Laws of the People's Republic of China

The Ministry of Foreign Trade and Economic Cooperation, the Ministry of Science and Technology, the State Administration for Industry and Commerce, the State Administration of Taxation, the State Administration of Foreign Exchange

Decree of the Ministry of Foreign Trade and Economic Cooperation, the Ministry of Science and Technology, the State Administration for Industry and Commerce, the State Administration of Taxation and the State Administration of Foreign Exchange

No.2

The Provisions Concerning the Administration of Foreign-funded Business-starting Investment Enterprises were adopted at the 11th ministerial meeting of the Ministry of Foreign Trade and Economic Cooperation. It is hereby promulgated and shall be implemented as of March 1, 2003.

Minister of the Ministry of Foreign Trade and Economic Cooperation Shi Guangsheng

Minister of the Ministry of Science and Technology Xu Guanhua

Director general of the State Administration for Industry and Commerce Wang Zongfu

Director general of the State Administration of Taxation Jin Renqing

Director general of the State Administration of Foreign Exchange Guo Shuqing

January 30, 2003

Provisions Concerning the Administration of Foreign-funded Business-starting Investment Enterprises

Chapter I General Provisions

Article 1

The present Provisions are formulated to encourage foreign-funded companies, enterprises and other economic organizations or individuals (hereinafter referred to as foreign investors) to come to China to engage in business-starting investments, and to establish and perfect the mechanism of business-starting investments in China in accordance with the Law of the People's Republic of China on Chinese-foreign Contractual Joint Ventures, the Law of the People's Republic of China on Chinese-foreign Equity Joint Ventures, the Law of the People's Republic of China on Foreign-capital Enterprises, the Company Law of the People's Republic of China and other related laws and regulations.

Article 2

The term "foreign-funded business-starting investment enterprise " (hereinafter referred to as FBIE" refers to the foreign-funded investment enterprises established by foreign investors or by foreign investors jointly with companies, enterprises or other economic organizations established and registered in China in accordance with the Chinese law (hereinafter referred to as Chinese investors). To establish an FBIE shall be in conformity with the present Provisions. It shall mainly engage in business-starting investments.

Article 3

The term "business-starting investment" means making principal equity investments to high and new tech enterprises that haven't been listed in the stock market (hereinafter referred to as invested enterprises), and providing management services to them for the prospective capital gains.

Article 4

An FBIE is allowed to take the form of the non-legal-person organization or the corporate organization.

As to a non-legal-person organization, the investors shall bear joint liabilities for its debts. The investors may also specify in the contract of the FBIE that: When the assets of an FBIE are not enough to clear the debts of this enterprise, the indispensable investors as stated in Article 7 shall bear joint liabilities and the other investors shall bear the liabilities to the company within the limit of contributions made by each of them.

For a corporate-form FBIE, the investors shall bear the liabilities to the company within the limit of the amount of investment made by each of them.

Article 5

The FBIEs shall abide by relevant laws and regulations of China, shall be in conformity with the policies of foreign investment industries and shall not damage the public interests of China. The legitimate businesses and lawful rights and interests of the FBIE within the borders of China shall be subject to the protection of Chinese law.

Chapter II Establishment and Registration

Article 6

To establish an FBIE, the following requirements shall be met:

(1)

There are more than 2 but less than 50 investors, and at least one shall be an indispensable investor as stated in Article 7 ;

(2)

The investors of a non-legal-person organization shall subscribe to a minimum total contribution in the sum of 10, 000, 000 U.S. $. The investors of an incorporated FBIE shall subscribe to a minimum total capital in the sum of 5, 000, 000 U.S. $. Except for the indispensable investors as provided in Article 7 , each of the other investors shall subscribe to a minimum capital contribution no less than 1, 000, 000 yuan. Foreign investors may contribute their investments in convertible currencies and Chinese investors may contribute their investments in Renminbi.

