Laws of the People's Republic of China

The General Administration of Civil Aviation, the Ministry of Foreign Trade and Economic Cooperation, the State Development Planning Commission

Decree of the General Administration of Civil Aviation of China, the Ministry of Foreign Trade and Economic Cooperation of the People's Republic of China and the State Development Planning Commission of the People's Republic of China

No.110

The Provisions on Foreign Investment in Civil Aviation, which were adopted at the Executive Meeting of the General Administration of Civil Aviation of China, the Ministry of Foreign Trade and Economic Cooperation and the State Development Planning Commission and approved by the State Council on December 10, 2001, are hereby promulgated and shall enter into force on August 1, 2002.

Director General of the General Administration of Civil Aviation Yang Yuanyuan

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

Director of the State Development Planning Commission Zeng Peiyan

June 21, 2002

Provisions on Foreign Investment in Civil Aviation

Article 1

In order to expand the opening of the civil aviation industry of China (hereinafter referred to as civil aviation), to promote the reform and development of the civil aviation and to protect the legitimate rights and interests of the investors, these Provision have been enacted in accordance with 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 Chinese-foreign Contractual Joint Ventures, the Provisions on Guidance of Foreign Investment Direction and the Catalog for Guidance of Foreign Investment Industries (hereinafter referred to as the Guidance Provisions and the Catalog respectively), and the relevant laws and regulations on civil aviation.

Article 2

These Provisions shall apply to the investment made in the civil aviation by foreign companies, enterprises and other economic organizations or individuals (hereinafter referred to as the foreign investors).

Article 3

The scope of civil aviation that foreign investors may invest in shall include: civil airports, public air transport enterprises, general aviation enterprises and projects related to air transport. Foreign investors are forbidden from investing in and managing air traffic control systems.

(1)

Foreign investors are encouraged to construct civil airports. The "civil airports" as used in these Provisions shall exclude airports for both civil and military use. Foreign-funded civil airports are divided into two categories:

1.

Flying areas of civil airports, including the runway, taxiway, connecting apron, parking apron, and flight assisting light;

2.

Terminal buildings.

(2)

Foreign investors are encouraged to invest in the existing public air transport enterprises. Foreign investors are encouraged to invest in the general aviation enterprises engaging in agriculture, forestry and fishery operations. Foreign investors are allowed to invest in the general aviation enterprises engaging in business flight, air sight-seeing or serving the industry, but may not engage in the projects involving state secrets.

(3)

The "projects related to air transport" shall include: air fuel, airplane maintenance, freight transport and storage, ground service, air food, parking lots and other approved projects.

Article 4

The forms of foreign investment shall include:

(1)

Equity joint venture or contractual joint venture (hereinafter referred to as joint venture);

(2)

Purchasing shares of civil aviation enterprises, including the shares issued overseas and the foreign shares issued inside China by the aviation enterprises;

(3)

Other approved investment forms. Foreign investors must be qualified as a Chinese legal person to invest, in the form of contractual joint venture, in public air transport and general aviation enterprises engaging in business fight and air sight-seeing.

Article 5

Where foreign investors invest in public air transport enterprises and civil airports, under the same conditions, priority shall be given to the foreign enterprises of the same kind with international advanced management level.

Article 6

Where foreign investors invest in civil airports, the Chinese party shall take the relatively holding position. Where foreign investors invest in public air transport enterprises, the Chinese party shall take the holding position, and the proportion of investment made by one foreign investor (including its associate enterprises) may not exceed 25%. Where foreign investors invest in the general aviation enterprises engaging in business flight, air sight-seeing or that serving the industry, the Chinese party shall take the holding position; where they invest in the general aviation enterprises engaging in agriculture, forestry or fishery operations, the proportion of foreign investment shall be determined by both the Chinese and foreign parties through negotiation.

Article 7

The operating period of joint ventures with foreign investment shall not exceed 30 years generally.

Article 8

With respect to civil airport enterprises with foreign investment, their charges for air service shall conform to the uniform standard of the state, and the standards of the charges for non-air service shall be determined by the local price departments at the request of the enterprises. The public air transport enterprises and general aviation enterprises with foreign investment shall execute the price policies of the State.

Article 9

With respect to the land needed for the construction of civil airports, the foreign investors shall go through the procedures for land evaluation and the examination and approval of disposition of land use right in accordance with the laws and regulations of the state on land administration and the provisions of the General Administration of Civil Aviation of China (hereinafter referred to as the GACA) on the administration of airport land use.

Article 10

The foreign investors investing in the construction of civil airports may enjoy the priority to invest in and manage the projects related to air transport.

Article 11

With respect to the projects above the quota for foreign investment in civil aviation, according to the nature of the projects, the State Development Planning Commission (for basic construction projects) and the State Economic and Trade Commission (for technical reform projects) shall, with the consent of the GACA, respectively make examination and approval of the project proposals and the feasibility study reports; the Ministry of Foreign Trade and Economic Cooperation (hereinafter referred to as the MOFTEC) shall make the examination and approval of the contracts and articles of association. With respect to the projects under the quota, the GACA shall make the examination and approval of the project proposals and the feasibility study reports, and the MOFTEC shall make the examination and approval of the contracts and articles of association. Where foreign investors invest in the projects related to air transport, such as freight transport and storage, ground service, air food, and parking lots, etc., they shall go through the procedures for examination and approval in accordance with the procedures and authorities prescribed in the Guidance Provisions and the Catalog.

Article 12

After the contracts and articles of association of the civil airport projects with foreign investment have been approved, the foreign investors shall apply to the MOFTEC for the certificate of approval for foreign-funded enterprise and then go through the relevant procedures for registration at the administrations for industry and commerce. After the contracts and articles of association of the public air transport enterprises and general aviation enterprises with foreign investment have been approved, the enterprises shall apply to the GACA for drawing or altering their licenses for operation, apply to the MOFTEC for drawing the certificate of approval for foreign-funded enterprise, and go through the relevant registration procedures at the administrations for industry and commerce.

Article 13

Where civil aviation enterprises issue shares overseas, issue foreign shares inside China or absorb foreign investment by other means, they shall go through the procedures for examination and approval with the relevant authorities of the state.

Article 14

The capital increase, change of equity, and other matters of foreign-funded civil aviation enterprises (projects) shall be submitted for examination and approval to the organ that originally made the examination and approval.

Article 15

The GACA and its local administrations shall exercise industrial administration and supervision over the business activities of foreign-funded civil aviation enterprises.

Article 16

These Provisions shall be referred to if companies, enterprises, other economic organizations or individuals from the Special Administrative Region of Hong Kong, the Special Administrative Region of Macao and Taiwan area invest in civil aviation in other Chinese provinces, autonomous regions and municipalities directly under the Central Government.

Article 17

These provisions shall enter into force as of August 1, 2002. The Circular on the Relevant Policies Concerning Foreign Investment in Civil Aviation promulgated by the GACA and the MOFTEC on May 6, 1994 (MinHangZongJuHan [1994] No.448) and the Circular on the Explanation for Several Issues of the Relevant Policies Concerning Foreign Investment in Civil Aviation promulgated by the GACA and the MOFTEC on October 25, 1994 (MinHangZongJuFa [1994] No.271) shall be nullified at the same time.