Laws of the People's Republic of China

    Article 1  These Measures are formulated for the purpose of supporting
the production and business activities of enterprises with foreign investment,
expanding the economic and technological co-operation with foreign countries,
and facilitating and promoting the development of national economy.

    Article 2  The Bank of China shall, in accordance with the State policies
and on the basis of the principles of ensuring safety and benefit and providing
services, grant loans to enterprises with foreign investment that need funds
for their construction projects and production and business operations, with
the priority to those product-for-export enterprises and advanced technology
enterprises which enjoy good economic returns.

    Article 3  Enterprises with foreign investment, i.e. Chinese-foreign
equity joint ventures and Chinese-foreign contractual joint ventures, and
foreign-capital enterprises (hereinafter referred to as "enterprises") that
qualify for obtaining loans as prescribed in Article 7 of these Measures may
apply to the Bank of China for loans.

    Article 4  The Bank of China must, when providing loans, sign a loan
agreement with the borrower and strengthen the management of its loans.

    Article 5  The Bank of China shall grant the following loans to the
enterprises:

    1. Fixed assets loans to be used for covering the expenses for the
construction, the purchase of technology and equipment, and the installation
of the equipment incurred by capital construction projects and technical
innovation projects. The loans shall be divided into the following forms:

    (1) medium and short-term loans;

    (2) buyer's credit;

    (3) syndicate loans;

    (4) project loans.

    2. Working capital loans to be used as funds needed in the enterprises'
production and circulation of commodities and in their normal business
operations. The loan shall be devided into the following forms:

    (1) production reserves and operating loans;

    (2) incidental loans;

    (3) current deposit overdraft.

    3. Loans on spot exchange mortgage to be granted by the Bank of China in
accordance with the provisions of the Interim Measures Concerning the Renminbi
with Foreign Investment promulgated by the People's Bank of China.

    4. Stand-by loans to be granted by the Bank of China upon examination
and approval of the application submitted by an enterprise, and be put by and
used for future special purposes as specified in the application.

    Article 6  The currencies in respect of loans shall be divided into
domestic currency and foreign currencies. The domestic currency refers to
Renminbi and foreign currencies shall include U.S. Dollars, British Sterling
Pounds, Japanese Yens, Hong Kong Dollars, Federal German Marks, and other
convertible currencies accepted by the Bank of China.

    Article 7  Any enterprise with foreign investment that applies for loans
shall satisfy the following precondition:

    1. The applying enterprise has obtained a business licence issued by a
Chinese administrative department for industry and commerce and has opened
an account with the Bank of China.

    2. The registered capital of the applying enterprise has been fully paid
in within the prescribed period of time and has been increased in accordance
with the law.

    3. The board of directors of the applying enterprise has made the decision
on the borrowing and has issued the letter of authorization.

    4. The programme of investment in fixed assets of the applying enterprise
has been approved by a planning department.

    5. The applying enterprise has the ability to repay the loan and has
provided the reliable guarantee for repaying the principal and interest.

    Article 8  The term of a loan shall commence from the day on which the
loan contract goes into effect and terminate on the day on which the
principal, the interest, and all other relevant fees have been paid in full
as stipulated by the contract.

    Article 9  The term for a fixed assets loan shall not exceed 7 years. The
term of a loan for a particular project of a special type may, subject to the
approval of the Bank of China, be properly extended, but such extension shall
not exceed the time which is one year prior to the termination of business of
the enterprise as prescribed by the business licence of the enterprise.

    Article 10  The term of a working capital loan shall not exceed 12 months.

    Article 11  The interest rates of loans in Renminbi shall be calculated
in accordance with the interest rates of loans granted to State-owned
enterprises as determined by the People's Bank of China.

    The interest rates of loans in foreign currencies shall be calculated in
accordance with the integrated interest rates set by the Head Office of the
Bank of China; it may also be determined through consultation between the
lender and the borrower in the light of the interest rates in the
international market. The interest rates with respect to foreign buyer's
credit and other credits shall be determined on the basis of the agreed rates
plus a certain margin.

    Article 12  The period and method for calculating interest with respect
to loans in Renminbi shall be those prescribed by the People's Bank of China;
the period and method for calculating interest with respect to loans in
foreign currencies shall be those perscribed in loan contracts.

    Article 13  Any enterprise that applies to the Bank of China for a loan
shall go through the following procedures:

    1. The enterprise shall submit an application, together with the
corresponding certifications and materials in the light of the specific
details of the requirement for the loan;

    2. The Bank of China shall examine and assess the application and the
certifications and materials submitted, and upon verification and approval,
the lender and the borrower shall sign a loan contract through negotiation.

    Article 14  The enterprise shall use the loan in accordance with the
schedule, amount and scope for use as stipulated in the loan contract.