(3)

It shall have definite organization form;

(4)

It shall have a definite and legitimate investment direction;

(5)

Except that the operations of such an enterprise are subject to the management of a business-starting investment management company under authorization, an FBIE shall have at least 3 professional managerial persons who have practical experience in business-starting investment;

(6)

It shall meet the other requirements as provided in laws and administrative regulations.

Article 7

An indispensable investor shall meet the following requirements:

(1)

Business-starting investment is its main business;

(2)

The accumulative total capital managed by it in the three years before the application is not less than 100, 000, 000 U.S. dollars, and of which no less than 50, 000, 000 U.S. dollars have been used in business-starting investment If the indispensable investor is a Chinese investor, the accumulative total capital managed thereby in the three years before the application is submitted is not less than 100, 000, 000 Yuan, and of which no less than 50, 000, 000 yuan have been used in business-starting investment;

(3)

It shall have at least 3 professional managerial persons who have practical experience in business-starting investment;

(4)

If the affiliated entity of an investor meets the above-mentioned requirements, the investor may apply for the status of an indispensable investor. The term "affiliated entity" in this paragraph refers to an entity controlled by the investor, or an entity that controls the investor, or another entity that subject to the control of the same entity that controls the investor. The term "control" in this paragraph means that the controlling party has a voting power of more than 50 % over the controlled party.

(5)

Neither the above-mentioned indispensable investor nor its affiliated entity shall have any record of being prohibited from engaging in business-starting investment or business of investment consultancy, or being punished for the reason of cheat, by the judicial departments and other relevant agencies of the country where it is located;

(6)

An indispensable investor of a non-legal-person enterprise shall subscribe to and actually pay not less than 1 % of the subscribed contributions and the actual total contributions respectively, and it shall bear joint liabilities for the debts of this enterprise. An indispensable investor of an incorporated FBIE shall subscribe to and actually pay not less than 30% of the subscribed contributions and the actual total contributions respectively.

Article 8

The following procedures shall be observed in the establishment of an FBIE:

(1)

The investors shall submit the establishment application and relevant documents to the administrative departments in charge of foreign trade and economic cooperation at the provincial level of the place where the FBIE is to be established.

(2)

The administrative departments in charge of foreign trade and economic cooperation at the provincial level shall complete the original examination and report to the Ministry of Foreign Trade and Economic Cooperation (hereinafter referred to as the MOFTEC) within 15 days as of the acceptance of the above-mentioned materials.

(3)

The MOFTEC shall, with the consent of the Ministry of Science & Technology£¬make a written decision on approval or disapproval within 45 days as of the acceptance of all the above-mentioned materials. And it shall issue a Certificate of Approval for Foreign-invested Enterprises to the approved enterprises.

(4)

With the approved of establishing an FBIE, the applicant shall file an application for registration at the State Administration of Industry and Commerce or at local bureaus with its authorization by presenting the Certificate of Approval for Foreign-invested Enterprise within one month as of the acceptance of the Certificate of Approval for Foreign-invested Enterprise.

Article 9

The following documents shall be submitted to the MOFTEC when applying for the establishment of an FBIE:

(1)

an establishment application signed by the indispensable investors;

(2)

contracts and articles of association of the FBIE signed by all the investors;

(3)

a written declaration made by the indispensable investors (covering: a. the investors meet the requirements as provided in Article 7 ; b. all the materials submitted are genuine; and c. the investors will strictly abide by the present provisions and other relevant Chinese laws and regulations);

(4)

a letter of legal advice issued by a law firm affirms that the legal indispensable investors exist and the above-mentioned declaration has got valid authorization and has been signed;

(5)

explanations of the business-starting operations of the foreign investors, explanations of the capital managed by them of the three years before the application is submitted, explanations of the investment made among the capital managed by them of the three years before the application is submitted, resumes of its professional managerial persons of business-starting investment;

(6)

the registration certificate of the investors (photocopy) and the certificate of the legal representative (photocopy);

(7)

the notice of pre-approval of the name of the FBIE issued by the name registration organ;

(8)

If the qualifications of the indispensable investors are based on the requirements as provided in paragraph (4) of Article 7 , they shall submit relevant materials of the affiliated entity that meets the requirements;

(9)

other documents related to the establishment application as required by the examination and approval authority.

