Laws of the People's Republic of China

The Ministry of Railway, the Ministry of Foreign Trade and Economic Cooperation

Decree of the Ministry of Railway, Ministry of Foreign Trade and Economic Cooperation

No.4

Interim Measures on Examination, Approval and Administration of Railway Freight Transport Industry Invested by Foreigners are hereby promulgated, and shall enter into force as of the date of promulgation.

Minister of the Ministry of Railway: Fu Zhihuan

Minister of the Ministry of Foreign Trade and Economic Cooperation: Shi Guangsheng

August 29, 2000

Interim Measures on Examination, Approval and Administration of Railway Freight Transport Industry Invested by Foreigners

Article 1

These Measures are formulated in accordance with the Law of the People's Republic of China on Chinese-foreign Equity Joint Ventures, the Law of the People's Republic of China on Chinese-foreign Contractual Joint Ventures as well as laws and regulations concerning the railway industry for the purposes of pushing the railway freight transport industry opening to the outside world, promoting the development of the railway freight transport industry and protecting the investors' legitimate rights and interests.

Article 2

These Measures are applicable to the establishment of Chinese-foreign railway freight transport companies by foreign investors in the form of join venture (including such two types as equity joint venture and contractual joint venture).

Article 3

The Ministry of Foreign Trade and Economic Cooperation of the People's Republic of China (hereinafter referred to as the MOFTEC) and the Ministry of Railway of the People's Republic of China (hereinafter referred to as the Ministry of Railway) are responsible for the examination and approval of Chinese-foreign cooperative railway freight transport companies.

Article 4

The State shall protect the legitimate rights and interests of the Chinese-foreign cooperative railway freight transport companies according to law. The Chinese-foreign cooperative railway freight transport companies operating railway freight transport business must abide by the laws, regulations of the People's Republic of China and other relevant rules and shall not impair the social public interests in China and the legitimate rights and interests of the existing railway transport enterprises. The Chinese-foreign cooperative railway freight transport companies shall accept the supervision and administration by the Ministry of Railway and other relevant departments of the State.

Article 5

To establish a Chinese-foreign cooperative railway freight transport company, the main foreign investor shall be a freight transport company which has engaged in freight transport business for more than 10 years and had strong capital capacity and good business achievements. The main Chinese investor shall be a railway transport company which has engaged in freight transport business for more than 10 years. Within the period stipulated by the Chinese government, the Chinese party's investment proportion shall not be less than 51%.

Article 6

A Chinese-foreign cooperative railway freight transport company to be established shall meet the following requirements:

(1)

having freight wagons and other means of delivery adaptable to its business scale, and having necessary places and facilities for handling railway freight transport business;

(2)

having a stable source of freight;

(3)

having necessary professional technicians and managers to operate the business;

(4)

the amount of the registered capital shall satisfy the business need and the minimum not less than $25 million.

Article 7

To establish a Chinese-foreign cooperative railway freight transport company, the applicant (the main Chinese investor used as an example, the same below) shall submit the following documents:

(1)

an application letter and a project proposal;

(2)

a feasibility study report;

(3)

a Chinese-foreign joint venture contract and articles of association;

(4)

the applicant's legal certifying document and its creditworthiness certifying document;

(5)

a power of attorney of the legal representative of the Chinese-foreign cooperative railway freight transport company and a name list of the members of the board of directors as well as their resumes;

(6)

other documents required by the MOFTEC and the Ministry of Railway.

Article 8

The application to establish a Chinese-foreign cooperative railway freight transport company shall be handled in accordance the following procedures:

(1)

The applicant shall submit all the documents stipulated in Article 7 of these Measures to the Ministry of Railway. The Ministry of Railway shall make a decision of approval or disapproval within two months as of the date of receipt of all the documents. For a project with investment scale of $30 million or above, the Ministry of Railway shall transmit it to the State Development Planning Commission for examination, approval and establishment of the project. Where, upon examination, the establishment requirements of a Chinese-foreign cooperative railway freight transport company has been met and the establishment of the project approved, the Railway Freight Transport Business License shall be issued by the Ministry of Railway.

(2)

The applicant shall, through the Ministry of Railway, transmit the Chinese-foreign joint venture contract and articles of association to the MOFTEC for examination and approval. The applicant shall manage the Approval Certificate of Foreign Invested Enterprises with the MOFTEC based on the approval document.

(3)

The applicant shall, within the prescribed period, undertake the enterprise registration with the administrative department for industry and commerce in accordance with relevant provisions concerning registration of companies based on the Railway Freight Transport Business License and the Approval Certificate of Foreign Invested Enterprises.

(4)

Where a Chinese-foreign cooperative railway freight transport company needs to establish branches domestically, abroad and in HongKong or Macao region, it shall report this matter to the Ministry of Railway and the MOFTEC for approval.

Article 9

The Ministry of Railway shall examine and approve the establishment of projects and issue Railway Freight Transport Business Licenses based on the circumstances of railway transport capacity and the development needs of the railway transport market.

