Laws of the People's Republic of China

    Article 1  These Provisions are formulated in order to promote economic
and technological exchanges between China's mainland and the region of Taiwan,
thereby boosting common prosperity of the two parts of the motherland on both
sides of the Straits, and to encourage companies, enterprises and individuals
on Taiwan (hereinafter referred to as "investors from Taiwan") to make
investments on China's mainland.

    Article 2  Investors from Taiwan may make investments in all provinces,
autonomous regions, municipalities directly under the Central Government, and
special economic zones on China's mainland.

    Investors from Taiwan are encouraged to engage themselves in land
development operations in Hainan Province and on the designated islands and in
areas along the coastal regions of the Provinces of Fujian, Guangdong and
Zhejiang.

    Article 3  The investments made by investors from Taiwan on China's
mainland may take the following forms:

    (1) to establish enterprises with the capital wholly owned by investors
from Taiwan;

    (2) to establish equity or contractual joint ventures;

    (3) to carry out compensation trade, to process supplied materials, to
assemble supplied parts, and to carry out contractual production;

    (4) to purchase shares and various kinds of bonds and debentures of
existing enterprises;

    (5) to purchase real estate;

    (6) to obtain land use right according to law and to engage in land
development operations; and

    (7) to adopt other forms of investment permitted under the laws and
regulations.

    Article 4  Investors from Taiwan may make investments in various trades in
China's mainland: industries, agriculture, service trades, and other trades
that are in conformity with the orientation of social and economic
development. Investors from Taiwan may select investment projects from the
lists of projects published by the departments concerned under various local
people's governments; they may also put forward, of their own accord,
proposals as to their investment intent and file their applications to the
departments of foreign economic relations and trade or to the examining and
approving organs designated by various local people's governments in areas
where they intend to make investments.

    The State encourages investors from Taiwan to make investments in the
establishment of export oriented enterprises and of technological advanced
enterprises and gives corresponding preferential treatment to such enterprises.

    Article 5  With respect to the various types of enterprises established
with investments by investors from Taiwan - enterprises with the capital
wholly owned by investors from Taiwan, equity and contractual joint ventures
(hereinafter referred to as "enterprises with investments by compatriots from
Taiwan"), they shall all be operated in accordance with these Provisions; in
addition to this, they may also enjoy the corresponding preferential treatment
as enjoyed by enterprises with foreign investments with reference to the
relevant provisions in foreign-related economic laws, decrees and regulations
of the state.

    With respect to the other forms of investment made by investors from
Taiwan on China's mainland, and with respect to those investors from Taiwan
who have not set up business offices on the mainland, but have dividends,
interest, rental, royalties and other incomes that come from China's mainland,
in addition to the application of these Provisions, reference shall be made to
the relevant foreign-related economic law, decrees and regulations.

    Article 6  Investors from Taiwan may make investments by using freely
convertible currencies, machinery and equipment or other physical goods,
industrial property right, and proprietary technology.

    Article 7  The investments made on China's mainland by investors from
Taiwan, the assets they have purchased, their industrial property rights,
their profits from investments, and other lawful rights and interests shall be
protected by state laws, and may be transferred or inherited according to law.

    Investors from Taiwan shall, in their activities on China's mainland,
abide by state laws, decrees and regulations.

    Article 8  The state shall not nationalize the investments made by
investors from Taiwan or other assets belonging to them.

    Article 9  Where the state, in light of the needs of social and public
interest, has to requisition the enterprises with investments by compatriots
from Taiwan, the State shall handle the requisitioning according to the legal
procedures and the investors concerned shall be duly compensated.

    Article 10  The lawful profits gained by the investors from Taiwan from
their investments, their other lawful income and the funds after liquidation
may be remitted out of China's mainland according to law.

    Article 11  Machinery and equipment imported to meet the needs of the
enterprises with investments by compatriots from Taiwan and included in the
total amount of investment, the motor vehicles for use in production, the
office equipment, as well as the articles and means of communications for
personal use and within reasonable quantities, imported by individual
compatriots from Taiwan during the period when they work in the aforesaid
enterprises shall be exempted from Customs duties and consolidated industrial
and commercial tax, and also from application of import licences.

    The raw and processed materials, fuels, bulk parts, spare and component
parts, primary parts, and fittings, which are imported by the enterprises with
investments by compatriots from Taiwan for the production of export
commodities, shall all be exempted from Customs duties and consolidated
industrial and commercial tax and also from obtaining import licences, and
placed under the supervision of the Customs. In case that the aforesaid
imported raw materials and parts are used for the production of commodities to
be sold on the market of China's mainland, it is imperative to make up the
procedures for importation and to pay taxes and duties according to the
regulations.

    The export commodities produced by the enterprises with investments by
compatriots from Taiwan shall, with the exception of those commodities the
export of which is under restriction by the state, be exempted from Customs
duties on export goods and consolidated industrial and commercial tax.

    Article 12  Enterprises with investments by compatriots from Taiwan may
obtain loans from financial institutions of China's mainland; they may also
obtain loans from financial institutions outside China's mainland, and may use
their assets as well as their rights and interests as mortgage or security.

    Article 13  With respect to the enterprises with the capital wholly owned
by investors from Taiwan, their period of operation shall be determined by the
investors themselves; as to equity and contractual joint ventures their period
of operation shall be determined, through consultation, by the various parties
to the ventures, they may also choose not to stipulate a period of operation.

    Article 14  The composition of the board of directors of equity joint ]
ventures and the appointment of the chairman of the board of directors, the
composition of the board of directors or of the joint managerial organs of
contractual joint ventures and the appointment of the chairman or the
appointment of the director of the joint managerial organs, shall be
determined, through consultation, by the various parties to the equity or
contractual joint ventures in light of the proportion of investments or the
terms of contract.

    Article 15  Enterprises with investments by compatriots from Taiwan shall
conduct their operational and managerial activities in accordance with the
approved contract or articles of association. The enterprises' decision-making
power for business operations and management shall not be interfered with.

    Article 16  The technical and managerial personnel, engaged by individuals
and enterprises investing on China's mainland may apply and obtain
multiple-journey travel documents.

    Article 17  The investors from Taiwan, who make investments on China's
mainland, may appoint their relatives or friends residing on the mainland as
their agents. The agents should hold legally effective letters of authority.

    Article 18  In areas where enterprises with investments by compatriots
from Taiwan are concentrated, the investors from Taiwan may apply to the local
people's government for the establishment of the association of investors from
Taiwan.

    Article 19  With respect to equity and contractual joint ventures to be
established, on China's mainland, with investments by investors from Taiwan,
the application for the establishment of the aforesaid enterprises shall be
filed by the mainland party; as to the enterprises to be established with
capital wholly owned by investors from Taiwan, the application shall be filed
directly by the investors from Taiwan themselves, or they may entrust their
relatives or friends residing on the mainland, or entrust the institution
providing advisory services, with the application. The applications for the
establishment of enterprises with investments by investors from Taiwan shall
be accepted and handled, in a unified manner, by the local department for
foreign economic relations and trade, or by the examining and approving organs
designated by the local people's government.

    Cases concerning the examination and approval of the application for the
establishment of enterprises with investments by compatriots from Taiwan shall
be handled in accordance with the authority prescribed by the State Council.
Departments for foreign economic relations and trade at various levels or the
examining and approving organs designated by the local people's government
shall, within forty-five days of receipt of complete application documents,
make the decision on whether the said application is approved or disapproved.

    The applicants shall, within thirty days of receipt of the written
approval, file an application to the department for the administration of
industry and commerce, and, in accordance with the relevant procedures for
registration and administration, go through procedures for registration and
obtain business licences.

    Article 20  With respect to the investors from Taiwan who have made
investments in China's mainland, in case that a dispute arises during the
execution of, or in connection with, a contract, the parties concerned shall
try their best to settle the dispute through consultation or mediations.

    Where the parties concerned are unwilling to settle the dispute through
consultation or mediation, or the consultation or mediation has failed, the
parties concerned may, in accordance with the stipulation of the arbitration
articles in the contract, or in accordance with the written arbitration
agreement reached by the parties concerned after the dispute has arisen,
submit their dispute to the arbitration authorities on China's mainland or in
Hong Kong for settlement.

    In the event that the parties concerned did not include an arbitration
article in their contract, and no written arbitration agreement has been
reached after the dispute has arisen, then the dispute may be brought before
the people's court.

    Article 21  The right to interpret these Provisions resides in the
Ministry of Foreign Economic Relations and Trade.

    Article 22  These Provisions shall go into effect as of the date of
promulgation.