Laws of the People's Republic of China

    Article 1  These Regulations are formulated with a view to expanding
international economic and financial co-operation, facilitating the inflow of
foreign capital and the introduction of technology and promoting growth of
the special economic zones.

    Article 2  The term "foreign banks" referred to in these Regulations
means the branch banks established in the special economic zones by banks
with foreign capital whose head offices are based in foreign countries or in
Hong Kong and Macao regions and are registered in accordance with the laws
of these localities as well as banks with foreign capital whose head offices
are based in the special economic zones and are registered in accordance with
the laws of the People's Republic of China.

    The term "Chinese-foreign joint banks" referred to in these Regulations
means banks jointly funded and operated in the special economic zones by
banks and financial institutions with foreign capital and banks and financial
institutions with Chinese capital.

    Article 3  Foreign banks and Chinese-foreign joint banks shall abide by
the laws and regulations of the People's Republic of China and their legitimate
business activities and lawful rights and interests shall be protected by
the laws of the People's Republic of China.

    Article 4  To establish in a special economic zone a foreign bank or a
Chinese-foreign joint bank, an application shall be filed with the People's
Bank of China, which shall examine and approve the application based on the
needs of growth of the special economic zones and on the basis of the
principle of equality and mutual benefit.

    The branch banks of the People's Bank of China in the special economic
zones shall exercise administration and supervision over the foreign banks
and Chinese-foreign joint banks.

    The State Administration of Foreign Exchange Control shall be responsible
for the issuance of the licence for business operations in foreign exchange.

    Article 5  Application for the establishment of a foreign bank or a
Chinese-foreign joint bank shall be handled in accordance with the following
provisions respectively:

    1. If a bank with foreign capital intends to establish a branch bank in
a special economic zone, the head office of the bank shall file the
application and submit the following documents and data:

    (1) a written application duty signed by the chairman of the board of
directors or the general manager with the authorization of the board of
directors and certified by a notary office, containing such information as
the name of the intended branch bank, the amount of operating funds allocated
by the head office, the curriculum vitae of the principal persons in charge
and letters of authorization, and the types of business operations applied
for;

    (2) articles of association of the head office of the bank, the
composition of the board of directors, the balance sheets, statements of
profit and loss, and reports of business position for the three years prior to
the application for the establishment of the branch bank;

    (3) a copy of the business licence verified and issued by the competent
authorities in the country or region where the bank is located; and

    (4) letters of undertaking issued by the head office of the bank assuming
the tax and debt repayment obligations for the intended branch bank.

    2. For the establishment of the head office of a foreign bank in a special
economic zone, the foreign investors concerned shall file the application and
submit the following documents and data:

    (1) a written application for the establishment of the foreign bank,
containing such information as the name of the head office of the foreign
bank, the registered capital and the paid-in capital, a list of the principal
persons in charge and the types of business operations applied for;

    (2) articles of association;

    (3) a list of the candidates for the board of directors, including its
chairman and vice-chairmen, and the directors nominated by the investors; and

    (4) data about the status of the assets and liabilities of the investors
attached with documents certified by a notary office.

    3. For the establishment of a Chinese-foreign joint bank in a special
economic zone, all investing parties thereto shall jointly file the
application and submit the following documents and data:

    (1) a written application for the establishment of the joint bank,
containing such information as the name of the joint bank, the name of each
of the investing parties thereto, the registered capital and the paid-in
capital, the percentage of capital contribution by each of the investing
parties, a list of the candidates for the principal persons in charge and
the types of business operations applied for;

    (2) a feasibility study report jointly prepared by all the investing
parties thereto;

    (3) the draft agreement, contract and articles of association of the
joint bank initialled by the authorized representatives of the respective
investing parties thereto; and

    (4) a list of the candidates for the board of directors, including its
chairman and vice-chairmen, jointly nominated by all the investing parties
thereto.

    4. Where foreign banks and Chinese-foreign joint banks established in the
special economic zones intend to establish separate branch offices in the
special economic zones, the application shall be filed with branch banks of
the People's Bank of China in the special economic zones for approval.

    If any of the documents and data referred to in paragraph 1 of this
Article is written in a foreign language, they shall be attached with a
Chinese version.

    Article 6  The People's Bank of China shall, based on the application of
a foreign bank or a Chinese-foreign joint bank, grant approval for the bank
concerned to engage in part or all of the following business operations:

    1. loans in the domestic currency and in foreign currencies and discount
of negotiable instruments;

    2. inward remittances from foreign countries or from Hong Kong and Macao
regions and collection of foreign exchange;

    3. settlement for export transactions, and mortgage in foreign currency;

    4. exchange of foreign currencies and of negotiable instruments in
foreign currencies;

    5. investment in the domestic currency or in foreign currencies;

    6. gurantees of the domestic currency and foreign currencies;

    7. deals in stocks and securities;

    8. trust and safe deposit box services, credit and financial standing
investigations and consultancy services;

    9. outward remittances by enterprises with overseas Chinese capital,
foreign-capital enterprises, Chinese-foreign equity joint ventures and
Chinese-foreign contractual joint ventures and settlement for their import
transactions, and mortgage in foreign currency;

    10. deposits in the domestic currency and in foreign currencies and
overdrafts by enterprises with overseas Chinese capital, foreign-capital
enterprises, Chinese-foreign equity joint ventures and Chinese-foreign
contractual joint ventures and by foreigners, overseas Chinese and compatriots
from Hong Kong and Macao;

    11. handling deposits or loans in foreign exchange in foreign countries
or in Hong Kong and Macao regions; and

    12. other business operations.