Article 10

The term of operation of a Chinese-foreign cooperative railway freight transport company shall be agreed in the contract by both Chinese and foreign parties and generally shall not exceed 20 years. The term of operation of a Chinese-foreign cooperative railway freight transport company which make contributions to build or purchase railway lines and station installations may extend appropriately.

Where both Chinese and foreign parties agree to continue operation after the term of operation expires, the matter shall be reported to the original examining and approving authority for approval.

Article 11

After a Chinese-foreign cooperative railway freight transport company is established, the amendment of the joint venture contract and articles of association shall be transmitted to the MOFTEC for approval through the Ministry of Railway.

Article 12

Chinese-foreign cooperative railway freight transport companies will engage in transport of bulk cargo, frozen and chilled food, tinned fluid and gas, container cargo and other cargo by its self-owned and leased freight wagons, but the transport concerning China's State security and on which there are other separate provisions in laws and administrative regulations is excluded.

Chinese-foreign cooperative railway freight transport companies engaging in transport of dangerous cargo and other related business shall conform to laws, regulations and relevant provisions of the People's Republic of China.

Article 13

Chinese-foreign cooperative railway freight transport companies will mainly engage in railway freight transport business in the following ways:

(1)

to use its self-owned and leased wagons and other means of delivery, rent locomotives, station installations and line passing capacity from other railway transport enterprises to engage in railway freight transport;

(2)

to use its self-owned locomotives and other means of delivery, rent station installations and line passing capacity from other railway transport enterprises to engage in railway freight transport;

(3)

to use its self-owned locomotives and other means of delivery, through making contributions to build or purchase railway lines, terminal lines and station installations, to engage in railway freight transport on its self-owned lines or lines of other railway transport enterprises.

Article 14

Chinese-foreign cooperative railway freight transport companies shall deal with the relationship of associate transactions and competition in the same industry with other railway transport enterprises based on the principle of market economy. Where the associated enterprises provide products and services mutually, the contract shall be signed based on the principle of equality, mutual benefit, cost compensation and reasonable profit.

Article 15

The State calls for combined transport conducted by Chinese-foreign cooperative railway freight transport companies and other transport enterprises as well as among Chinese-foreign cooperative railway freight transport companies. The parties conducting combined transport shall sign contracts of combined transport to clearly define all parties' rights and obligations based on the principle of fairness, reasonableness, equality and mutual benefit.

Article 16

Chinese-foreign cooperative railway freight transport companies must strictly abide by the various provisions of the Ministry of Railway of the People's Republic of China concerning the safety of railway transport and the transportation equipment and installations must conform to the State standards or industry standards of the People's Republic of China.

Chinese-foreign cooperative railway freight transport companies must accept the safety supervision from the Ministry of Railway and its authorized safety supervision institutions.

Article 17

Chinese-foreign cooperative railway freight transport companies engaging in freight transport must be subject to the uniform control of nationwide railroad networks.

Article 18

The price of freight transport conducted by Chinese-foreign cooperative railway freight transport companies and the administration measures thereof shall implement the tariff policy of the State railway.

Article 19

Chinese-foreign cooperative railway freight transport companies shall pay taxes and fees in accordance with the laws and regulations of the People's Republic of China.

Article 20

Chinese-foreign cooperative railway freight transport companies shall submit statistics materials to relevant departments according to law.

Article 21

The format of the major transportation vouchers and bills used by Chinese-foreign cooperative railway freight transport companies shall be submitted to the Ministry of Railway for checking and filing for the record.

Article 22

Chinese-foreign cooperative railway freight transport companies shall submit a report on the last year's transport business operations to the MOFTEC and the Ministry of Railway by the end of April each year. The main contents include:

(1)

the specific transportation routes and products carried;

(2)

the total number of the employees and the number of Chinese employees;

(3)

the circumstances concerning such aspects as freight transport volume (10 thousand ton, 10 thousand ton/kilometer), the amount of containers carried, the transport income, locomotives used as well as the line infrastructure;

(4)

the total business amount, the amount of profit and the taxes paid in the current year;

(5)

other materials stipulated by the MOFTEC and the Ministry of Railway.

Article 23

Chinese-foreign cooperative railway freight transport companies must operate railway freight transport business according to law. Whoever violates the provisions of laws, regulations and rules may be given a warning or an order to stop business for rectification by the Ministry of Railway; where the circumstances are serious, the Railway Freight Transport Business License shall be cancelled and the qualification for operating freight transport business be removed.

Article 24

The establishment of cooperative railway freight transport companies in other provinces, autonomous regions and municipalities directly under the Central Government in China by investors from China Hongkong Special Administrative Region, Macao Special Administrative Region and Taiwan region shall be handled with reference to these Measures.

Article 25

The MOFTEC and the Ministry of Railway are responsible for the interpretation of these Measures.

Article 26

These Measures are applicable to the present system on administration of railway transport and shall enter into force as of the date of promulgation.