Let’s begin by noting there are already plenty of restrictions on personal freedoms when the consensus is that these restrictions somehow protect people from themselves, or they protect society as a whole. For example, where I live you can’t legally…

- Drive without a seatbelt
- Ride a motorcycle without a helmet
- Commit suicide
- Practice law, medicine, or other professions without a license
- Operate a motor vehicle while under the influence
- Gamble in most places
- Carry an Uzi down the street
- Buy dynamite
The list goes on, and that doesn’t even include the many restrictions on underage activities. So there is nothing unusual or unprecedented about legal restrictions on freedom when an argument can be made that it protects lives or property.

My argument against allowing individuals to invest in stocks is that unless you have insider knowledge, which is already illegal, your odds of beating the index averages are slim. It is nothing more than gambling.

The myth of stock investing is that a person who does more research has better results. But there is no science to support that view. Indeed, the person who understands the most about individual stock investing avoids them completely and invests in ETFs or index funds.

The problem with doing your own research on stocks is that you must rely on the information coming from the management of a company, and managers are generally misinformed or lying. Even the most seasoned investment professionals running mutual funds perform worse than the indexes on average. Brains and research can’t overcome the fact that much of your data is deliberately tainted at the source.

When people go to Vegas to gamble, they usually set some sort of limit for their losses. And they go with the full knowledge that winning is unlikely. It makes sense for that sort of activity to be legal, within limits, because it is viewed as entertainment and not investment. But if it were common for people to bet their retirement savings on Blackjack, you can be sure it would be illegal.

We don’t allow unlicensed people to practice law or medicine, sell real estate, or even build a house. It is entirely consistent to restrict the untrained from making risky stock investments.

I reiterate that this runs against my own libertarian philosophy. I would feel I had lost something important if I couldn’t invest in individual stocks. But it is also true that my net worth would be larger if I had never done it. And it would be larger still if I hadn’t allowed professionals to do it on my behalf.

If anyone comments to this post by saying, “I do my own research and I made money in the stock market,” it is proving my point. And if you don’t see why that proves my point that further proves my point.

According to the PRC Income Tax Law for Foreign Investment Enterprise and Foreign Enterprise, its Implementation Regulations, ministerial regulations and rules issued by the State Administration of Taxation, an RO that carries on business activities within the PRC is subject to tax on income derived from sources in the PRC irrespective of whether they are paid by any sources inside the PRC.

In the absence of complete and accurate information relating to the RO’s PRC-source income, the PRC tax authority normally adopts the cost plus method to ascertain the taxable income for practical reasons.

The major category of tax includes business tax and income tax. Business Tax is imposed at a rate of 5% on the total gross amount of monthly overheads incurred by the RO. The business tax is filed at monthly interval. Corporate Income tax is imposed at a rate of 33% on the deemed income. The deemed income is assessed at a rate of 10% on the total gross amount of overheads incurred by the RO during the relevant period. The RO must file income tax at a quarterly interval. For example, if the monthly overhead is RMB80,000, the business tax and income tax will be calculated as follows:-

Gross amount = RMB80,000 / (1-10%-5%) = RMB94,118
Business tax = RMB94118 * 5%
Income tax = RMB 94,118 * 10% (deemed profit) * 33%
The income tax rate of 33% including 3% local income tax will be reduced to 15% if the RO is located within the special economic zones or other designated areas.

The State Administration of Taxation (SAT) lists the following types of taxable activities that a representative office may perform: -

Acting as a merchandise trade agent;
Consulting services relating to business, legal, tax and accounting;
Services performed for a resident fellow subsidiaries of the same non-resident holding company;
Acting as advertising agents;
Providing services relating to visa handling, fee collecting, ticketing, tour operator, and hotel accommodation for non-resident tourist companies;
Consulting services given on behalf of non-resident financial institutions;
Providing services within the business scope of a transport company;
Other taxable activities the RO performs for the clients.
The following activities are not subject to income tax and business tax:-

Resident representative offices performing services of market research, providing business information, liaison, consulting for the non-resident head offices on a free of charge basis;
Resident representative offices taking instructions from resident companies to act for them as agent, and the agency activities are mainly performed outside the PRC.