Article 10

The FBIEs shall give a clear indication of "Business-starting Investment" in its name. Except for business-starting investment enterprises, none of the other foreign investment enterprises may use the aforesaid words in their name.

Article 11

In applying for establishing an FBIE, the following documents shall be submitted to the registration organ and shall be responsible for their authenticity and effectiveness:

(1)

registration application signed by the chairman of the board of directors or by the person-in-charge of the joint management committee;

(2)

contracts, articles of association, the documents and certificate of approval issued by the approving authorities;

(3)

legal license to do business or the certification of the ID of the investor;

(4)

credit certification of the investor;

(5)

appointment documents and the certification of the ID of the legal representative and archival documents of the directors and managers of this enterprise;

(6)

notice of pre-approval of its name;

(7)

the certification of the address of the enterprise and the certification of its business offices.

In the case of applying for establishing a non-legal-person organization, the applicant shall submit the articles or agreement of overseas indispensable investors besides the aforesaid materials. Where an enterprise includes investors as provided in Article 7 (4) of the present Provisions, the applicant shall submit the letter of undertaking issued by its affiliated entity, which is to bear the joint liabilities of investments. All of the aforesaid documents should be written in Chinese. Those written in foreign languages other than Chinese shall be accompanied by good Chinese translations.

An FBIE should apply to the original registration organ for the modification registration of its modified registration matters.

Article 12

Upon the approval of the registration organ, the incorporated FBIEs shall be issued the business license of legal entity, and the non-legal-person FBIEs shall be issued a business license.

A business license shall clearly states the total registered capital of the investors and the names of the dispensable investors.

Chapter III Capital Contributions and Relevant Modifications

Article 13

The capital contributions made by the investors of a business-starting enterprise without qualifications of legal entity and the relevant modifications shall be in conformity with the following:

(1)

The investors may pay the their subscribed capital by installments according to the proceedings of the business-starting investment, but the longest term shall be no more than 5 years. The amount of capital to be invested at each stage shall be decided by the FBIE itself according to the contract of the enterprise and the agreement concluded by it and its invested enterprise. In the contract, the investors shall stipulate liabilities of the investors who do not pay the subscribed capital contributions and relevant measures.

(2)

During the period of the continuous existence of the FBIE, the investors generally shall not reduce their subscribed amount of capital. Upon approval of the examination and approval organ, an investor may reduce its subscribed amount of capital if the said amount exceeds 50 % of the total provided that it has obtained the consent of the indispensable investors and the business-starting FBIE isn't in violation of the requirement of minimum registered capital of 1, 000, 000 U.S. $ (The present provision shall not be applicable to a case where an investor reduces its invested amount of capital in accordance with item (5) of this Article or the FBIE reduces the untapped capital when its term of investment expires). In this case, the investors shall stipulate the conditions, procedure and methods for reducing the subscribed amount of capital in the contract of the FBIE;

(3)

Indispensable investors shall not withdraw from the FBIE during the period of its continuous existence. A necessary withdrawal under a special circumstance shall be upon the consent of the investor whose investment amount exceeds 50% of the total amount, and the relevant rights and interests shall be assigned to the new investor who satisfies the conditions as provided in Article 7 . The contract and the articles of association of this enterprise shall be modified and shall be reported to the check and approving authority for approval.

The transference of the other investors' subscribed amount of capital or invested amount of capital shall be done in compliance with the contract of the FBIE and the assignee shall meet the requirements as provided in Article 6 . All investors shall make relevant modifications in the contract and the articles of association of the FBIE and report to the examination and approval organ for archival purposes.

(4)

After an FBIE has been established, the investment application of new investors shall be in conformity with the present Provisions and the stipulations in the contract, and shall be consented by the indispensable investors. Relevant modifications shall be made in the contract and the articles of association of the FBIE and shall be reported to the examination and approval organ for archival purposes.

