Laws of the People's Republic of China

Ministry of Finance, National Development and Reform Commission

Circular of the MOF and the NDRC about Printing and Distributing the Interim Measures for the Management on Sovereignty Guarantee Financing of the Export-Import Bank of the United States of America

No. 121 [2005] of the Ministry of Finance

The finance departments (bureaus) and the development and reform commissions of all provinces, autonomous regions, municipalities directly under the Central Government, and cities specifically designated in the state plan, the financial bureau and development and reform commission of Xinjiang Production and Construction Corps, China Development Bank, Export-Import Bank of China, Bank of China, Agricultural Bank of China, Industrial and Commercial Bank of China, China Construction Bank, and Bank of Communications,

Upon approval of the State Council, the Ministry of Finance signed with the Export-Import Bank of the United States of America a Framework Agreement between the Ministry of Finance of the People's Republic of China and the Export-Import Bank of the United States of America (hereinafter referred to as the Framework Agreement, see Annex) on January 24, 2005, which came into effect as of the date of signature. From then on, all projects under the sovereignty guarantee financing of Export-Import Bank of the United States of America shall be restricted by this Agreement. For the purposes of strengthening the management of contingent sovereignty external debts and regulating the working procedures for the issuance of sovereignty guarantees to the Export-Import Bank of the United States of America, the Interim Measures for the Management on Sovereignty Guarantee Financing of the Export-Import Bank of the United States of America are hereby printed and distributed to you, please comply with them. If you find any problem during the implementation thereof, please promptly report it to the Ministry of Finance or National Development and Reform Commission.

Annex 1, Interim Measures for the Management on Sovereignty Guarantee Financing of the Export-Import Bank of the United States of America

Annex 2, Framework Agreement (Chinese Translation and English Text)

Ministry of Finance

National Development and Reform Commission

November 28, 2005 Annex 1Interim Measures for the Management on Sovereignty Guarantee Financing of the Export-Import Bank of the United States of America

Chapter I General Provisions

Article 1

These Measures are formulated for the purposes of strengthening the management of contingent sovereignty external debts and regulating the management of sovereignty guarantee financing of the Export-Import Bank of the United States of America (hereinafter referred to as the sovereignty guarantee financing).

Article 2

The term "sovereignty guarantee financing" refers to the financing for which, under the Framework Agreement between the Ministry of Finance of the People's Republic of China and the Export-Import Bank of the United States of America (hereinafter referred to the US Ex-Im Bank), the Ministry of finance offers corresponding sovereign guarantee to the Export-Import Bank of the United States of America, i.e. the loans that the US Ex-Im Bank directly grants to the domestic banks or other borrowers in China or the guarantee that it provides for the loans or export credit insurance to the financial institutions (the financial institutions registered within the territory of the United States of America).

Article 3

Any project under sovereignty guarantee financing shall be in line with the industrial policies of the state and shall be mainly used for introducing advanced technologies and equipment of the United States of America.

Article 4

The debts formed by sovereignty guarantee financing belong to the contingent sovereignty external debts of the government of China, and shall be integrated into the unified management of sovereignty external debts by the Ministry of Finance. The projects under the sovereignty guarantee financing shall be managed as the government investment projects by the National Development and Reform Commission. (hereinafter referred to as the NDRC). The state policy banks and state-owned controlling commercial banks (hereinafter referred to as the handling banks) shall be responsible for handling the sovereignty guarantee financing business.

Article 5

A provincial finance department may, on the basis of full evaluation of the project, and in light of the financial strength of this region, decide whether or not to offer repayment guarantee to the handling bank for any project under sovereignty guarantee financing, or directly act as the borrower of the project. On the occurrence of any delay in repayment of a loan for such project, the Ministry of Finance may, by reference to the Classes A and B Projects under Foreign Government Loans, settle the repayment problem by deducting the financial budget according to the Notice of the Ministry of Finance on the Measures for the Implementation of Deductions for Delayed Foreign Government Loans for Classes A and B Projects (for Trial Implementation) (No. 32 [2003] of the Ministry of Finance).

For a project which the provincial finance department bears no repayment liability, the handling bank shall make a clear commitment to the Ministry of Finance that it will bear the final repayment liabilities by itself.

The handling bank shall charge an on-lending fee for the project under sovereignty guarantee financing according to the relevant provisions of the Ministry of Finance governing the commission charges for on-lending foreign government loans.