    Article 15  In case where the Bank of China deems it necessary for the
enterprise applying for loans to provide a guarantee, the enterprise must
provide one that is acceptable to the Bank.

    Article 16  The enterprise may submit to the Bank of China the following
guarantees:

    1. Credit guarantee. The enterprise may submit to the Bank of China an
irrevocable letter of guarantee for the repayment of the principal and interest
of the loan issued by a financial institution, or an enterprise, or any
other unit that enjoys creditworthiness and has the capability to repay the
debt.

    2. Mortgage guarantee. The enterprise may mortgage its property and
rights and interests to the Bank of China as guarantee for the repayment of
the principal and interest the loan granted by the Bank of China. The
following items may be mortgaged:

    (1) building property, machinery and equipment;

    (2) marketable goods in stock;

    (3) deposits or deposit certificates in foreign currencies;

    (4) negotiable securities and instruments;

    (5) stock equities or other transferable rights and interests.

    Article 17  An enterprise that is to obtain a loan secured by mortgage
shall sign a mortgage document with the Bank of China, which shall be
notarized by a Chinese notary office. The collateral security shall be insured
with the People's Insurance Company of China in its full value. The
enterprise shall provide both credit guarantee and mortgage guarantee when
the Bank of China deems it necessary.

    Article 18  The enterprise shall, in accordance with the loan contract,
repay the loan and pay the interest and other relevant fees in full and on
schedule.

    Article 19  The after-tax net cash income of the enterprise shall first
be used to repay the fixed assets loan.

    Article 20  With respect to an enterprise that fails to comply with the
provisions of the loan contract, the Bank of China shall have the right to
adopt the following measures to safeguard its rights and interests in
accordance with the loan contract and in the light of the seriousness of the
breach:

    1. setting a deadline for the rectification of the breach;

    2. suspending the loan;

    3. recalling the loan ahead of schedule;

    4. notifying the guarantor to perform its guarantee responsibility.

    Article 21  If the enterprise fails to repay the principal of the loan
and pay the interest, in the case of a loan in credit guarantee, the guarantor
enterprise (or unit) shall be liable for repaying the defaulted principal of
the loan and paying the defaulted interest and relevant fees thereon and, in
the case of a loan on mortgage guarantee, the Bank of China shall, in
accordance with the provisions of the law, have the right and priority to
have the principal of the loan repaid and have the defaulted interest and
other fees thereon paid with the collateral security duly commuted or with
the money derived from selling the collateral security.

    With respect to a loan which the enterprise fails to repay on schedule,
the Bank of China shall impose as a penalty an additional interest at a rate
ranging from 20 percent to 50 percent above its original rate starting from
the day repayment is overdue.

    Article 22  The Bank of China shall have the right to examine the
situation as to how the enterprise is using the loan. The enterprise shall
periodically report to the Bank of China the progress of the construction of
the project concerned, the plans for its production, sales and finance, and
submit the statements and materials of implementation thereof until the loan
is fully repaid. If the owner of the enterprise is represented by another
legal person, the owner shall, when the Bank of China deems it necessary,
submit to the Bank of China its annual financial statement.

    When the Bank of China is conducting inspection of credit, the enterprise
shall report the actual situation and provide convenience for the work.

    Article 23  Before the Joan is fully repaid, the enterprise shall, unless
otherwise approved by the Bank of China, handle all the financial matters
in its business operations through the account it has opened with the Bank
of China and may not transfer its funds to other banks or financial
institutions without authorization. When the Bank of China deems it necessary,
it shall have the right to require the enterprise to open a custody account.

    Article 24  The enterprise shall notify in due time the Bank of China
of any major resolutions or decisions made by its board of directors or by
its owner on financial affairs as well as of any change of personnel in the
board. The enterprise shall solicit the opinions of the Bank of China in
advance with respect to any major amendments and supplements to its joint
venture contract or cooperative contract and its articles of association,
if such amendments and supplements will affect the creditor's rights of the
Bank of China.

    Article 25  Unless otherwise approved by the Bank of China, the valid
language used in the legal documents such as the loan contract signed by the
enterprise and the Bank of China and the annexes thereto shall be the Chinese
language and the applicable law shall be the law of the People's Republic
of China.

    Article 26  The rules for the implementation of these Measures shall be
formulated by the Head Office of the Bank of China. The Bank of China in a
special economic zone may, in the light of its actual business situation,
draw up detailed rules for the implementation thereof, which shall be
submitted to the Head Office of the Bank of China for approval before they
are enforced.

    Article 27  These Measures shall go into effect as of the date of
promulgation. The Interim Measures of the Bank of China for Granting Loans to
Chinese-Foreign Equity Joint Ventures approved by the State Council and
promulgated by the Bank of China on March 3, 1981 shall be simultaneously
annulled.

    With respect to the loan contracts signed by the Bank of China and
enterprises before the entry into force of these Measures, such loan contracts
shall continue to be valid.