(5)

Among the incomes of an FBIE arising from selling or disposing of the interests of its invested enterprise by other means, the part equivalent to its original amount of investment may be directly allocated to all the investors. Such allocation constitutes a reduction of the invested amount of the investors. An FBIE shall stipulate concrete methods of allocation in its contract, and at least 30 days before it makes such allocation, it shall submit an archival statement on the request of reducing the relevant invested amount of the investors. In the said statement, it shall prove that the amount of the investments to be made by the investors and the other capital it has at that time is at least in conformity with the investment obligations that the FBIE shall undertake at that time. However, such allocation shall not be a plea to the litigation resulted from its violation of any of the investment obligations.

Article 14

When a non-legal-person organization files an application to the registration authority for modifying its registration, the archival evidential documents issued by the above-mentioned examination and approval organ may replace relevant documents for examination and approval.

Article 15

Having made investments according to the proceedings of business-starting investments and upon relevant capital verification report, the investors of the FBIE shall file an application to the original registration organ for handling the archival procedures for their investments. The registration organ shall fill up the number of its actual amount of capital behind the item of "Capital Amount" on its Business License.

Where an FBIE makes no investment or fails to make the total investment, it shall be subject to penalties imposed by the registration organ in accordance with the existing regulations.

Article 16

The investors of an FBIE shall make investments and relevant modifications in accordance with the existing regulations.

Chapter IV Institutional Structure

Article 17

An FBIE in the form of non-legal-person organization shall establish a joint management committee. An FBIE in the form of company shall establish a board of directors. The investors shall stipulate on how to organize the joint management committee or the board of directors in the contract and in the articles of association of the FBIE. The joint management committee and the board of directors shall manage the enterprise on behalf of its investors.

Article 18

The subordinate administrative departments of the joint management committee and the board of directors shall, in accordance with the power as specified in the contract and the articles of association of the FBIE, take charge of the routine managerial work and execute the investment decisions made by the joint management committee and the board of directors.

Article 19

The person-in-charge of an administrative department shall satisfy the following conditions:

(1)

shall have full capacity for civil conduct;

(2)

shall have no record of criminal offence;

(3)

shall have no record of bad operations;

(4)

shall be experienced in business-starting investments and have no record of illegal practices.

(5)

shall meet the other requirements of the examination and approval organ.

Article 20

The administrative departments shall regularly report the following to the joint management committee and the board of directors:

(1)

significant investments under authorization;

(2)

metaphase & annual performance reports and financial statements;

(3)

other matters as provided in laws and regulations;

(4)

relevant matters as stipulated in the contract and in the articles of association of the FBIE.

Article 21

The joint management committee and the board of directors may grant the power of routine administration to a business-investment management enterprise or another FBIE rather than establish administrative departments. The business-investment management enterprise may be a domestically-funded business-starting investment enterprise or a foreign-funded one or an overseas enterprise. In this case, the business-starting investment enterprise and the business-starting investment management enterprise shall conclude a managerial contract, stipulating respective rights and interests. Such a contract shall not come into effect until it has been agreed by all the investors and has been approved by the examination and approval organ.

Article 22

The investors of an FBIE may, by reference to the international practices, stipulate interior system for income allocations and incentive mechanism in the business-starting investment contract.

Chapter V Business-Starting Investment Management Enterprise

Article 23

An entrusted business-starting investment management enterprise shall meet the following conditions:

(1)

To accept the entrustment of the FBIEs and to manage the investments made by them shall be its main business;

(2)

It shall have at least 3 professional managerial persons who have at least three years of practical experience in business-starting investment;

(3)

Its registered capital or its total investments shall not be less than 1, 000, 000 yuan or equivalent foreign exchange;

(4)

It shall have a perfect interior control system.

Article 24

A business-starting investment management enterprise is allowed to take the form of the corporate organization or the partnership organization.

Article 25

A business-starting investment management enterprise may be entrusted to manage different FBIEs.

Article 26

A business-starting investment management enterprise shall report the matters as listed in Article 20 to the joint management committee and the board of directors of the entrusting party.