Business Activities
In defining the business activities, the State Administration of Taxation, the State Administration of Industry and Commerce, and the Ministry of Foreign Trade and Economic Cooperation (The MOFTEC is now called the Ministry of Commerce) have different provisions. The SAT prescribes what constitutes a taxable activity while the SAIC stipulates that the RO should be engaged in non-direct business activities, subject to provisions in the international agreement. (Specifically, the restrictions on income-earning business activities undertaken by RO’s in respect of legal, accounting, taxation, and management consulting are lifted in the WTO agreements China has acceded to.) The MOFTC also provides that the RO’s may only be engaged in non-direct business activities in respect of business liaison, product introduction, market research, and technical exchange on behalf of their heading office.

To determine whether certain activities are taxable, one has to consider the income tax rules rather than the types of activities an RO is allowed to do as stated in the scope of activities in the business licence . If the RO performs those non-direct activities for the client of its non-resident head office or other non-resident foreign companies on a fee basis, then the income derived from those activities is taxable under the PRC income tax rules .

The representative offices that do not carry on business activities or the RO’s that carry on non-taxable activities, can submit applications to the tax authority for the granting of a tax exemption certificate.

The table below may help analyze the issue:

Taxation on Employees
The RO has the legal obligation to deduct from its payroll the income tax and pay them to the local tax office. In addition, the RO and the staff have to bear certain social security contributions respectively including pension fund, hospitalization, unemployment, injury, and birth planning insurances. Please see the Individual Income Tax that follows on the income tax issue for foreign nationals and employees from Hong Kong , Macau and Taiwan .

It has been a 13-year journey from the preliminary work in 1994 to the passing of thePRC Enterprise Income Tax Law (referred to as “the EIT Law” hereafter) on 16th March 2007, which marked the completion of the unification of two tax systems for  domestically funded and foreign funded enterprises in China. It is a system innovation in the process of building socialism and a harmonized society within the country. To reap the benefits of the new tax system depends very much on its implementation in an effective manner. A few days ago, the State Council announced the long-awaited  Implementation Regulations of the PRC EIT Law (referred to as “the Implementation Regulations” hereafter), which is to come into play with the implementation of the  EIT Law.

To enable the taxpayers and the tax administrators to better understand and  follow the spirit inside the Implementation Regulations, the reporter interviewed theofficials in charge of the State Administration of Taxation on certain questions about  the Implementation Regulations. The officials in charge made the remarks that the drafting of the Implementation  Regulations followed the principles of legality, practicality, global convergence,conservatism, and easy operability. The drafts have brought the existing tax policyinto the contents of the Implementation Regulations and demonstrated the continuity  of the tax policies, without stepping outside the scope of the EIT Law. The Implementation Regulations give details to the EIT Law taking into account the economic activities and the latest development of the economic systems, and this hasdemonstrated the scientific properties of the current policies. In addition, the drafting  committee borrowed the prevailing international income tax policies and learned from  the experiences of international tax reforms. The Implementation Regulations have  embodied international custom and shows the forward-lookingness of the tax policies.According to the officials in charge, the Implementation Regulations contain 8 chapters with 133 clauses, mainly giving details to the provisions in the EIT Law. The  officials in charge gave detailed elaborations on certain key policies and designs in  the EIT Law.

The definition of actual management organization is to protect tax sovereignty.

To share the international experiences, the EIT Law expressly lays down the legal person income tax system, adopting the defined concept of resident and non-resident   enterprises.

The key to define the taxpayer under the legal person income tax system is the  criteria for resident enterprises and non-resident enterprises. The EIT Law uses the  place of incorporation and actual management organization as the criteria todetermine the resident and non-resident enterprises. It is easier to understand and  apprehend place of incorporation but it is difficult to understand the criteria for placeof actual management. How is the place of actual management determined in theImplementation Regulations and what are the relevant considerations?

The officials in charge made the remarks that from the experiences of international practices in recent decades, the place of actual management is in general the place where the enterprise carries on its daily production and business activities. From a legal perspective, it also includes the place where important business decisions are made. From an administrative perspective, the tax law only lays down the principle or

does not lay down anything, leaving the detailed rules to be developed from decided tax cases. To protect tax sovereignty and the willful tax evasion, the Implementation Regulations have expanded the scope for place of actual management and provide that it is the place where the enterprise exercises actual and overall management and control over its production, staff, books of accounts and assets. That helps the issue of administrative decisions later with reference to the actual situations of the enterprises, better protect the tax sovereignty of our country. Detailed criteria can be developed by issuing ministerial rules from the practices in tax collections and administrations.