Article 6

A project under sovereignty guarantee financing shall be entitled to enjoy the relevant tax preferential policies of the state on projects under loans of international financial organizations and foreign governments.

Article 7

The composite costs for sovereignty guarantee financing shall be more favorable than international commercial loans of the same period.

Chapter II Management Procedures for Projects under Sovereignty Guarantee Financing

Article 8

After the development and reform commission of a province, autonomous region, municipalities directly under the Central Government, city specifically designated in the state plan finishes the examination and approval or ratification or archival filing formalities for a project of sovereignty guarantee financing, it shall submit a project fund application to the NDRC. The sectoral administrative department of the State Council, Central management enterprises and conglomerates under separate planning shall directly submit project fund applications to the NDRC.

For a project on which the feasibility study report shall be subject to the examination and approval of the State Council and NDRC, the feasibility study report shall contain the contents of project fund application. No separate project fund application is required for examination and approval.

A project fund application or feasibility study report containing the contents of project fund application shall be subject to the examination and approval of NDRC after the NDRC consults the opinions of the Ministry of Finance on the sovereignty guarantee.

Article 9

A project fund application shall contain the following items:

(1)

Brief introduction to the project, including the project construction scale and contents, total investment, the principal sum, foreign loans and other capital, owner of the project, project execution institution, period of construction, etc.;

(2)

The composite costs of the (intent) sovereignty guarantee financing, including the repayment period, grace period, interest rate, guarantee fee, commitment fee of the loan, etc.;

(3)

The mode of execution of the sovereignty guarantee financing (bank on-lending or direct financing);

(4)

The bankroll purposes of the loan;

(5)

The list and plan for purchasing the equipment and materials;

(6)

The repayment of loan and guarantee liabilities, the source of repayment fund and repayment plan;

(7)

The economic analyses and financial evaluation conclusion; and

(8)

The progress about the foreign-related work of the project.

A project fund application shall be accompanied by the following documents:

(1)

The examination and approval or ratification or archival filing document of the project; and

(2)

The comparative scheme on the purchase of domestically made equipment (on the basis of the relevant circumstance of the project and according to the requirements of the relevant department).

Article 10

The approval document of the project fund application is one of the bases for the negotiation with the foreign party, entry into an agreement, domestic on-lending, register of foreign debts, bidding and purchasing, and tax exemption. The approval document of a project fund application shall be valid for 2 years and it is automatically invalidated after the expiration.

Article 11

After the project fund application is approved, the handling bank shall submit to the Ministry of Finance an intent application for putting the project into the list of projects of sovereignty guarantee financing: The application shall be accompanied by following documents:

(1)

The examination and approval or ratification or archival filing document of the project;

(2)

The reply of the NDRC to the project fund application;

(3)

The relevant document of the local finance department or any other institution about offering guarantee for the financing of the project; and

(4)

The procurement company determined through bidding according to the relevant provisions of the Ministry of Finance.

Article 12

After the Ministry of Finance puts the project into the list of projects of sovereignty guarantee financing, which is applied for by the handling bank, and make a notification to the US Ex-Im Bank, it shall inform the handling bank and procurement company to carry out the foreign-related work and send a copy to the NDRC.

Article 13

The project unit and procurement company shall, according to the principle of giving attention to fully competition and feasibility on practicality, and in light of the procurement plan in the project fund application upon approval, choose US suppliers by way of limited competitive bidding, invitation of public bidding, or directly negotiation. After the procurement company has signed the commerce contract with a foreign party, it shall send to the Ministry of Finance and the NDRC a duplicate of the contract separately for archival purposes.

Article 14

The handling bank and the project unit shall conduct the comprehensive comparison for the financing quotes and other circumstance by at least 3 US financial institutions, confirm the US loaning bank and the loan conditions, and negotiate with the US party on the financing plan.

Article 15

After the handling bank, via a US loan-granting institution, obtains preliminary promise ( LETTER OF INTEREST) from the US Ex-Im Bank for offering a guarantee to the project, it shall apply to the Ministry of Finance for issuing a sovereignty guarantee to the US Ex-Im Bank. The application shall be accompanied by the following materials:

(1)

The preliminary promise of the US Ex-Im Bank on offering guarantee to the project (photocopy);

(2)

The quotation of the US financial institution, and the conclusion and reasons for choosing the US loaning bank; and

(3)

The financing plan concluded with the US party.