    Article 7  The registered capital of the head office of a foreign bank
or a Chinese-foreign joint bank established in a special economic zone shall
be no less than Renminbi 80 million yuan in equivalent foreign exchange and
the paid-in capital thereof shall be no less than 50 percent of the registered
capital; a branch bank of a foreign bank established in a special economic
zone must possess an operating fund allocated by its head office amounting to
no less than Renminbi 40 million yuan in equivalent foreign exchange.

    The paid-in capital and the operating funds of a foreign bank or a
Chinese-foreign joint bank shall be raised in full within 30 days following
the day on which its establishment is approved and shall then be audited
and verified by a registered accountant of the People's Republic of China.

    Article 8  A foreign bank or a Chinese-foreign joint bank shall, within
30 days following the day on which its establishment is approved, go through
the procedures of registration with the administrative department for industry
and commerce and obtain a business licence and shall, within 30 days following
the day of the commencement of its business operations, go through the
procedures of tax registration with the local tax authorities. Where a foreign
bank or a Chinese-foreign joint bank fails to commence its business operations
within 12 months following the day on which its establishment is approved, the
original document of approval shall automatically become null and void.

    Article 9  The total amount of loans granted by the head office of a
foreign bank or by a Chinese-foreign joint bank in a special economic zone to
any enterprise in the special economic zone shall not exceed 30 percent of the
total sum of its paid-in capital plus its reserve funds and the total amount
of investment in the special economic zones shall not exceed 30 percent of the
total sum of its paid-in capital plus its reserve funds.

    Article 10  The business operations in exchange and settlement between the
domestic currency and foreign currencies of a foreign bank or of a
Chinese-foreign joint bank shall be handled in accordance with the rates of
exchange quoted by the State Administration of Foreign Exchange Control and
with other relevant provisions.

    The rates of interest with respect to the various kinds of deposits,
loans, overdrafts and discount of negotiable instruments in the domestic
currency or in foreign currencies handled in the special economic zones by a
foreign bank or by a Chinese-foreign joint bank may be fixed with reference
to the rates of interest prescribed by the branch banks of the People's Bank
of China in the special economic zones.

    Article 11  A foreign bank or a Chinese-foreign joint bank that handles
various deposits in the domestic currency or in foreign currencies in the
special economic zones shall place deposit reserve funds with the branch
banks of the People's Bank of China in the special economic zones.

    Article 12  Foreign banks and Chinese-foreign joint banks shall submit to
the blanch banks of the People's Bank of China in the special economic zones
the following reports and statements of business operations:

    1. prior to the 10th of each month, the balance sheet of the previous
month shall be submitted;

    2. prior to the 15th of the first month of each quarter, a breakdown of
deposits and loans, a breakdown of outward and inward remittances and
settlement for import and export transactions, and a breakdown of investment
projects of the previous quarter shall be submitted; and

    3. prior to the end of March of each year, the balance sheet, the
statement of profit and loss and the statement of account balance of the
previous year shall be submitted, attached with an audit report presented
by a registered accountant of the People's Republic of China.

    Article 13  The branch banks of the People's Bank of China in the special
economic zones shall have the right to examine the position of business
operations and financial status of the foreign banks and Chinese-foreign
joint banks, require them to submit or provide the related information and
the relevant data, and send persons to examine their account books and files.

    Article 14  A foreign bank may remit abroad the profit that remains after
tax has been paid in accordance with the law.

    The head office of a foreign bank or a Chinese-foreign joint bank
established in a special economic zone shall, in accordance with the relevant
provisions, draw the reserve fund, the staff bonus fund, the welfare fund and
the enterprise development fund from its after-tax profit. The portion of the
profit distributed to investors from abroad may be remitted abroad.

    Foreign staff and staff from Hong Kong and Macao regions of a foreign
bank or of a Chinese-foreign joint bank may remit abroad their salaries and
other legitimate income that remain after tax has been paid in accordance
with the law.

    Article 15  A foreign bank or a Chinese-foreign joint bank that is to
terminate its business operations shall, 30 days prior to the termination
thereof, submit a written report to the People's Bank of China for approval.

    A foreign bank or a Chinese-foreign joint bank that is to suspend its
business operations shall, in accordance with the provisions of the People's
Republic of China concerning the dissolution and liquidation of
foreign-capital enterprises and Chinese-foreign equity joint ventures and
under the supervision of the branch bank of the People's Bank of China in
the special economic zone and other relevant departments, conduct its
liquidation. After the taxes have been paid in full and liabilities have
been settled, the funds of the foreign bank or the fund owned by or
distributed to investors from abroad in a Chinese-foreign joint bank may be
remitted abroad.

    Upon the completion of liquidation as referred to in the preceding
paragraph, the foreign bank or Chinese-foreign joint bank shall approach
the registration and licence-issuing authorities for the cancellation of
its registration and business licence.

    Article 16  In the case where a foreign bank or a Chinese-foreign joint
bank violates these Regulations or any other financial regulations, the
branch banks of the People's Bank of China in the special economic zones
shall have the right to issue a warning or impose a fine on it in the light
of the seriousness of the case. In case of disagreement with the penalty,
an appeal may be brought before the People's Bank of China for its ruling.

    If a foreign bank or a Chinese-foreign joint bank violates the laws and
regulations to an especially serious extent, the People's Bank of China may
order it to suspend its business operations or shall, in an extreme case,
order it to be disbanded.

    Article 17  These Regulations shall also apply to banks and financial
institutions with overseas Chinese capital or with capital from Hong Kong
and Macao regions.

    Article 18  The People's Bank of China shall be responsible for the
interpretation of these Regulations.

    Article 19  These Regulations shall become effective as of the date of
promulgation.