Laws of the People's Republic of China

State Administration of Radio, Film and Television

Order of the State Administration of Radio, Film and Television

No.21

The Provisional Regulation on Investment in Cinemas by Foreign Investors, which was passed at the executive meeting of the State Administration of Radio, Film and Television on September 28, 2003 and approved by the Ministry of Commerce and the Ministry of Culture of the People's Republic of China, is hereby issued and shall go into effect on January 1, 2004.

Xu Guangchun, Director of the State Administration of Radio, Film and Television

Lv Fuyuan, Minister of Commerce of the People's Republic of China

Sun Jiazheng, Minister of Culture of the People's Republic of China

November 25, 2003

Provisional Regulation on Investment in Cinemas by Foreign Investors

Article 1

The present Regulation is formulated according to h 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 Regulation on Film Administration, and other relevant laws and regulations with the aim to meet the demand of the reform and opening process, to absorb foreign capital, to introduce advanced technology and equipment, and to promote the prosperous development of the film industry of China.

Article 2

The present Regulation shall be applicable to the foreign companies, enterprises, other economic organizations or individuals (hereinafter referred to as foreign parties) who, according to the principle of equality and mutual benefit and upon approval of the Chinese government, establish Chinese-foreign equity joint ventures or contractual joint ventures, construct or reconstruct cinemas, and engage in film projection business cooperatively with the companies or enterprises registered within China (hereinafter referred to as the Chinese party).

Article 3

Overseas investors are not permitted to establish any solely-owned cinemas or form any film network companies.

Article 4

Foreign investors who intend to invent in cinemas shall satisfy the conditions as follows:

1)

The arrangements and planning are in line with the local cultural facilities;

2)

The registered capital is no less than 6 million Yuan;

3)

There are fixed business (showing) premises;

4)

For the Chinese-foreign equity joint cinemas to be established, the share of the investment made by the Chinese party in the registered capital shall account for no less than 51%; for the Chinese-foreign equity joint cinemas to be established in such pilot cities as Beijing, Shanghai, Guangzhou, Chengdu, Xi'an, Wuhan, and Nanjing, the share of the investment made by the foreign party in the registered capital may not be above 75%;

5)

The period of the equity or contractual joint venture shall not exceed 30 years; and

6)

The equity or contractual joint venture shall abide by the relevant laws, regulations and provisions of China.

Article 5

In the case that the Chinese party makes the investment with state-owned assets (excluding cash), the relevant formalities shall be carried out in the light with the relevant provisions on the management of state-owned assets.

Article 6

The establishment of a foreign-funded cinema shall be reported for examination and approval in accordance with the procedures as follows:

1)

The Chinese party must submit an application to the provincial administrative department of commerce of the place where it is located, providing the documents as follows:

1.

The project application form of the establishment of the foreign-funded cinema;

2.

The certificate of juridical person status of the Chinese party, the documents relating to the land use right of the cinema, and the creditability certificate issued by the bank;

3.

The qualification certificate of the foreign party, the creditability certificate issued by the bank, and the financial status certificate issued by the accounting firm;

4.

The notice for preliminary approval of the cinema name issued by the department of industry and commerce administration;

5.

The feasibility study report, contract, and articles of association; and

6.

Other documents required by the laws and regulations and the examination and approving authority.

2)

After obtaining consent from the provincial administrative department of film, the provincial administrative department of commerce of the place where the applicant is located shall make the examination in accordance with the relevant laws and regulations of the state on foreign investment, and report to the Ministry of Commerce, the State Administration of Radio, Film and Television, and the Ministry of Culture for archival purposes. The Certificate of Approval for Foreign-funded Enterprises shall be issued to the foreign-funded enterprise that has been approved to establish.

3)

For a foreign-funded cinema that has been permitted to establish, the applicant shall, within one month from the day of receiving the Certificate of Approval for Foreign-funded Enterprises, carry out registration formalities with the provincial department of industry and commerce administration by taking the Certificate of Approval for Foreign-funded Enterprises.

4)

After the construction or reconstruction of a foreign-funded cinema has been finished and after the said cinema has been checked and accepted by the relevant departments, the applicant shall apply for the License for Film Projection with the provincial administrative department of film by taking the Certificate of Approval for Foreign-funded Enterprises and the Business License before starting the business of film projection.

Article 7

For any change of the shareholding or investment of a foreign-funded cinema that has been established, the procedures prescribed in Article 6 herein shall be followed.

Article 8

A foreign-funded cinema must abide by the relevant laws and regulations of the state, run businesses in the light with the Regulation on Film Administration, and subject itself to the supervision and administration of the relevant departments of the Chinese government. For each film to be shown, the cinema must hold a License for Public Film Projection issued by the State Administration of Radio, Film and Television (SARFT), and any smuggled or pirate films are not permitted to be shown, and any video tapes, VCD, or DVD are not permitted to be shown for commercial purpose.

Article 9

Foreign investors who are engaged in any other entertainment business affiliated to the cinema shall comply with the relevant provisions of the state.

Article 10

For investors from Hong Kong Special Administrative Region, Macao Special Administrative Region, and Taiwan area who establish any enterprises engaging in film projection in the mainland of China, the present Regulation shall be referred to.

Article 11

The present Regulation and the appendix hereto shall go into effect on January 1, 2004. The Provisional Regulation on Investment in Cinemas by Foreign Investors issued by the SARFT, the Ministry of Foreign Trade and Economic Cooperation and the Ministry of Culture on October 25, 2000, shall be abolished at the same time when the present Regulation and the appendix hereto go into effect.

Appendix:

In order to promote the establishment of closer economic and trade relationship between Hong Kong, Macao and the mainland of China, and to encourage the service providers from Hong Kong and Macao to establish enterprises engaging in film projection in the mainland of China, and in the light with the Arrangements of the Mainland of China and Hong Kong on Establishing Closer Trade and Economic Relationship and the Arrangements of the Mainland of China and Macao on Establishing Closer Trade and Economic Relationship, the following special provisions are hereby made with respect to the investment in cinema made by service providers from Hong Kong and Macao as provided for in the Interim Regulation on Investment in Cinemas by Foreign Investors:

1.

From January 1, 2004, service providers from Hong Kong and Macao shall be permitted to construct, reconstruct and operate cinemas in the mainland of China through equity or contractual joint ventures. The service providers from Hong Kong and Macao may hold the majority shares, but the proportion may not be over 75%.

2.

Other provisions on investment in cinemas by service providers from Hong Kong and Macao in the mainland of China shall still comply with the Provisional Regulation on Investment in Cinemas by Foreign Investors.