Article 16

The Ministry of Finance shall make a commitment on issuing a sovereignty guarantee to the project on sovereignty guarantee financing that meets the relevant conditions, and shall notify the relevant opinions to the handling bank and US Ex-Im Bank .

Article 17

After the Us Ex-Im Bank approves to provide a loan or guarantee for the project, the handling bank shall sign a loan agreement with the US Ex-Im bank and the US loaning bank and shall file an application to the Ministry of Finance for the issuance of a sovereignty guarantee (which shall be accompanied by a duplicate of the loan agreement).

Article 18

After the Ministry of Finance issues a certificate of sovereignty guarantee, if it is necessary to make any essential revision to the loan agreement signed by the handling bank and US Ex-Im Bank, the handling bank shall obtain a written consent of the Ministry of Finance in advance.

Article 19

After the loan agreement takes effect, the NDRC or local development and reform commission shall, upon application of the project unit, issue a letter of confirmation of domestic-funded or foreign-funded projects encouraged to developing by the state . The Ministry of Finance shall, upon application of the handling bank, issue a loan certification proving that the project uses sovereignty guarantee financing.

Chapter III Supplementary Provisions

Article 20

The power to interpret these Measures shall remain with the Ministry of Finance and the NDRC.

Article 21

These Measures shall come into force as of January 1, 2006.

Annex 2:Framework Agreement between the Ministry of Finance of the People's Republic of China and the Export-Import Bank of the United States of America

The Ministry of Finance of the People's Republic of China (hereinafter referred to as the Ministry of Finance) and the Export-Import Bank of the United States of America ?C an agency of the United States of America (hereinafter referred to the "US Ex-Im Bank") signed this Framework Agreement on January 24, 2005 (hereinafter referred to as "Framework Agreement", The Ministry of Finance or the US Ex-Im Bank is referred to as "one party", both the Ministry of Finance and the US Ex-Im Bank are referred to as "both parties"):

Background

Considering that the US Ex-Im Bank is willing to assist the export of commodities and services made in or originated from the US to the People's Republic of China by providing export credit insurance, credit guarantees or direct loans (hereinafter referred to as the "US exports";

Considering that the Ministry of Finance is willing to, in accordance with laws and regulations of the People's Republic of China, provide the Ex-Im Bank with sovereign reputation guarantees of the People's Republic China for some businesses by observing the procedures as follows;

Accordingly, on the basis of reciprocal aids and benefits, both parties agreed to:

Article 1

Support of the US Ex-Import Bank

The US Ex-Im Bank may irregularly provide export credit insurances (hereinafter referred to as the "insurances", loan guarantees (hereinafter referred to as the "guarantees" and direct loans (hereinafter referred to as the "loans" for the credits to Chinese banks and other borrowers for the financing of the US exports. Each export financing business shall be denominated in US dollars, on which the Chinese debtor and the US Ex-Im Bank shall sign relevant agreements (hereinafter referred to the "credit agreement").

Article 2

Guarantees of the Ministry of Finance and their nature

1.

Guarantees of the Ministry of Finance

The Ministry of Finance shall, according to the format of Annex 1 of this Framework Agreement, issue a letter of guarantee to each export business under this Framework Agreement it supports. Each guarantee of the Ministry of Finance will make the Ministry of Finance bear the direct, universal, irrevocable and unconditional obligations to timely make full payments for all outstanding amounts of the Chinese debtor under the credit agreement (including, but not limited to, the principal, interests, costs and expenses) (hereinafter referred to the "guaranteed amount") without offsetting any debt or deducting any tax. If the Chinese debtor fails to pay any or all the guaranteed amount(s) which are mature, the Ministry of Finance shall, after it receives the first notice of repayment, pay off all outstanding amounts of the Chinese debtor in US dollars according to the requirements of the US Ex-Im Bank.

Each guarantee of the Ministry of Finance is a payment guarantee rather than a mere guarantee for demand of payment and it is completely valid till the Chinese debtor has irrevocably paid off the guaranteed debt. Each guarantee of the Ministry of Finance shall be a consecutive, absolute and unconditional payment guarantee of the first debtor rather than a mere guarantee of the guarantor. The debt under each guarantee of the Ministry of Finance is secured by the sovereign reputation of the People's Republic of China.

2.

Submission of Guarantees of the Ministry of Finance

Both parties agree that the guarantee of the Ministry of Finance shall be submitted to the US Ex-Im Bank during the period after the entry of credit agreement on each export business and prior to the first payment. When the Ministry of Finance submits a guarantee to the US Ex-Im Bank, it shall simultaneously issue a certification about the person authorized to sign the guarantee on behalf of the Ministry of Finance.

