorities.

The tax payable on income from wages and salaries shall be computed on a monthly basis and turned in by the withholding agents or by the taxpayers to the State Treasury within the first seven days of the following month and the tax returns submitted to the tax authorities. The tax payable on income from wages and salaries for specified trades may be computed on an annual basis and paid in advance in monthly installments, and the specific measures therefor shall be formulated by the State Council.

The tax payable on income gained by self-employed industrial and commercial households from production or business operation shall be computed on an annual basis and paid in advance in monthly installments. Such payment shall be made in advance by taxpayers within the first seven days of the following month, and final settlement shall be made within three months after the end of each year; any excess payment shall be refunded and any deficiency repaid.

The tax payable on income of enterprises and institutions from contracted or leased operation shall be computed on an annual basis and turned in by taxpayers to the State Treasury within 30 days after the end of each year and the tax returns submitted to the tax authorities. Taxpayers who gain income from contracted or leased operation in installments during a year shall pay tax in advance within the first seven days after each installment, and final settlement shall be made within three months after the end of each year; any excess payment shall be refunded and any deficiency repaid.

Taxpayers who earn income outside China shall pay tax to the State Treasury within 30 days after the end of each year and submit the tax returns to the tax authorities.

Article 10 All categories of income shall be computed in terms of Renminbi (RMB). Income in foreign currency shall be taxed on the equivalent amount converted into Renminbi according to the foreign exchange rate quoted by the State exchange control authorities.

Article 11 A service fee at the rate of 2 percent of the amount of tax withheld shall be paid to the withholding agent.

Article 12 The time to start the collection of individual income tax on interest income from savings deposit and the measures therefor shall be prescribed by the State Council.

Article 13 The administration of individual income tax collection shall be governed by the provisions of the Law of the People's Republic of China on the Administration of Tax Collection.

Article 14 The State Council shall, in accordance with this Law, formulate regulations for its implementation.

Article 15 This Law shall go into effect as of the date of its promulgation.

Schedule 1

Individual Income Tax Rates

(Applicable to income from wages and salaries)

Grade  Monthly Taxable Income                                Tax Rate(%)

1   Income of 500 yuan or less                                5

2   That part of income in excess of 500 to 2,000 yuan        10

3   That part of income in excess of 2,000 to 5,000 yuan      15

4   That part of income in excess of 5,000 to 20,000 yuan     20

5   That part of income in excess of 20,000 to 40,000 yuan    25

6   That part of income in excess of 40,000 to 60,000 yuan    30

7   That part of income in excess of 60,000 to 80,000 yuan    35

8   That part of income in excess of 80,000 to 100,000 yuan   40

9   That part of income in excess of 100,000 yuan             45

(Note: "Monthly taxable income" mentioned in this schedule refers to the amount remaining after deduction of 1,600 yuan for expenses or an additional deduction of expenses from monthly income in accordance with the provisions of Article 6 of this Law.)

Schedule 2

Individual Income Tax Rates

(Applicable to income gained by self-employed industrial and commercial households from production or business operation and income gained by enterprises and institutions from contracted or leased operation)

Grade  Monthly Taxable Income                                 Tax Rate(%)

1    Income of 5,000 yuan or less                            5

2    That part of income in excess of 5,000 to 10,000 yuan   10

3    That part of income in excess of 10,000 to 30,000 yuan  20

4    That part of income in excess of 30,000 to 50,000 yuan  30

5    That part of income in excess of 50,000 yuan            35

(Note: "Annual taxable income" mentioned in this schedule refers to the amount remaining after deduction of the costs, expenses and losses from the gross income in a tax year in accordance with the provisions of Article 6 of this Law.)

CHAPTER 1 GENERAL PROVISIONS 
Article 1

This Law has been formulated in order to improve the employment contract system, to specify the rights and obligations of the parties to employment

contracts, to protect the lawful rights and interests of Employees and to build and develop harmonious and stable employment relationships.

