Laws of the People's Republic of China

the Taiwan Affairs Office of the State Council, China Development Bank

Interim Measures on Loans Granted by the China Development Bank to Taiwan-funded Enterprises

the Taiwan Affairs Office of the State Council, China Development Bank

December 21, 2005

Chapter I General Provisions

Article 1

These Measures are formulated according to the Agreement on Financial Cooperation in Exploration as concluded between the Taiwan Affairs Office of the State Council (hereinafter referred to as the " TAOSC") and China Development Bank (hereinafter referred to as the Development Bank).

Article 2

Loans granted by the Development Bank to a Taiwan-funded enterprise shall be governed by the laws and regulations as promulgated by the state. The relevant bylaws of the Development Bank on loan management shall be carried out accordingly.

Article 3

The application filed by a Taiwan-funded enterprise for the Development Bank's loan shall comply with the existing state industrial policies and regional development policies, and shall meet the requirements of the Development Bank for capital proportion and credit construction.

Chapter II Objects, Scope, Variety and Interest Rate of Loans

Article 4

Objects of Loans

(1)

The cooperative enterprises, joint venture enterprises and solely Taiwan-funded enterprises which are registered by Taiwan businessmen in the Mainland, including large enterprises and small and medium-sized enterprises.

(2)

The infrastructure construction projects of Taiwan investment zones as approved by the State Council and the cross-straits agricultural cooperation exemplary zones and cross-straits technical and industrial parks as approved by the relevant ministries and commissions of the State Council.

Article 5

Scope of Loans

(1)

Industrial projects concerning energy, communication, electronics, raw materials or agriculture, and the projects of park construction;

(2)

Industrialization projects of High-tech, especially the projects which involve self-owned intellectual property;

(3)

Projects of infrastructure construction of export bases that meet the demand of the international market;

(4)

Projects involved in resource development and comprehensive utilization of renewable resources;

(5)

Projects propitious to regional economic construction and social development such as the development of the western regions, the revitalization of Northeast China and other old industrial bases, and the rise of the central region; and

(6)

Other projects, to which the TAOSC and the Development Bank believe necessary to grant support.

Article 6

Variety and Interest Rate of Loans

Loans granted by the Development Bank to Taiwan-funded enterprises are classified into mid/long-term loans and short-term loans and are as well classified into RMB loans and foreign exchange loans by currency. The loan interest rate shall be in line with the policies of interest rate as publicized by the People's Bank of China.

Chapter III Application for Loans

Article 7

The relevant application materials as submitted by a Taiwan-funded enterprise for loans shall be reported in triplicate to the Taiwan Affairs Office at the provincial level of the place where it is located. The Taiwan Affairs Office at the provincial level shall examine the application materials and then report them to the TAOSC. A large Taiwan-funded enterprise group may directly report its application materials to the TAOSC with a copy of the relevant documents and materials reported to the branch of the Development Bank at its locality (including the business department of the headquarters of the Development Bank, hereinafter the same).

Article 8

Application Materials

(1)

Letter of Application for Loans;

(2)

Feasibility research reports on the relevant loan project (or project proposal);

(3)

Examination and approval documents (for verification or archival filing) issued by the competent departments on projects, land, environmental protection and planning are required, with an exception of special projects;

(4)

The statement on the production and operation as well as the financial statements of the enterprise; and

(5)

Other relevant materials.

Chapter IV Preliminary Appraisal of Loans

Article 9

The TAOSC shall conduct preliminary examination on the reported projects, for which loans are applied, and shall recommend to the business development board of the Development Bank the projects that have been verified through an official letter of the economic bureau of the TAOSC.

Article 10

The business development board of the Development Bank shall notify the relevant departments of the headquarters of the Development Bank as well as its branch of the loan project as recommended by the TAOSC, and shall conduct appraisal on the relevant Taiwan-funded enterprise as well as the loan project in the aspect of creditworthiness and liabilities.

Chapter V Examination of Loans and Decision-making

Article 11

The Development Bank shall adopt the dual appraisal method of "separating credit appraisal from liabilities appraisal and giving priority to credit appraisal" in the appraisal of loans. The Development Bank shall conduct appraisal on the legal-person and construction project of a Taiwan-funded enterprises, and may make loan commitment to a Taiwan-funded enterprise that satisfies the relevant requirements.

Article 12

According to the existing measures of the Development Bank for the administration of appraisal, a project, for which a loan of more than RMB 30 million Yuan is applied, shall be subject to the decision of the headquarters of the Development Bank. A project, for which a loan of no more than RMB 30 million Yuan is applied, shall be subject to the appraisal and decision of the relevant branch of the Development Bank.

Chapter VI Conclusion of Credit Contract and Administration of Loans

Article 13

Where a loan commitment is made, a credit contract shall be concluded between the local branch of the Development Bank at the place where a Taiwan-funded enterprise is registered and the Taiwan-funded enterprise as well as the relevant guarantor. The Taiwan-funded enterprise shall, within 5 workdays as of the date of conclusion of contract, report the duplicate of the contract to the Taiwan Affairs Office at the provincial level or to the TAOSC.

Article 14

After the credit contract is concluded, the relevant Taiwan-funded enterprise shall open a loan account and deposit account in the relevant branch of the Development Bank.

Article 15

The Development Bank shall, according to the stipulations of the credit contract, grant a loan to the Taiwan-funded enterprise and collect the principal and interest of the loan on schedule.

Article 16

Loans granted by the Development Bank shall be earmarked for every specified purpose only. Where a Taiwan-funded enterprise occupies or embezzles any loan, fails to contribute capital according to schedule or in the case of any material risk resulting from the enterprise management, the Development Bank is entitled to stop granting the loan and collect the principal and interest of the granted loan ahead of schedule.

Article 17

A Taiwan-funded enterprise shall report to the branch of the Development Bank at its locality the project construction and enterprise production and operation which are required to be reported under the relevant contract. The Development Bank is entitled to carry out special examinations on the loans it has granted.

Article 18

A branch of the Development Bank shall intensify the management of loans and shall, according to the provisions of its headquarters, report to the parent bank of the Development Bank the loan commitment, contract conclusion, issuance of loans, collection of principals and interest, asset quality as well as after-loaning management on a quarterly basis. The comprehensive planning board of the Development Bank shall carry out independent statistical work on loans granted to a Taiwan-funded enterprise. The business development board of the Development Bank shall report to the economic bureau of the TAOSC all the information it has collected.

Article 19

The economic bureau of the TAOSC shall timely report the feedback to the relevant Taiwan Affairs Offices at the provincial level so as to facilitate the Taiwan Affairs Offices at all levels to do a good job in the relevant follow-up service and work.

Article 20

The Taiwan Affairs Offices at the provincial level shall follow up the projects that have been reported to the TAOSC. The Taiwan Office Affairs at the provincial level and branches of the Development Bank shall timely report any major problem as discovered to the TAOSC and the headquarters of the Development Bank. The TAOSC and the Development Bank shall negotiate jointly to solve the problem.

Chapter VII Other Matters

Article 21

The TAOSC and the Development Bank shall be responsible for the interpretation and revision of these Measures.

Article 22

These Measures shall go into effect as of the day of printing and distribution.