Laws of the People's Republic of China

    Article 1  These Regulations are formulated for the purpose of
facilitating the direct integration of science and technology with production
and the optimal combination of science and technology with other production
factors, promoting technical and economic development and supporting the
establishment of an experimental area for developing new-technology industries.

    Article 2  An area of approximately 100 square kilometres with the
Zhonggancun Area as its centre shall be delineated in the Haidian District of
the Beijing Municipality for the establishment of an export-oriented, open
experimental area for developing new-technology industries (hereinafter
referred to as the "experimental area").

    The limits of the experimental area shall be planned and delineated by the
People's Government of the Beijing Municipality.

    Article 3  These Regulations shall apply to technology-intensive and
intelligence-intensive economic entities that are engaged in the research,
development, production and management of one or many types of their new
technologies and the products thereof.

    The scope of new technologies and the products thereof shall be separately
prescribed by the People's Government of the Beijing Municipality in
accordance with the catalogues drawn up by the State Science and Technology
Commission.

    The proportional standards of the technical income, research and
development expenditure and output value of new products of new-technology
enterprises shall be formulated by the People's Government of the Beijing
Muncipality in consultation with the State Science and Technology Commission.

    Article 4  The new-technology enterprises in the experimental area shall,
after confirmation by the departments designated by the People's Government of
the Beijing Municipality, register with the administrative department for
industry and commerce in accordance with the pertinent provisions of the State.

    Article 5  With respect to the new-technology enterprises in the
experimental area, the following preferential treatment in the form of
reduction of, and exemption from, taxes shall be effected:

    (1) income tax shall be levied at a reduced rate of 15 percent. With
respect to an enterprise whose output value of export products amounts to over
40 percent of the total output value of the same year, income tax shall, upon
verification by the tax department, be levied at a reduced rate of 10 percent.

    (2) a new-technology enterprise shall be exempted from income tax in the
first three years following its inauguration and shall, upon approval by a
department designated by the People's Government of the Beijing Municipality,
be allowed a 50 percent reduction on the basis of the income tax rates
prescribed in paragraph 1 of this Article in the fourth through sixth years.

    (3) a new-technology enterprise may, upon approval by the People's
Government of the Beijing Municipality, be exempted from buying the bonds for
key construction projects issued by the State.

    (5) houses of a productive and business nature built for technological
development with self-raised funds shall be exempted from building tax in the
five years beginning from 1988.

    The above-mentioned preferential treatment in the form of reduction of,
and exemption from, taxes shall be applicable to the enterprises with foreign
investment established in the experimental area that measure up to the
standards of a new-technology enterprise.

    Article 6  The capital consruction projects of the new-technology
enterprises in the experimental area that are of a productive and business
nature shall be arranged for construction in accordance with the unified
planning. They shall not be incorporated into the scale of fixed assets
investment. Procedures for examination and approval shall be simplified and
priority shall be given to their construction.

    Article 7  No import licence shall be required for imported raw materials
and parts and components that are needed for the production of export products
by a new-technology enterprise in the experimental area and the Customs shall
inspect and grant clearance on the strength of the contract and the document
of approval issued by the department designated by the People's Government of
the Beijing Municipality. Bonded warehouses and bonded factories may, upon
approval by the Customs, be built in the experimental area and the Customs
shall exercise supervision and control over the imported raw materials and
parts and components in the same way as it deals with imported materials for
processing. The Customs shall, based on the actual processed and exported
quantities, grant exemption from import duties and product tax on the link of
import or value added tax. Export products shall be exempted from export
duties. Bonded goods that are to be shifted to the domestic market shall be
subject to the approval of the original examining and approving department and
the permission of the Customs and the taxes thereon shall be levied in
accordance with the relevant regulations. With respect to products the import
of which is restricted by the State or which are controlled by the State
import licencing system, the procedures shall be made up for to obtain the
document of approval for import or an import licence in accordance with the
pertinent provisions of the State.

    If a new-technology enterprise is to import instruments and equipment for
the development of new technology because China is not capable of producing
them, they shall, on the strength of the document of approval issued by the
examining and approving department and upon verification by the Customs, be
exempted from import duties for the next five years.