Article 2
This Law governs the establishment of employment relationships between, and the conclusion, performance, amendment, termination and ending of employment

contracts by, organizations such as enterprises, individual economic organizations and private non-enterprise units in the People's Republic of China

(“Employers”) on the one hand and Employees in the People's Republic of China on the other hand.

The conclusion, performance, amendment, termination and ending of employment contracts by state authorities, institutions or social organizations on the one

hand and Employees with whom they establish employment relationships on the other hand, shall be handled pursuant to this Law.

Article 3
The conclusion of employment contracts shall comply with the principles of lawfulness, fairness, equality, free will, negotiated consensus and good faith.
A lawfully concluded employment contract is binding, and both the Employer and the Employee shall perform their respective obligations stipulated therein.

Article 4
Employers shall establish and improve internal rules and regulations, so as to ensure that Employees enjoy their labor rights and perform their labor

obligations.

When an Employer formulates, revises or decides on rules and regulations, or material matters, that have a direct bearing on the immediate interests of its

Employees, such as those concerning compensation, work hours, rest, leave, work safety and hygiene, insurance, benefits, employee training, work discipline

or work quota management, the same shall be discussed by the employee representative congress or all the employees. The employee representative congress or

all the employees, as the case may be, shall put forward a proposal and comments, whereupon the matter shall be determined through consultations with the

Trade union or employee representatives conducted on a basis of equality.

If, during the implementation of an Employer's rule or regulation or decision on a crucial matter, the Trade union or an employee is of the opinion that the

same is inappropriate, it or he is entitled to communicate such opinion to the Employer, and the rule, regulation or decision shall be improved by making

amendments after consultations.

Rules and regulations, and decisions on material matters, that have a direct bearing on the immediate interests of Employees shall be made public or be

communicated to the Employees by the Employer.

Article 5
The labor administration authorities of People's Governments at the county level and above, together with the Trade union and enterprise representatives,

shall establish a comprehensive tri-partite mechanism for the coordination of employment relationships, in order to jointly study and resolve major issues

concerning employment relationships.

Article 6
A Trade union shall assist and guide Employees in the conclusion of employment contracts with their Employer and the performance thereof in accordance with

the law, and establish a collective bargaining mechanism with the Employer in order to safeguard the lawful rights and interests of Employees.

CHAPTER 2 CONCLUSION OF EMPLOYMENT CONTRACTS

Article 7
An Employer's employment relationship with a Employee is established on the date it starts using the Employee. An Employer shall keep a register of

employees, for reference purposes.

Article 8
When an Employer hires a Employee, it shall truthfully inform him as to the content of the work, the working conditions, the place of work, occupational

hazards, production safety conditions, labor compensation and other matters which the Employee requests to be informed about. The Employer has the right to

learn from the Employee basic information which directly relates to the employment contract, and the Employee shall truthfully provide the same.

Article 9
When hiring a Employee, an Employer may not retain the Employee's resident ID card or other papers, nor may it require him to provide security or collect

property from him under some other guise.

Article 10
To establish an employment relationship, a written employment contract shall be concluded.

In the event that no written employment contract was concluded at the time of establishment of an employment relationship, a written employment contract

shall be concluded within one month after the date on which the Employer starts using the Employee.

Where an Employer and a Employee conclude an employment contract before the Employer starts using the Employee, the employment relationship shall be

established on the date on which the Employer starts using the Employee.

Article 11
In the event that an Employer fails to conclude a written employment contract with a Employee at the time its starts to use him, and it is not clear what

labor compensation was agreed upon with the Employee, the labor compensation of the new Employee shall be decided pursuant to the rate specified in the

collective contract; where there is no collective contract or the collective contract is silent on the matter, equal pay shall be given for equal work.

Article 12
Employment contracts are divided into fixed-term employment contracts, open-ended employment contracts and employment contracts to expire upon completion of

a certain job.

Article 13
A “fixed-term employment contract” is an employment contract whose ending date is agreed upon by the Employer and the Employee.