3.

Notice not required

Except for the issuance of first notice of repayment under the guarantee of the Ministry of Finance, the US Ex-Im Bank shall not be required to issue to the Chinese debtor any other notice about exercising any right or making remedies or taking any other measures. Even if the US Ex-Im Bank has not issued the aforesaid notice of repayment, its any other right or remedy or measure may not be exempt or affected.

4

Demand of Repayment

On the occurrence of breach of the credit agreement, the US Ex-Im bank may demand the Ministry of Finance according to the format of Annex 3 of this Framework Agreement.

5

Modification of credit agreement

All substantial modifications or supplements to the credit agreement are subject to the written acknowledgment of the Ministry of Finance. Even if there is no such acknowledgement, the valid guarantee of the Ministry of Finance will not be restricted or become invalidated. But under such circumstance, the Ministry of Finance shall not bear the obligations under its valid guarantee unless it regards such modifications or supplements as nonexistent.

Article 3

Initiations of financing procedures

The Ministry of Finance will, according to the format of Annex 2 of this Framework Agreement, issue a notice to the US Ex-Import Bank for each export business that the People's Republic of China will support by using the guarantee of the Ministry of Finance (guarantee notice of the Ministry of Finance). The US Ex-Import Bank shall then decide whether to offer insurance, guarantee or loan in compliance with its policies and procedures.

This Framework Agreement does not constitute any obligation of the US Ex-Im Bank for a particular export business, likewise, nor does it constitute any obligation of the Ministry of Finance to issue a guarantee notice of the Ministry of Finance or issue a guarantee for any particular export business.

Article 4

Statements and Commitments

1.

The statements and commitments of the US Ex-Import Bank

The US Ex-Im Bank makes the following statements and commitments to the Ministry of Finance:

(1)

The US Ex-Im Bank is an independent agency of the US government, it has all the powers, power limits and statutory rights to sign and deliver this Framework agreement and perform all the obligations thereunder. The US Ex-Im Bank was established and runs under American law.

(2)

The Ex-Im Bank has taken all indispensable or necessary measures to sign, deliver, perform and comply with this Framework Agreement, as well as to make this Framework Agreement valid, binding and compulsory.

(3)

The Ex-Im Bank's commitments to provide insurances, guarantees or loans to export business state and guarantee that the Ex-Im Bank has taken all necessary measures and have obtained all necessary approvals for making such commitments.

2.

The statements and commitments of the Ministry of Finance

The Ministry of Finance makes the following statements and commitments to the Ministry of Finance:

(1)

The Ministry of Finance has all the powers, power limits and statutory rights to sign and deliver this Framework agreement and perform all the obligations thereunder. The Ministry of Finance was established and runs under Chinese Law.

(2)

The Ministry of Finance has taken all indispensable and necessary measures to sign, deliver, perform and comply with this Framework Agreement, to make this Framework Agreement and any guarantee of the Ministry of Finance valid, binding and compulsory, as well as to ensure the sovereign reputation of the People's Republic of China under this Framework Agreement and any guarantee of the Ministry of Finance, including but not limited to the obtainment of approvals to purchase and pay US dollars under this Framework Agreement and any guarantee of the Ministry of Finance.

(3)

The guarantees issued by Ministry of Finance state and guarantee that the Ministry of Finance has taken all necessary measures and all necessary approvals to issue such guarantees and perform all relevant obligations.

Article 5

Future financing and cooperation

Pursuant to provisions of Article 6 , within the valid period of this Agreement, any export business which obtains the guarantee of the Ministry of Finance shall be in line with the terms of this Framework Agreement. Both parties will periodically check the business under the Framework Agreement and negotiate with each other at any time so as to promote the smooth implementation of the export business.

In addition, in order to facilitate the efficient handling of credits of this Framework Agreement, the Ministry of Finance will, at any time, provide the US Ex-Im Bank with a checklist of export businesses applying for the guarantee of the Ministry of Finance under this Framework Agreement. Moreover, both parties will periodically assign special persons to be responsible for solving problems relating to the current and potential export business under this Framework Agreement.