    The Customs may establish an agency or station a supervising group in the
experimental area.

    Article 8  The money resulting from the exemption from, or reduction of,
taxes shall be placed on the State Supporting Fund and be used by the
enterprises exclusively for the development of new technology and production
and may not be used for collective welfare or for distribution among the
workers and staff.

    Article 9  The banks shall support the new-technology enterprises in the
experimental areas by means of providing loans and shall allocate every year a
certain amount from the repaid loans for technological transformation to be
used for the development of new technology. Export-oriented new-technology
enterprises shall be granted the priority of being provided with loans in
foreign exchange.

    The banks shall, for three years following the day on which these
Regulations go into effect, appropriate every year a certain amount of
special loans to be used exclusively for the development and construction
(including capital construction) of the new-technology enterprises in the
experimental area. This special fund shall be for the exclusive use mentioned
above and the banks shall control the turnover in its use. The banks shall
arrange every year for the experimental area to issue a certain amount of
long-term bonds to raise funds from society to support the development of new
technology.

    A new-technology enterprise may, upon approval by the tax department,
repay the loans it has used before tax. If the loans are to be used for
capital construction, they shall not be restricted by such provisions as
having to be deposited for half a year and longer before they are used.

    The banks in the experimental area may draw a certain proportion from
their interest income and found a loan risk fund. Chinese-foreign joint risk
investment companies may be established in the experimental area.

    Article 10  New-technology products import and export companies shall be
established in the experimental area. New-technology enterprises that possess
the necessary conditions shall be granted the right to foreign trade business
operations by the People's Government of the Beijing Municipality and
undertake export plans, assuming full responsibility for their own profits and
losses. They may, upon approval by the State departments concerned, establish
branch offices abroad. The foreign exchange earned by a new-technology
enterprise shall be retained entirely by the enterprise for the first three
years and shall, from the fourth year on, be divided between the local
authorities and the foreign exchange earning enterprise, with 20 percent going
to the former and 80 percent retained by the latter.

    Article 11  With respect to new-technology enterprises in the experimental
area that have relatively many economic and technical exchanges with foreign
countries or relatively much products export business, if their commercial and
technical personnel have to go abroad many times in a year, their first visit
abroad shall be examined and approved by the People's Government of the
Beijing Municipality and the later ones shall be examined and approved by the
respective enterprises themselves.

    Article 12  Instruments and equipment that are used by a new-technology
enterprise in the experimental area for the development of new technology and
the products thereof may be granted fast depreciation.

    Article 13  New-technology enterprises in the experimental area may fix
trial sale prices for the new products developed by themselves. If they handle
the new-technology products that have not been unifiedly priced by the State,
they may fix the prices for these products themselves.

    Article 14  Technical personnel working in scientific research
institutions, schools and enterprises are encouraged to do part-time jobs in
the new-technology enterprises in the experimental area, or launch, lead the
running of or contract various kinds of new-technology enterprises, or leave
their jobs to take up positions in the new-technology enterprises. The
departments concerned shall give them active support, provide convenience and
protect their legitimate rights and interests.

    New-technology enterprises shall be permitted to recruit graduating junior
college students, graduating university students, postgraduates, returned
students and foreign experts.

    Article 15  New-technology enterprises in the experimental area shall be
exempted from bonus tax. If the personal income of a person employed in such
an enterprise reaches the standard where the regulatory tax for personal
income shall be payable, a tax shall be levied in accordance with the relevant
regulations.

    Article 16  With respect to the various taxes paid by the new-technology
enterprises in the experimental area, the whole amount that has been increased
on top of the taxes paid in 1987, which are used as the radix, shall for five
years be returned to the Haidian District. This amount shall be used for the
development and construction of the experimental area and its use shall be
supervised by the municipal financial and tax departments.

    Article 17  The People's Government of the Beijing Municipality may
formulate procedures of implementation and specific implementing provisions in
accordance with these Regulations.

    Article 18  These Regulations shall go into effect on the date of
promulgation.