Article 27

The establishment of a foreign-funded business-starting investment management enterprise shall be in conformity with the conditions as provided in Article 23 and shall be reported to the examination and approval organ for approval via the administrative departments of foreign trade and economic cooperation at the provincial level where the company to be established is located. The examination and approval organ shall make a written decision on whether to approve or not within 45 days as of the acceptance of the complete set of the above-mentioned documents. It shall issue a Certificate of Approval for Foreign-invested Enterprises to the approved enterprises, which shall file an application to the registration organ by holding the Certificate within a month as of their acceptance of the Certificate.

Article 28

The following documents shall be submitted to the examination and approval organ in applying for the establishment of a foreign-invested business-starting investment management company:

(1)

establishment application;

(2)

contract and articles of association of foreign-funded business-starting investment management company;

(3)

the investors' registration certificate (photocopy) and the certificate of the legal representative (photocopy);

(4)

relevant documents required by the examination and approval organ;

Article 29

A foreign-invested business-starting investment management enterprise shall give a clear indication of "INVESTMENT MANAGEMENT" in its name. Except for the foreign-invested business-starting investment management enterprises any other foreign-funded enterprises shall not do so.

Article 30

An overseas business-starting investment management enterprise, which has acquired the approval of engaging in business-starting investment management under the authorization of FBIEs, shall file an application to the registration organ to handle the business registration procedures within 30 days as of the approval day of the management contract.

An applicant shall submit the following documents to the business registration organ and shall be responsible for their authenticity and effectiveness:

(1)

an application for registration signed by the chairman of the board of directors of the overseas business-starting investment management enterprise, or by a competent person;

(2)

a management contract and the approval documents of the examination and approval organ;

(3)

articles of association or partnership agreement of the overseas business-starting investment management enterprise;

(4)

the overseas business-starting investment management enterprise' legal license to do business;

(5)

the credit certification of the overseas business-starting investment management enterprise;

(6)

the power of attorney, resume and the certification of the identification of the person-in-charge of the Chinese project appointed by the overseas business-starting investment management enterprise;

(7)

the certification of its business offices in China; All of the aforesaid documents should be written in Chinese, those written in foreign languages other than Chinese shall be accompanied by good Chinese translations

Chapter VI Business Management

Article 31

An FBIE may engage in the following businesses:

(1)

It may make equity investments with all of its own capital through establishing new enterprises, or investing into an established enterprise, or accepting the stock equities transferred by the investors of an established enterprise, or through other means as permitted in the laws and regulations of the state;

(2)

It may offer business-starting investment consultancy services;

(3)

It may offer management consultancy to the invested enterprises;

(4)

It may engage in other businesses as approved by the examination and approval organ. The capital of an FBIE may be largely used to make equity investments into its invested enterprise.

Article 32

A business-starting enterprise shall not engage in the following activities:

(1)

It shall not make investments into the areas in which foreign investments are prohibited by the state;

(2)

It shall not make direct or indirect investments into the listed securities and bonds of an enterprise, but after the invested enterprise is listed, the shares held by the FBIE shall be an exception.

(3)

It shall not make direct or indirect investments into real property not for its own use;

(4)

It shall not make investments by way of loans;

(5)

It shall not make investments by embezzling the capital not in its ownership;

(6)

It shall not provide a loan or guaranty to others, but the bonds with a term of more than 1 year issued by its invested enterprise and the investments in the nature of bonds that may be converted into equity investments to the invested enterprise shall be excluded (this paragraph doesn't concern whether the invested enterprise is entitled to issue such bonds or not);

(7)

It shall not engage in other activities as prohibited in the law and regulations and the contract of the FBIE.

Article 33

The investors shall stipulate a term for foreign investments in the contract of the FBIE.

