Laws of the People's Republic of China

The National Development and Reform Commission

Decree of the National Development and Reform Commission

No.42

In accordance with the Price Law of the People's Republic of China, the Interim Measures for the Examination of the Price Costs of Major Goods and Services (Decree No.25 of the former State Planning Commission) have been revised, which were promulgated by the former State Planning Commission, and on this basis, the Measures for the Supervision and Examination of the Government's Price Costs are specifically formulated, which were adopted through discussion at the office meeting of the directors of the National Development and Reform Commission, are hereby promulgated, and shall enter into effect as of the day of March 1, 2006.

Director General Ma Kai

January 17, 2006

Measures for the Supervision and Examination of the Government's Price Costs

Article 1

In accordance with the Price Law of the People's Republic of China, these Measures are formulated in order to improve the scientific decision-making to boost prices by the government of the competent price departments, and regulate the act of supervision and examination on price costs.

Article 2

These Measures shall be in the same with the acts of the government of the competent price departments on the supervision and examination of price costs in the course of formulating or adjusting and servicing the prices of the goods, which are subject to government-guided prices or government-set prices (hereinafter referred to as the pricing).

Article 3

The "supervision and examination on price costs (hereinafter referred to as the cost supervision and examination)" as mentioned in these Measures shall means to the acts of the government of the competent price department to verify the price costs on the basis of investigating, measuring, and examining on the costs of the operators during the process of pricing. The pricing costs as mentioned in these Measures shall mean the average social reasonable expenses of the operators of countrywide or within a certain range for them producing or managing the same goods or providing the same kinds of services, which is the basis of pricing for the government.

Article 4

The cost investigation organs of the competent price departments of the people's governments at various levels (hereinafter referred to as the cost investigation organizations) shall take the charge of organizing the enforcement of the concrete work of cost supervision and examination.

The cost investigation organizations of all levels shall take the charge of the concrete affairs of cost supervision and examination within the competent price department at the same levels, or conduct cost supervision and examination on the relevant operators which are entrusted by the competent price department of the higher level or are asked for by the competent price department of a lower level.

Article 5

Catalogue management shall be applied to cost supervision and examination. Those goods and services, listed into the catalogue of cost supervision and examination, shall be determined by the competent price department under the State Council and the competent price department of the people's governments of the provinces, autonomous regions, and municipalities directly under the Central Government in accordance with central and local pricing catalogues, and they shall be formulated .

All the goods and services listed into the catalogue of price hearings and excluded the catalogue of price hearings but whereon hearings are required shall be automatically listed into the catalogue of price supervision and examination .

When making prices on goods and services unlisted into the catalogue of cost examination, the government of the competent price department may implement cost supervision and examination that is believed necessary.

Article 6

The justicial, scientific, normative, and efficient principle shall be followed in cost supervision and examination.

Article 7

The system of pre-pricing supervision and examination (hereinafter referred to as the examination on pricing and price adjustment) and regular supervision and examination shall be combinative applied to cost supervision and examination.

The intervals of regular supervision of the different goods and services shall be determined by the government of the competent price department in the catalogue of cost supervision and examination , and the intervals of regular examination shall be no less than one year at the minimum.

Article 8

The supervision and examination on pricing and price adjustment as well as regular supervision and examination shall not be carried out overlapped or repeatedly on the cost of the same kind of good or service of the same operator in a financial year.

Article 9

All goods or services listed in the catalogue of cost supervision and examination are not supervised on pricing and price adjustment or regular supervision and examination, and a price shall not be set up by the government of the competent price department .

Article 10

All the operators that produce or manage the same kind of goods or provide the same kind of services shall be enforced cost supervision and examination by a cost investigation organization. If the operators are in a large number, the cost investigation organization may select a certain number of operators that have representative to implement cost supervision and examination.

Article 11

In accordance with the fact of the costs of different goods and services and the power of price management, the measures on the supervision and examination of pricing costs of material goods and services shall be formulated by the competent price department of the State Council and the competent price department of the people's government of province, autonomous region, or municipality directly under the Central Government. The measures on the supervision and examination of pricing costs of material goods and services shall be covered the constituted items of the price costs of the relevant goods or services, verification methods and standards, and etc. For the goods and services in the local pricing catalogue, the nationally uniform measures for the supervision of price costs may be formulated by the competent price department of the State Council through coordination.

Article 12

Business accounting on the price costs shall be implemented according to the reasonable expenses, which the operators use in their normal production and business operation acts. The expenses shall not be listed into the price cost as follows:

1.

Expenses, which does not keep tally with the provisions of the Accounting Law of the People's Republic of China and the relevant laws, administrative regulations, and financial accounting systems;

2.

Expenses, which has nothing to do with the acts of production and business operation of goods and services in the process of cost supervision and examination;

3.

Expenses that does not keep tally with the provisions of the measures for the supervision and examination of price cost on relevant goods and services; and

4.

Other unreasonable expenses which operators use in the process of production and business operations.

Article 13

The operator shall record and make business accounting on the cost of production and business operations of goods and services correctly, and shall not resort to deceit.

