Laws of the People's Republic of China

Ministry of Finance, Ministry of Commerce

Circular of the Ministry of Finance and the Ministry of Commerce on Printing and Distributing the Measures Governing Special Funds for Foreign Economic and Technical Cooperation

The departments (bureaus) of the public finance and competent commercial departments of all provinces, autonomous regions, municipalities directly under the Central Government and cities under separate state planning, the Financial Bureau and the Commercial Bureau of Xinjiang Production and Construction Corps., all the economic and commercial agencies stationed abroad and all the enterprises directly under the Central Government:

In order to carry out the guidelines of the Central Committee of the CCP and the State Council for the development strategy of "Going Global" and regulate the administration of special funds for foreign economic and technical cooperation, we have formulated the Measures for the Administration of Special Funds for Foreign Economic and Technical Cooperation, which are hereby printed and distributed to you, and please comply with and implement them .

Ministry of Finance

Ministry of Commerce

December 9, 2005 Annex:Measures Governing Special Funds for Foreign Economic and Technical Cooperation

Article 1

For the purpose of implementing the strategy of "Going Global", encouraging enterprises with comparative predominance to carry out all kinds of foreign economic and technical cooperation orderly, strengthening and regulating the administration of special funds for foreign economic and technical cooperation (hereinafter referred to as the special fund) and improving the efficiency of using funds, these Measures are specially formulated according to the Budget Law of the People"s Republic of China and the relevant provisions on the administration of fiscal budget.

Article 2

The following principles shall be followed for the administration and use of the special funds:

(1)

Exercising the administrative power according to law, and being open and transparent;

(2)

Complying with the guidelines of state industrial policies;

(3)

Complying with state policies on foreign economy and trade; and

(4)

Being good for the promotion of economic development and technical progress of the country where the project is located.

Article 3

The scope of foreign economic cooperation as mentioned in these Measures includes: overseas investment, overseas agricultural, forestry and fishery cooperation, foreign engineering contracting, foreign labor services, establishment of overseas researching and developing platforms on high and new technologies, and foreign designing consultation, etc.

Article 4

The special funds may be used to support the foreign economic and technical cooperation business as mentioned above by enterprise by the means of direct subsidy or interest-subsidy, and etc.

Article 5

The contents of direct subsidy of the special funds refers to the relevant fees incurred before a domestic enterprise makes registration (register) of any overseas enterprise at the country where the project is located or concludes overseas economic and technical cooperation agreements (contracts) with any entity of the country where the project is located for the purpose of winning the project, including: legal, technical and commercial consultation fees for employing the third party, fees for purchase of regulative documents, bidding documents and other materials, and operation fees for the foreign labor, establishment of overseas researching and developing platforms on high and new technologies, and foreign designing consultation projects. The content of interest-subsidy of the special fund refers to the medium and long term loans happened in domestic banks for the overseas investment, cooperation and foreign engineering contract.

Article 6

The Ministry of Finance and the Ministry of Commerce shall, separately determine the field and scope the support priority of special funds for the present year as the form of "Notice". .

Article 7

An application enterprise shall meet the following fundamental conditions:

(1)

Having registered within the territory of the People"s Republic of China and having the qualification of an independent legal-person ;

(2)

Having obtained the written documents of the relevant state departments on the approval (verification or archival filing) for developing the foreign economic cooperation business;

(3)

Having no major illegal or irregular act or malicious default act of governmental funds within the latest five years; and

(4)

Having submitted statistical materials as required.

