Laws of the People's Republic of China

    Article 1  These Provisions are formulated in order to guard against the
risks of foreign exchange rate, stabilize the costs of import and export trade
(including other foreign economic activities) and develop the businesses of
buy and sale of spot and forward foreign exchange.

    Article 2 The Bank of China may be entrusted to buy and sell spot and
forward foreign exchange by departments, organizations, enterprises,
institutions and other units (hereinafter referred to as the client) in the
territory of China.

    Other financial institutions intending to conduct the businesses mentioned
in the preceding paragraph shall be approved by the State Administration of
Foreign Exchange Control.

    Article 3  Buy and Sale of foreign exchange referred to in these
Provisions means the buy and sale conducted among various convertible
currencies.

    Article 4  The client intending to entrust the Bank of China or other
financial institutions approved by the State Administration of Foreign
Exchange Control (hereinafter referred to as the designated financial agency)
on its behalf to buy and sell spot and forward foreign exchange shall be
approved by the State Administration of Foreign Exchange Control or its local
departments except for the following two situations:

    1) Specialized banks, financial institutions and foreign invested
enterprises with foreign investment with approval to conduct foreign exchange
businesses, for their self-owned or self-raised capitals of foreign exchange,
may buy and sell spot or forward foreign exchange by themselves in the
international financial market or entrust the designated financial agencies
to handle such businesses.

    2) Other clients not stipulated in the above paragraph who borrow foreign
exchange in cash within or out of China and receive, with permission,
donated foreign exchange, upon the approval to open cash account of foreign
exchange in financial institutions within China, may entrust the designated
financial agencies to buy and sell on their behalf spot or forward foreign
exchange according to the foreign trade contracts or other economic agreements.

    Article 5  The principle of voluntariness shall be adhered to in the
transactions of buy and sale of spot and forward foreign exchange.

    Article 6  The designated financial agency which is entrusted by a client
to buy and sell spot and forward foreign exchange shall base the transaction
on the foreign trade contracts or economic agreements signed by the client,
but transactions entrusted by the financial institutions with approval to
conduct foreign exchange and enterprises with foreign investment are excepted.

    Article 7  When the designated financial agency is entrusted by a client
to buy and sell spot or forward foreign exchange, the client shall provide
performance guarantee. Mortgage of foreign exchange quota or advance payment
of performance bond in cash may be used as the performance guarantee.

    The letter of guarantee for RMB at equal value issued by the deposit
bank shall be simultaneously provided in case the foreign exchange quota is
mortgaged as guarantee.

    In case the foreign exchange quota is settled ahead of time into foreign
exchange in cash to pay the performance bond in advance, the settlement is
limited to using US dollar.

    Article 8  When a client buys and sells forward foreign exchange,
application and copies of trade contracts or other economic agreements shall
be submitted to the local department of foreign exchange control in accordance
with the stipulation of Article 6. After being examined and approved by the
department of foreign exchange control, the client may entrust the designated
financial agency to buy forward foreign exchange by presenting the approval
documents of the department of foreign exchange control.

    Article 9  In case the foreign exchange quota is settled ahead of time
into foreign exchange in cash to pay the performance bond in advance, the
department of foreign exchange control shall endorse the payment notice of
foreign exchange quota issued by the client with the date and its stamp and
shall deduct the foreign exchange ration. The client in the same city shall
within 3 working days after the date of the endorsement (7 working days for
the client in a different city) buy US dollars from the quota and deposit
them into the account of "specific guarantee deposit" in the designated
financial agency.

    In case the foreign exchange quota is mortgaged, the department of foreign
exchange control shall transfer the foreign exchange quota mortgaged by the
client to the account of foreign exchange quota in the designated financial
agency.

    In case the option transaction is entrusted by the client, only foreign
exchange quota can be mortgaged as guarantee, but the insurance premium of
option which should be paid upon conclusion of the transaction may be settled
in advance into foreign exchange in cash.

    Article 10  When the designated financial agency is entrusted to buy
and sell spot and forward foreign exchange, if the client uses the foreign
exchange quota to settle ahead of time into foreign exchange in cash and pay
the performance bond in advance for the transaction of forward foreign
exchange, the designated financial agency shall check and calculate through
the account of "specific guarantee deposit"; but if the client uses the cash
of foreign exchange originally owned to pay the performances bond in advance
for the transaction of forward foreign exchange, the designated financial
agency shall still check and calculate through the account of "guarantee
deposit".

    Article 11  In case the date of import payment is behind the date of
delivery, if the foreign exchange quota is settled ahead of time into foreign
exchange in cash, designated financial agency shall re-deposit temporarily
the cash position derived from the delivery into the account of "specific
guarantee deposit"; and if the cash of foreign exchange originally owned
is used, the designated financial agency shall re-deposit the cash position
derived from the delivery into the account of "guarantee deposit".

    Article 12  The authority to interpret these Provisions resides in the
State Administration of Foreign Exchange Control.

    Article 13  These Provisions shall enter into force as of the date of
promulgation.