Article 6

Other financing arrangements

Any provision of this Framework Agreement does not prevent any of the parties from undertaking other export businesses which are different from this Arrangement. However, if no written approval is granted by the Ministry of Finance and the US Ex-Im Bank, no provision of this Framework Agreement may apply to any other export business. Both parties specially propose to timely hold talks to reach a supplementary agreement to the Framework Agreement regarding the export of large-scale planes.

In addition, both parties predict that the US Ex-Im Bank and Chinese debtors will carry out the export business without the guarantee of the Ministry of Finance (hereinafter referred to as the "non-sovereign business"). The non-sovereign business will be regarded as not falling within the scope of this Framework Agreement. Both parties consider that such business will be bound by separate negotiations and legal agreements between the US Ex-Im Bank and Chinese debtors.

Article 7

Applicable law and jurisdiction

1.

Both of the Ministry of Finance and US Ex-Im Bank agree that on the occurrence of any claim, controversy or dispute relating to this Framework Agreement or to any guarantee of the Ministry of Finance, both parties shall, within 180 days after either party issues a written notice, negotiate with each other so as to determine whether or not it is possible to reach a settlement method acceptable to both parties.

(1)

Both parties agree that for a failure to reach any settlement method acceptable to both parties through negotiation as mentioned in Paragraph 1 of this Article, three arbitrators appointed under the Arbitration Rules of the International Chamber of Commerce shall make a final award on the settlement of claim, controversy or dispute relating to this Framework Agreement or to any guarantee of the Ministry of Finance according to the Arbitration Rules of the International Chamber of Commerce pursuant to the Arbitration Rules of the International Chamber of Commerce. The arbitration shall be carried out in London. The working language of arbitration shall be English. All the documents and testimonies to be presented as proofs during the process of arbitration shall be translated into English. The chief arbitrator shall not be a US citizen nor a Chinese citizen. Under the provisions of the following Sub-item (3), the award made by the arbitrators shall be final and be of binding force to both parties.

(2)

The arbitration shall proceed as soon as possible, shall cut down expenses to the maximum extent, and shall accelerate the making of an award. Written statements may be considered as proofs.

(3)

Notwithstanding other provisions in this Agreement, if the financing with a guarantee of the Ministry of Finance includes any payment of debt within the consolidated period of the Paris Club Arrangement, any arbitration award relating to the claim, controversy or dispute within the scope of this Arrangement (or which shall fall within the scope of such arrangement if any award is not made according to the stipulated terms) may, according to the choice of either party, be deemed null and void.

3.

The Framework Agreement, guarantees of the Ministry of Finance and export business as mentioned herein do not mean that the Government of the People's Republic of China accepts, apart from the forms as mentioned in Paragraph 1 and Item (1) of Paragraph 2, any form of jurisdictional power exercised by any agency over any dispute arising out of or relating to the Framework Agreement, guarantee of the Ministry of Finance or export business.

Article 8

Notices

All notices and communications relating to this Framework Agreement or Guarantees of the Ministry of Finance shall be in writing and in English (or be accompanied by an accurate English translation so as to make the US Ex-Im Bank have the power to use them for all purposes under this Framework Agreement). They shall be delivered to the persons set forth below and shall be effective when delivered to the following address or telephone number of the opposite party (to another address or telephone number offered by the Ministry of Finance or US Ex-Im Bank at least 30 days in advance).

(1)

Notices to the Ministry of Finance:

Director General Finance Department of the Ministry of Finance

Sanlihe, Xicheng District, Beijing, People's Republic of China, 100820

Tel: (гл86)10-68551218

Fax: (гл86) 10-68551297

(2)

Legal Advisor Office of the Legal Advisor

US Ex-Im Bank

811 Vermont Avenue, N. W., Washington DC, USA, 20571

Tel: (гл1)202-565-3430

Fax: (гл1)202-565-3566

Article 9

Termination of agreement

The Ministry of Finance or US Ex-Im Bank may, at any time, terminate this Framework Agreement by written notice to the opposite party no less than 90 days in advance. However, the termination of this Framework Agreement shall not affect the effectiveness of any prior guarantee of the Ministry of Finance, or any other right or obligation of either party relating to the insurance, guarantee or direct loan that the US Ex-Im Bank has consented to provide for any export business under this Framework Agreement theretofore.

This Framework Agreement shall be formally signed and delivered by both parties, shall be in duplicate, shall be of equivalent force, and shall become effective as of the date as mentioned above.

Signature:

Name:

Title:

Ministry of Finance of the People's Republic of China

Signature:

Name:

Title:

US Ex-Im Bank: