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The up-to-date Developments of Laws and Regulations in China

Part One: News from Business of Securities

1.1 Formal promulgation of the Provisional Regulation of Management on Securities Investment Fund

This Provisional Regulation was promulgated on November, 14, 1997 by the State Council Securities Commission and had taken effect on the date of promulgation.

The Securities Investment Fund shall be set up by means of jointly investing, for the purpose of enjoying interests and sharing risks collectively.

The Securities Investment Fund has two different types, the open-end Fund and the closed-end Fund. The total number of the former's issuing units may vary from time to time and the investors have the right to buy or sell the Fund units according to the quotation at the operating place determined by the government, while latter's total number of units shall be determined previously and remain unchanged during the whole operating term of the Fund. After of the Fund issued, the investors have the right to transfer or trade the units of the Fund in the securities market.

The commercial banks, after examination and approval by the China Securities Supervision and Management Committee and the People's Bank of China, may conduct business as trustees of the Fund. The Fund management Companies, after examination and approval by the China Securities Supervision and Management Committee, may deal with matters of Fund managing and establishing Fund by promoter method as Fund Managers.

Additionally, the Provisional Regulation stipulates the rights and responsibilities of the Fund units holders and the legal liabilities of violating the Provisional Regulation.

1.2 The Guide on Articles of Association of Listed Companies

This Guide, promulgated by the China Securities Supervision and Management Committee on the December 16, 1997, took into effect on the same day. The Articles of Association of listed companies failing to including the contents of the Guide due to listed companies been listed before the Guide issued shall be modified accordingly by listed companies concerned.

This Guide shall be applied to the listed companies issuing Chinese capital shares or foreign capital shares listed in China and those issuing the both kinds of shares.

The listed companies only issuing foreign capital shares listed overseas or those issuing Chines capital shares and the former ones may not necessarily abide by this Guide. They shall continuously observe the Essential Clauses in Articles of Association of Companies Listed Overseas.

Part Two: News From Banking

2.1 Measures for Payments and Settlements

This Measure was promulgated on September 19th 1997 by People's Bank of China, and has come into force since December 1st 1997, Measures for Bank Settlements has ceased to have effect simultaneously.

This Measure shall apply to the payments and settlements of RMB within the territory of the People's Republic of China, however, the application of the measure could be adjusted if the People's Bank of China stipulates otherwise. The Measure emphasizes that either unit, individual person or banks must observe three principles when doing payments and settlements. Theses principles are (I) Strictly abide by credit, performing contract and making payments; (II) the money should be debited into the exact owner's account and also arranged by the owner; (III) the bank has no responsibility to pay advance money for anybody.

The Measure also stresses that Bank shall keep secret for the savings in the basic saving account, normal saving account, special saving account and provisional saving account of unit and individual person. Banks shall protect its clients' self- disburse right of the money. Unless laws or regulations stipulates otherwise, banks shall not provide inspection service for any unit or individual person; unless laws or regulations stipulates otherwise, banks will not freeze or deduct money for any unit or individual persons, nor stop the normal payment procedure of unit and individual person.

2.2 New Channels for Domestic Institutions to Borrow Foreign Loans

Approved by the People's Bank of China, the State Administration of Foreign Exchange ("SAFE") promulgated "Administrative Measures on International Commercial Loan Borrowings by Domestic Institutions" ("AMICLBDI") and "Administrative Measures governing the Issue of Bonds Abroad by Institutions in PRC" (AMIBAI") on 24 September 1997. The above-mentioned regulations will take effect on 1 January 1998.

The above-mentioned regulations were replenished and amended on the basis of "Administrative Measures on International Commercial Loan Borrowings by Domestic Institutions" promulgated on 26 September 1991 and "Administrative Regulations governing the Issue of Bonds Abroad by Institutions in PRC" promulgated in 1987. The new regulations have made relatively obvious amendments as follows:

(1) Bringing the administration range of International Commercial Loan to completion, that is in addition to the buyers credits, general foreign exchange commercial loans, foreign exchange loans for international financial leasing, the measures further confirms that compensation trade repaid by foreign exchange, foreign exchange savings made by foreign institutions and individual persons, project finance and credit for trade exceed 90 days shall also be administrated as international commercial loan.

(2) specifying the qualification inspection conditions for methods of borrowing foreign loans by domestic institutions;

(3) specifying the definition and classification of foreign exchange bonds;

(4) specifying the qualification inspection conditions for entering into foreign exchange bond market by domestic institutions.

In order to coordinate the implementation of the above two regulations, SAFE also issued the "Detailed Rules for the Monitoring of External Debt" on the same day, this rule will also take effect from January 1st, 1998. "Detailed Rules for Implementing Registration of Foreign Debt" published on November 10th 1989 by SAFE will be annulled simultaneously.

Part Three: Information from the Field of Investment

New Amendment to "the Guideline Catalogue of Foreign Investment Industries"

The Guideline Catalogue of Foreign Investment Industries which has updated by the State Planning Commission, the State Economic and Trade Commission and the Ministry of Foreign Trade and Economic Cooperation was promulgated on 31st December 1997.

The updated catalogue has made the relatively obvious amendments as follows:

In the Guideline Catalogue of Encouraged Foreign Investment Industries, the clause of Shipping Industries was canceled, and the category of permitted foreign investment projects of products for full direct export was raised.

In the Category A of Guideline Catalogue of Restricted Foreign Investment Industries, the restrictions on four industries which included Coal Industries, Ferrous Metals Industries, Non-ferrous Metals Industries as well as Construction Materials and Equipment and Other Non-metallic Manufacturing Industries were canceled.

In the Category B of Guideline Catalogue of Restricted Foreign Investment Industries, the restriction on Coal Industries was canceled, namely, wholly foreign-owned enterprises were permitted to operate the exploitation of coking coal.

Three industries which included Electricity Industries, Medical Mechanical Industries and Shipping Industries were raised as restricted investment industries.

Catalogue of Industries Prohibited for Foreign Investment did not be made obvious amendment.

New catalogue was updated in accordance with the present situation of economic and technological development in China, the whole situation of foreign investment industries and the developing direction in the future. New catalogue has further defined the range of industries for foreign investment. Lots of industries have been stipulated that Chinese investors should occupy a controlling or dominant position. (replaced the provision of State-owned assets occupied a controlling or dominant position in the old catalogue). These presented that the utilization for foreign investment in China has entered into a new phase that China has been making great efforts to utilize the foreign investment as well as develop national industry concurrently, and to bring along the development of domestic industries through importing foreign advanced technology and management experience, thus making the domestic industry become in conformity with the international market and strengthening its competition capabilities.

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