The independent accounting shall be made on the goods and services, which are under the control of government guided prices or government-set prices as well as the costs and incomes of the production and business operations of the relevant goods and services, which have close relationship with them.

Article 14

The operator shall submit the cost documents of the relevant goods and services (hereinafter referred to as the cost documents) in accordance with the request of the government of the competent price department for cost examination, and shall take the charge of the authenticity and legitimacy of the cost documents that he provides. The cost documents shall include the contents as follows:

1.

The report forms of cost shall be filled according to the requirements of the government of the competent price department of and the prescribed formats after business accounting.

2.

The annual financial report shall have been audited by registered accountants or the departments of taxation, the departments of audit and other governmental departments. And

3.

Other documents correlating with the cost.

If the normal business operations have not been started, the feasibility study report examined and approved by the entity, which has the power of examination and approval, and the report forms of cost measured and filled in the light of the requirements of the competent price department and the prescribed format thereof, shall be provided.

Article 15

The preliminary examination on the cost documents, which are submitted by operators, shall be made by the cost investigation organization . If the contents of the cost documents are not complete, the operators shall be required to make up the relevant documents.

Article 16

If the cost documents submitted by the operator have been passed the preliminary examination, according to Article 12 of these Measures, the relevant measures for the supervision and examination of price costs of the goods or services and other relevant provisions, the cost investigation organization shall, make examination on the costs of the operator. The operator shall be notified in a written form in time by the cost investigation organization, which contents the opinions and reasons for increasing or cutting down the cost to the operator. If the operator has different opinions on increasing or cutting down of the verified cost, opinions and reasons may be brought forward in a written form to the cost investigation organization. After completing the cost examination work of the individual operators, the cost investigation organization shall fill in the cost verification forms of the operators according to the cost data finally verified.

Article 17

After completing the cost examination work for each project, the cost investigation organization shall make business accounting on the price costs of all the operators supervised and examined in accordance with the cost verification forms, and a report on cost examination shall be handed in to the competent price department. The report on cost supervision and examination shall be included the contents as follows:

1.

Projects of cost supervision and examination;

2.

Basis for cost supervision and examination;

3.

Procedures for cost supervision and examination;

4.

Major contents of cost supervision and examination;

5.

Conditions of cost increase and decrease and the reasons thereof;

6.

Cost verification form;

7.

Price costs; and

8.

Other matters need to be specified.

The report of cost supervision and examination shall be signed and sealed by the personnel who has participated in the cost examination, and shall be affixed with the official seal of the cost investigation organization or the special seal of the cost supervision and examination.

Article 18

If the government of the competent price department breaks these Measures, and formulates the prices of the goods and services, which are listed into the catalogue of cost supervision and examination without going through cost supervision and examination, the competent price department in the higher level or the people's government in the corresponding level shall order it to correct and if the circumstance is serious, a notice of criticism shall be circulated. If the big impact has been made, the governor who is directly responsible and other personnel directly liable shall be given a disciplinary sanction in accordance with law or submitted to the relevant department for disciplinary sanction.

Article 19

If the staff member, who is taken the charge of the work of cost supervision and examination, has relationship of interest with the operator, he or she shall evite when examining the cost of the operator. The cost investigation organization and the staff members may not use the cost documents of the operators that they have obtained according to the law for any other purpose beyond cost supervision and examination, and shall not disclose the business secrets of the operators.

Article 20

In their cost examination work, if the staff members who take the charge of the work of cost supervision and examination disclose state secrets, or business secrets, or abuse their power, practice favoritism for selfish interests, neglect their duty, extort or take bribes, and enough to constitute a crime, criminal responsibility shall be investigated in accordance with the law; if it does not constitute a crime, a disciplinary sanction shall be given.

Article 21

If the operator breaks the provisions of Article 13 of these Measures or fails to hand in the cost documents as the provisions of Article 14 of these Measures, the government of the competent price department shall order to correct in time, and a notice of criticism shall be circulated. If an operator provides the cost documents less contents than those prescribed in Article 14 and can not submit the supplement documents according to the requirements of the cost investigation organization, or provides false cost documents, the cost investigation organization shall not provide cost supervision and examination or shall suspend the current cost supervision and examination.

Article 22

The expenses for the cost supervision and examination may be applied to list into the financial budget of the corresponding level.

Article 23

When formulating the charge standards of the administrative organs of the state, the government of the competent price department shall conduct cost supervision and examination according to these Measures.

Article 24

When other relevant departments formulate prices, these Measures shall be referred to as the cost supervision and examination are made.

Article 25

The rules may be formulated by the governments of the competent price departments of the people's governments of all the provinces, autonomous regions, and municipalities directly under the Central Government according to these Measures.

Article 26

The National Development and Reform Commission have the right of interpreting these Measures.

Article 27

These Measures shall enter into effect as of the day of March 1, 2006, the Interim Measures for the Supervision and Examination on the Price Costs of Major Goods and Services promulgated by the National Development and Planning Commission on November 1, 2002 shall be annulled therefore.