Article 34

The incomes of an FBIE shall be generated largely from selling the stock equities it holds in the invested enterprise or from disposing of the stock equities by other means. When an FBIE sell the stock equities it holds in the invested enterprise or dispose of the stock equities by other means, it may, in accordance with the law, choose one of the following available methods of withdrawing:

(1)

It may transfer part of or all of the stock equities it holds to other investors;

(2)

It may sign an agreement of stock equity counter-purchase with the invested enterprise, which may counter-purchase the stock equities held by the business-starting investment enterprise under certain circumstances;

(3)

Where the invested enterprise satisfies the conditions of listing as provided by laws and administrative regulations, it may apply for listing in the securities markets of home and abroad. In accordance with the law, the FBIE may transfer the shares it holds in the invested enterprise through the securities markets;

(4)

The other methods that are allowed by the laws and administrative regulations of China. The concrete regulatory measures concerning the invested enterprise' counter-purchase of the stock equities held by the FBIE shall be separately formulated by the examination organ jointly with the registration organ.

Article 35

An FBIE shall make tax declaration in accordance with the tax laws of the state. As to a non-legal-person organization, in accordance with the law, it may request all the investing parties to file returns for enterprise income taxes on their own, or file an application by itself, after the application has been approved, it shall, in accordance with the law, calculate and pay the enterprise income tax in a consolidated way.

The concrete regulatory measures concerning the levy of enterprise income tax upon the non-legal-person FBIEs shall be promulgated separately by the State Administration of Taxation.

Article 36

Where the profit or other income obtained by a foreign investor from an FBIE is to be remitted abroad, it shall be paid from the foreign currency account of the FBIE, or shall be remitted through an entrusted bank with the foreign currencies purchased from the bank. Such payment or remittance shall be made on the basis of the allocation decision made by the joint management committee or the board of directors, the audit report issued by an accountant office, the certification of inflow of foreign investments and the report on the verification of capital, the certification of tax payment and the tax return (where an enterprise enjoys tax concession, it shall present the evidential documents of tax concession issued by the tax authorities).

In accordance with the law, a foreign investor may request to purchase foreign currencies to remit the investments withdrawn from the FBIE. As to an FBIE in the form of company, the opening and access of foreign currency account, changes of capital and other matters involving the incomes and expenses of foreign currencies shall be handled pursuant to the existing regulations concerning the administration of foreign exchange. But relevant regulations on the non-legal-person FBIEs shall be formulated separately by the State Administration of Foreign Exchange.

Article 37

The investors shall stipulate the business term of the FBIE in the contract and in the articles of association, generally speaking, the term shall not exceeds 12 years. When the business term expires, it may be extended upon the approval of the examination and approval organ.

Upon the approval of the examination and approval organ, an FBIE may be dissolved, terminate the contract and the articles of association ahead of the schedule. However, if a non-legal-person organization has sold out all the investments or sold them off by other means, have paid off all its debts and have allocated all the residual properties to the investors, it may, without being subject to approval, enter into the dissolving and terminating procedure, but it shall submit a written explanation for archival purposes to the examination and approval organ at least 30 days before the dissolve comes into effect.

Where an FBIE is to be dissolved, it shall liquidate in compliance with pertinent regulations.

Article 38

An FBIE shall file an application to the original registration organ for deregistration within 30 days as of the completeness of the liquidation.

It shall submit the following documents in applying for the cancellation and it shall be responsible for their authenticity and effectiveness:

(1)

an application for deregistration signed by the chairman of the board of directors, or by the person-in-charge of the joint management committee, or by the person-in-charge of the liquidation organ;

(2)

decision made by the board of directors or the joint management committee;

(3)

liquidation report;

(4)

certifications for the cancellation of registration issued by tax authorities and the custom;

(5)

the approving documents or archival documents of the examination and approval organ;

(6)

other documents as required in the laws and administrative regulations. Where an application for deregistration has been approved by the registration organ, the FBIE terminates. The joint liabilities of the indispensable investors of a non-legal-person organization shall not be immune for the termination of the enterprise.

Chapter VII Examination and Supervision

Article 39

The domestic investments of an FBIE shall be made by referring to Rules for Guiding Foreign Investments and the Guiding Catalogue of Industries for Foreign Investments.