An Employer and a Employee may conclude a fixed-term employment contract upon reaching a negotiated consensus.

Article 14
An “open-ended employment contract” is an employment contract for which the Employer and the Employee have agreed not to stipulate a definite ending date.
An Employer and a Employee may conclude an open-ended employment contract upon reaching a negotiated consensus. If a Employee proposes or agrees to renew his

employment contract or to conclude an employment contract in any of the following circumstances, an open-ended employment contract shall be concluded, unless

the Employee requests the conclusion of a fixed-term employment contract:

(1) The Employee has been working for the Employer for a consecutive period of not less than 10 years;

(2) when his Employer introduces the employment contract system or the state owned enterprise that employs him re-concludes its employment contracts as a

result of restructuring, the Employee has been working for the Employer for a consecutive period of not less than 10 years and is less than 10 years away

from his legal retirement age; or

(3) prior to the renewal, a fixed-term employment contract was concluded on two consecutive occasions and the Employee is not characterized by any of the

circumstances set forth in Article 39 and items (1) and (2) of Article 40 hereof.

If an Employer fails to conclude a written employment contract with a Employee within one year from the date on which it starts using the Employee, the

Employer and the Employee shall be deemed to have concluded an open-ended employment contract.

Article 15
An “employment contract with a term to expire upon completion of a certain job” is an employment contract in which the Employer and the Employee have

agreed that the completion of a certain job is the term of the contract.

An Employer and a Employee may, upon reaching a negotiated consensus, conclude an employment contract with a term to expire upon completion of a certain job.

Article 16
An employment contract shall become effective when the Employer and the Employee have reached a negotiated consensus thereon and each of them has signed or

sealed the text of such contract.

The Employer and the Employee shall each hold one copy of the employment contract.

Article 17
An employment contract shall specify the following matters:
(1) The name, domicile and legal representative or main person in charge of the Employer;
(2) The name, domicile and number of the resident ID card or other valid identity document of the Employee;
(3) The term of the employment contract;
(4) The job des cription and the place of work;
(5) Working hours, rest and leave;
(6) Labor compensation;
(7) Social insurance;
(8) Labor protection, working conditions and protection against occupational hazards; and
(9) Other matters which laws and statutes require to be included in employment contracts.

In addition to the requisite terms mentioned above, an Employer and a Employee may agree to stipulate other matters in the employment contract, such as

probation period, training, confidentiality, supplementary insurance and benefits, etc.

Article 18
If a dispute arises due to the fact that the rate or standards for labor compensation or working conditions, etc. are not explicitly specified in the

employment contract, the Employer and the Employee may renegotiate. If the negotiations are unsuccessful, the provisions of the collective contract shall

apply. If there is no collective contract or the collective contract is silent on the issue of labor compensation, equal pay shall be given for equal work;

if there is no collective contract or the collective contract is silent on the issue of working conditions, the relevant regulations of the state shall

apply.

Article 19
If an employment contract has a term of not less than three months but less than one year, the probation period may not exceed one month; if an employment

contract has a term of more than one year and less than three years, the probation period may not exceed two months; and if an employment contract has a term

of not less than three years or is open-ended, the probation period may not exceed six months.

An Employer may stipulate only one probation period with any given Employee.

No probation period may be specified in an employment contract with a term to expire upon completion of a certain job or an employment contract with a term

of less than three months.

The probation period shall be included in the term of the employment contract. If an employment contract provides for a probation period only, then there is

no probation period and the term concerned shall be the term of the employment contract.

Article 20
The wages of a Employee on probation may not be less than the lowest wage level for the same job with the Employer or less than 80 percent of the wage agreed

upon in the employment contract, and may not be less than the minimum wage rate in the place where the Employer is located.

Article 21
An Employer may not terminate an employment contract during the probation period unless the Employee is characterized by any of the circumstances set forth

in Article 39 and items (1) and (2) of Article 40 hereof. If an Employer terminates an employment contract during the probation period, it shall expl