Article 8

A project being applied for shall meet the following conditions:

(1)

Having been approved, registered or put on records by the relevant state departments;

(2)

Having been registered or put on records according to law by the country where the project is located, and the project has come into effect;

(3)

The contractual sum for an overseas contracting engineering shall not be lower than 5 million USD (or equivalent currencies) in principle; the investment amount by the Chinese party for an overseas investment project and an agricultural, forestry or fishery cooperation project shall not be lower than 1 million USD (or equivalent currencies) in principle; and the contractual sum for overseas labor cooperation, overseas researching and developing platforms on high and new technology and foreign designing consultation cooperation shall not be lower than 500 thousand USD (or equivalent currencies) in principle;

(4)

As to the projects for which the interest subsidiary for medium and long-termed loans are applied for, the following requirements shall be met:

i.

the loans with interest subsidiary as applied for shall be medium and long-termed domestic bank loans for more than one year (including one year);

ii.

the loans shall be used for construction and operation of foreign economic and technical cooperation projects;

iii.

the sum of a single loan shall not be lower than RMB three million yuan (or equivalent foreign currencies);

iv.

the accumulative sum of applied loans with interests subsidiary for each project shall not exceed the total amount of Chinese side investment or the contractual sum; and

v.

the support of interest subsidiary may be given to each project for less than five years.

(5)

The imbursement method of rationed operational fees shall be applied to the projects for establishment of overseas researching and developing platforms on high and new technology , cooperation of overseas labor services and foreign designing consultation, and the specific conditions thereof shall be separately formulated.

Article 9

As a general principle, the proportion of direct subsidies fees shall not exceed 50% of the fees actually paid by an application enterprise, and t one project can only enjoy support just once.

Article 10

The standard of rate of interest subsidiary for medium and long-termed loans shall be:

(1)

The rate of interest subsidiary for RMB loans shall not exceed the base interest rate as promulgated and implemented by the People"s Bank of China if the actual interest rate is lower than the base interest rate; shall not exceed the actual interest rate .

(2)

The annual rate of interest subsidiary for loans in foreign currencies shall not exceed 3% or the actual interest rate if the actual interest rate is lower than 3%.

Article 11

Special funds shall be calculated and paid in RMB. .

Article 12

The following application materials shall be submitted for applying for special funds:

(1)

An application report: including basic information on the project, loans for the project or the fees as expended, and analysis of anticipatory proceeds from the project;

(2)

Documents of the state on approval of foreign economic and technical cooperation projects;

(3)

Annual audit reports of the application enterprise for the latest three years;

(4)

Vouchers on the expended fees or the list of interest settlements (the photocopies thereof shall be affixed with the seal of the enterprise); and

(5)

Written opinions issued by Chinese embassies (consulates) in foreign countries.

(6)

Other materials that require to report.

Article 13

An enterprise shall, when submitting the relevant foreign materials related to the application, concurrently submit Chinese translation thereof, and shall properly compile all the application materials into books on the basis of the above-mentioned order.

Article 14

The application procedures shall be as follows:

(1)

A local enterprise shall submit application materials as prescribed in these Measures and the "Notice" to the provincial financial and commercial departments, which shall be responsible for preliminarily examining application materials according to this "Notice" and submit them to the Ministry of Finance and the Ministry of Commerce before the prescribed time; and

(2)

The enterprise directly under the Central Government shall separately submit the application materials as prescribed in these Measures and the "Notice" to the Ministry of Finance and the Ministry of Commerce before the prescribed time.

Article 15

The Ministry of Finance shall, together with the Ministry of Commerce, entrust intermediary institutions to examine and verify the application materials as submitted by the enterprises directly under the Central Government and the local regions, and determine the amount of fee subsidies and the amount of interest subsidiary.

Article 16

Special funds shall be appropriated by the Ministry of Finance according to the fiscal budgetary grade.

Article 17

An enterprise shall, after obtaining special funds, deal with them according to the relevant financial provisions.

Article 18

All the relevant enterprises shall manage and use fiscal special funds in strict accordance with the provisions of the state, and be voluntarily subject to the supervision and inspection of the financial, commercial and auditing administrative departments.

Article 19

All the relevant entities shall file applications in strict accordance with the state provisions on the supporting scope and time of special funds. No enterprise may cheat or hold back special funds in any form. Where any enterprise violates the provisions, the Ministry of Finance and the Ministry of Commerce shall take back all special fiscal funds and cancel its qualification for its later annual application, and deal with it in accordance with the Regulation on Penalties and Sanctions against Illegal Fiscal Acts.

Article 20

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

Article 21

These Measures shall come into force as of the date of promulgation.