Article 40

Where an FBIE invests in any of the encouraged and approved enterprises, it shall go through archival procedures at the entrusted departments of foreign trade and economic cooperation where the invested enterprise is located. Within 15 days as of the acceptance of the archival materials, the said entrusted departments shall complete the examination and issue a Certificate of Approval for Foreign-invested Enterprise to the invested enterprise, which shall file an application for registration to the registration organ upon the Certificate. The registration organ shall decide whether to approve the registration or not in accordance with relevant laws and administrative regulations, and it shall issue a Business License of Foreign Invested Corporate Enterprise to the approved enterprises.

Article 41

Where an FBIE invests in any of the restricted enterprises, it shall file an application to the provincial authorities of foreign trade and economic cooperation where the restricted enterprise is located, and it shall offer the following materials:

(1)

its statement on having sufficient investment funds;

(2)

its approval certificate and business license (copies);

(3)

the contract and the articles of association of the invested enterprise signed by the FBIE (and the other investors of the invested enterprise).

Within 45 days as of the acceptance of the above-mentioned materials, the provincial authorities of foreign trade and economic cooperation shall make a written reply of approval or disapproval to the applicant, to whom it shall issue a Certificate of Approval for Foreign-invested Enterprise. The invested enterprise shall file an application to the registration organ for registration upon the approving documents and the Certificate. The registration organ shall decide whether to approve the registration or not. It shall issue a Business License of Foreign Invested Corporate Enterprise to the approved enterprises.

Article 42

Where an FBIE invests into the projects in the area of service trade that is open to the foreign investors gradually, it shall be subject to the examination and approval in compliance with pertinent regulations of the state.

Article 43

To increase or transfer any of its investment into the invested enterprise, an FIBE shall go through the procedures in accordance with Articles 40, 41 and 42.

Article 44

An FBIE shall report to the examination and approval organ for archival purposes as of the completeness of the procedures of Articles 40 through 43.

Article 45

Moreover, in March every year, an FBIE shall report the information of fund collection and utilization in the previous year to the examination and approval organ for archival purposes.

Within 5 days as of the acceptance of the archival materials, the examination and approval organ shall issue a certification of archival registration, which shall be one of the requisite materials for an FBIE to accept annual joint examination. Where an enterprise that fails to follow the above-mentioned procedures, it shall be subject to the relevant punishment by the examination organ after discussing with the pertinent department of the State Council.

Article 46

In the registered capital of the enterprise invested by an FBIE, if the proportion of the actual contributions paid in by a foreign investor or the proportion of the total contributions paid in by the foreign investors in the proportion of the FBIE is not less than 25%, the invested enterprise is entitled to enjoy relevant preferential treatments granted to foreign-invested enterprises. If the said proportion is less than 25 %, the invested enterprise shall not enjoy relevant preferential treatments granted to foreign-invested enterprises.

Article 47

Where an already established domestically-funded enterprise with domestic investor (s) of natural person may continue to keep their status of shareholder(s) after this enterprise has accepted the investments of an FBIE and has changed into a foreign-invested enterprise.

Article 48

Where the person-in-charge of the administrative department of a business-starting investment enterprise or the person-in-charge of the investment management enterprise has illegal practices, he shall be held responsible. If the circumstances are serious, the FIBE shall not continue to engage in business-starting investments and relevant activities of investment management.

Chapter VIII Supplementary Provisions

Article 49

The present Provisions shall be applicable to the FBIEs to be established in the mainland by the investors from the Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan Region.

Article 50

The power to interpret the present Provisions shall remain with the Ministry of Foreign Trade and Economic Cooperation, the Ministry of Science and Technology, the State Administration for Industry and Commerce, the State Administration of Taxation and the State administration of Foreign Exchange.

Article 51

The present Provisions shall enter into force as of March 1, 2003. The Interim Provisions on the Establishment of Foreign-Funded Business-starting Investment Enterprises promulgated by the Ministry of Foreign Trade and Economic Cooperation, the Ministry of Science and Technology and the State Administration for Industry and Commerce on August 28, 2001 shall be abolished on the same day.