Laws of the People's Republic of China

    Article 1  Income tax shall be paid in accordance with this Law by
Chinese-foreign equity joint ventures (hereinafter referred to as "joint
ventures") within the territory of the People's Republic of China on their
income from production, business operations and other sources.

    Income tax on the income derived from production, business operations
and other sources by branches and subbranches of a joint venture that are
within and outside the territory of China shall be paid by their head office
on a consolidated basis.

    Article 2  The taxable income of a joint venture shall be the amount
remaining from its gross income in a tax year after the costs, expenses and
losses have been deducted.

    Article 3  The income tax rate on joint ventures shall be 30%. In addition
, a local income tax of 10% Of the assessed income tax shall be levied.

    The income tax rates on joint ventures exploiting petroleum, natural gas
and other resources shall be stipulated separately.

    Article 4  In the case of a foreign joint venturer remitting out of China
its share of profit obtained from the venture, an income tax of 10% shall be
levied on the remitted amount.

    Article 5  A joint venture scheduled to operate for a period of 10 years
or more shall, upon approval the tax authorities of an application filed by
the venture, be exempted from income tax in the first two years after it has
begun to make a profit and allowed a 50% reduction in the third through the
fifth years.

    With the approval ol the Ministry of Finance of the People's Republic of
China, joint ventures engaged in low-profit operations such as farming and
forestry or joint ventures established in remote, economically
under-developed areas may be allowed a 15-30% reduction in income tax for a
period of another ten years following the expiration of the term for exemption
and reductions prescribed in the preceding paragraph.

    Article 6  A joint venturer which reinvests in China its share of profit
obtained from the venture for a period of not less than five years shall,
upon approval by the tax authorities of an application filed by the joint
venturer, be refunded 40% of the income tax already paid on the reinvested
amount. If it withdraws the reinvested funds before the end of the fifth year,
it shall repay the refunded tax.

    Article 7  Losses incurred by a joint venture in a tax year max, be made
up with a corresponding amount drawn from next year's income. Should the
income in the subsequent tax year be insufficient to make up for the said
losses, the balance may be made up with further deductions from its income
year by year, but within a period not exceeding five years.

    Article 8  Income tax on joint ventures shall be computed and levied in
an annual basis and paid advance in quarterly instalments. Such advance
payments shall be made within 15 days after the end of each quarter, and the
final settlement shall be made within five months after the end of each tax
year, with a refund for any overpayment or a supplemental payment for any
deficiency.

    Article 9  Joint ventures shall file their income tax returns in respect
of advance payments with the local tax authorities within the period
prescribed for advance payments, and shall file their annual income tax
returns together with the statements of final accounts within four months
after the end of the tax year.

    Article 10  Income tax on joint ventures shall be computed in terms of
Renminbi (RMB). Income in foreign currency shall be taxed on the equivalent
amount converted into Renminbi according to the exchange rate quoted by the
State General Administration of Exchange Control of the People's Republic
of China.

    Article 11  When a joint venture starts operations, changes its line of
production, moves to a new site, ceases to operate or assigns its registered
capital, it shall present the relevant certificates for tax registration
with the local tax authorities within 30 days after registering with the
General Administration for Industry and Commerce of the People's Republic
of China.

    Article 12  The tax authorities shall have the right to inspect the
financial, accounting and tax affairs of joint ventures. The joint ventures
must make reports according to the facts and provide all relevant
information; they may not refuse to cooperate and may not conceal the facts.

    Article 13  A joint venture must pay its tax within the prescribed time
limit. In case of failure to do so, the tax authorities, in addition to
setting a new time limit for tax payment, shall impose a surcharge for
overdue payment equal to 0.5% of the overdue tax for every day in arrears,
starting from the first day payment becomes overdue.

    Article 14  The tax authorities may, in light of the circumstances,
impose a fine on a joint venture which has violated the provisions of
Articles 9, 11 or 12 of this Law.

    In dealing with any joint venture which has evaded or refused to pay tax,
the tax authorities, in addition to pursuing the tax payment, impose a fine
of not more than five times the amount of the tax underpaid or not paid, in
accordance with the seriousness of the case. Cases of gross violation shall be
handled by the local people's courts in accordance with the law.

    Article 15  In case of a dispute with the tax authorities over tax
payment, a joint venture must pay tax according to the relevant regulations
before applying to higher tax authorities for reconsideration. If it does not
accept the decision made after such reconsideration, it may bring suit in the
local people's court.

    Article 16  Income tax paid abroad by a joint venture or its branches or
subbranches may be credited against the assessed income tax of the head office.

    When agreements on avoidance of double taxation have been concluded
between the Government of the People's Republic of China and foreign
governments, income tax credits shall be handled in accordance with the
provisions of the respective agreements.

    Article 17  Rules for the implementation of this Law shall be formulated
by the Ministry of Finance of the People's Republic of China.

    Article 18  This Law shall go into effect on the day of its promulgation.