Laws of the People's Republic of China

   Article 1. In accordance with the provisions of Article 8 of the Law of the People's Republic of China on Chinese-Foreign Joint Ventures that "A joint venture shall open an account with the Bank of China or a bank approved by the Bank of China", these Interim Procedures are formulated to support the requirements of Chinese-foreign joint ventures (hereafter referred to as "joint ventures") for funds in their operating and business activities through the handling of loans to joint ventures (hereafter refereed to as "loans").

   Article 2. Prospective Borrowers. Any joint venture may apply for a loan if, in accordance with the provisions of the Law of the People's Republic of China on Chinese-Foreign Joint Ventures, it has been approved by the Foreign Investment Commission, has registered with the General Administration for Industry and Commerce and has obtained a business license.

   Article 3. Types of Loans. The Bank of China shall handle the following types of loans to joint ventures:

(1).Working capital loans. Short-term revolving funds for deficits that arise in the process of the production or circulation of goods by the joint venture.

(2).loans for the settlement of accounts. Funds for settlement by joint ventures when their production capital is tied up in goods that are in the process of being sold within the People's Republic of China or abroad.

(3)Fixed asset loans. Funds for the deficits that arise when joint ventures need to increase their fixed assets in order to expand their business operations or to make replacements and technical innovations.

The above-mentioned loans fall into two categories: Renminbi loans and foreign currency loans. A loan shall be repaid in the same currency in which it was made. Interest on a foreign currency loan shall be computed and charged in foreign currency.

   Article 4.Conditions for Loans.

A Joint venture that applies for the use of a loan shall satisfy the following conditions:

(1). It shall comply with the Law of the People's Republic of China on Chinese-Foreign Joint Ventures.

(2) It shall have opened a deposit account with the Bank of China or a bank approved by the Bank of China (hereafter referred to as "the bank").

(3) It shall be creditworthy and soundly managed.

(4)The source of funds for repayment of the loan and for payment of interest shall be fully guaranteed. At the time of drawdown, the joint venture shall have provided, in a form acceptable to the bank, collateral security or the guaranty of a uarantor enterprise.

   Article 5. Term of Loans.

The term of a lone shall be decided by the borrowing venture and the bank, according to the specific contents of the items covered by the loan and distinguishing among differing cases.

   Article 6. Interest Rates on Loans. The interest rates on Renminbi loans shall be those prescribed by the People's Bank of China. The interest rates on foreign currency loans shall be set by the Bank of China and shall be put into effect after being checked and approved by the People's Bank of China.

   Article 7. Application for Loans, Signing of Loan Agreements and Utilization of Loans.

(1) A borrowing venture that applies for a loan must satisfy the conditions for a loan and have the approval of its board of directors; it shall go through the procedures for applying for a loan from the bank, fill out and submit an application for utilization of the loan and provide necessary documentation, materials and copies of relevant contracts.

(2) After the loan application is examined and approved by the bank, the borrowing venture shall sign a loan agreement with the bank, open a loan account and complete borrowing procedures in accordance with the provisions of the agreement. For a loan secured by credit, a letter of guaranty of repayment of the loan, issued by a guarantor enterprise and acceptable to the bank, shall be attached to the loan agreement; for a loan secured by things, written confirmation that the collateral serves as security for repayment, issued by the borrowing venture and acceptable to the bank, shall be attached to the loan agreement.

   Article 8. Repayment of the Principal and Payment of Interest on Loans.

(1) The borrowing venture must repay the bank on the dates and in the amounts prescribed in the repayment schedule of the loan agreement. If repayment of the loan becomes overdue, in the case of a loan secured by credit the guarantor enterprise shall be responsible for repayment of the entire amount due, and the bank shall have the right to debit the deposit accounts of the borrowing venture and the guarantor enterprise for repayment of the principal of the loan and payment of interest thereon; in the case of a loan secured by things, the bank shall have the right to sell the collateral of the borrowing venture in order to repay the principal of the loan and pay interest thereon. With respect to overdue loans, the bank shall, from the day on which the loan becomes overdue, charge the borrowing venture additional interest of 20 to 50 per cent of the original interest rate.

(2) The borrowing venture mast pay interest in accordance with the interest computation dates prescribed by the bank and , if it fails to do so, the bank on its own initiative shall transfer the amount of interest that is due into the loan account of the borrowing venture and compute compound interest thereon.

   Article 9. Servicing and Supervision of Loans. In accordance with the policies and decrees of the State, the bank shall actively support joint ventures in developing their production and operations and provide good service to them. Borrowing ventures shall accept the inspection and supervision of the bank with respect to utilization of loans and shall provide the bank with materials and reports concerning various kinds of plans, such as those for production, supply and marketing, finances and capital construction, and how they are being put into effect. If a borrowing venture does not comply with the loan agreement, the bank may, distinguishing among differing cases, adopt economic measures to safeguard its rights and interests, such as terminating disbursement of the loan or recalling the loan ahead of the repayment schedule.

(The English translations are for reference only)