Laws of the People's Republic of China

Reply of the General Office of the Ministry of Commerce on the Relevant Issues Concerning Stock Equity Alternation of Foreign-invested Enterprises

Xiamen Foreign Investment Bureau:

We have received your Request for Instructions on Such Issues as the Revocation of Written Instructions on Stock Equity Transfer that Have Been in Effect for Years but with Controversies of Fact and the Alternation of Investors by Examination and Approval Authorities (Xia Wai Zi Fa [2006] No. 61). In recent years, administrative disputes caused by the alternation of investors' stock equity in foreign-invested enterprises have become a common phenomenon. For the purpose of running administration in accordance with the law, protecting the legal interests of investors and enterprises, preventing the examination and approval authorities from being involved in civil and administrative disputes, suggestions are hereby presented as follows:

1.

Administrative commercial departments, during the examination and approval work of the alternation of investors' stock equity of foreign-invested enterprises, shall handle all things strictly in accordance with the provisions of related laws, administrative regulations as well as the Provisions for the Alteration of Investors' Stock Equity in Foreign-invested Enterprises. Unless upon application by proper parties or effective decisions by judicial or arbitral institutions with jurisdiction, the examination and approval authorities shall not voluntarily alter the investors' stock equity.

2.

Where the examination and approval authorities, while examining the application for alternation of investors' stock equity in foreign-invested enterprises, find alternating items that directly bear on major interests of others, they shall, in accordance with relevant provisions of the Administrative License Law of the People's Republic of China, inform the interested parties of the right to state, to defend themselves and to request a hearing.

3.

The applicant for alternation of stock equity shall be responsible for the truthfulness of materials submitted. Where controversies arise concerning the truthfulness of materials of application, the final decision is left to judicial organs with jurisdiction.

4.

Where the judicial organs find that relevant parties conduct deceptions or refuse to file relevant materials and evidence in accordance with the requirements of the examination and approval authorities, the examination and approval authorities may revoke relevant documents of approval in accordance with related laws, administrative regulations and rules.

General Office of the Ministry of Commerce

March, 18, 2006