Budgeted fiscal appropriation is non-taxable income

The EIT Law introduces the concept of non-taxable income. Fiscal appropriation is one of the three items of non-taxable income. What about the various types of subsidies enterprises receive from local governments at the provincial levels or below? How is it provided under the Implementation Regulations?

The officials in charge remarked that the fiscal appropriation, defined as non-taxable income under the Implementation Regulations, is the funds appropriated to the institutions, social bodies and organizations administered under the budget of the local governments, with the exceptions that the State Council, the Ministry of Finance and the State Administration of Taxation provide otherwise. That in general excludes the subsidies and the rebates of local taxes that the enterprise receives from various local governments, and narrows down the scope for fiscal appropriations as an item of nontaxable income. The main considerations for these are (i) the various types of subsidies that the enterprise receives not only include exemption and reduction of turnover taxes, but also include special subsidies for the enterprises to carry on designated activities, both resulting in the increase in net assets and economic benefits flowing in, thus the imposition of income tax being lawful; (ii) the imposition of income tax on the enterprises that receive subsidies from local governments strength the dministration of tax exemption and reduction since the local governments offer various types of tax exemption and reduction in disguise in luring inbound investments, resulting in the erosion of the tax base at the national level; and (iii) the existing legal rules on accounting for government subsidies classify government subsidies as non-operating revenue. That tax rules should be consistent with the accounting rules on government subsidies.

Deduction of reasonable wages and salaries before tax

The EIT Law unifies the deduction of actual payments for various items of expenses,and provides that enterprises can claim deductions of actual and reasonable cost and expense before tax. The Implementation Regulations make specific provisions for the items to be deducted and the criteria for deduction before taxes.

According to the officials, in respect of deduction of wages and salaries, the Implementation Regulations provide that actual and reasonable wages and salaries can be deducted from income. It means that scrapping the limited deduction of wages and salaries for domestically funded enterprises in the past years relieve them of the tax burden. The amount of deducted wages and salaries must be reasonable. Obviously unreasonable amount is not deductible. To the employees in general, the remunerations that the enterprise pays should be considered to be reasonable. There

may be exceptions. Where the shareholders and their close relatives work as the employees in the company, the payment of excessive wages and salaries is thedistribution of dividends in disguise. Alternatively the wages and salaries of the management working for the state owned enterprises are raised in breach of the rules of the departments for the supervision and administration of state owned assets. All

these complicated cases relating to wages and salaries will erode the tax base of the enterprise income tax. To strengthen the administration over tax bases, the Implementation Regulations add the qualification “reasonable” to wages and salaries.The official revealed that the State Administration of Taxation shall issue the 5 “Administrative Measures for the Deduction of Wages” to clarify what is considered

to be “reasonable” wages and salaries in the Implementation Regulations.

60% of the incurred business entertainment expenses are deductible, not exceeding 0.5% on the sales (business) turnover for current year

The Implementation Regulations provide that 60% of the business entertainment expenses incurred in connection with production and business activities shall be deductible from income, but the maximum amount shall not exceed 0.5% of the sales (business) turnover for the current year. What are the policy considerations lying behind this rule?

The official said that the amount of business entertainment expenses is a mix of corporate entertainment and personal consumption. Among them, the personal consumption falls under non-business expenses that should not be deducted before tax. Therefore, there is a requirement to limit the amount of business entertainment to a certain percentage. However, it is difficult to distinguish between business entertainment and personal consumption. The international practice is to arbitrarily set

a relative percentage between the two. In Italy 30% of the business entertainment expenses is deductible before tax. In Canada, the amount is 80%. In the US and New Zealand, the amount is 50%. Taking into consideration of international practices and the existing practice of limiting the deduction of business entertainment to a percentage of the sales amount, we combine the two practices as per experts’ recommendations on the adoption of a strict policy: business entertainment is subject to a 60% deduction and not exceeding 0.5% of the sales amount (business turnover) for the current year.

Limiting the deduction of advising expenses to 15% on sales revenue, and remaining amount being carried over for deduction in future years

The Implementation Regulations consider the combined amount of advertising expenses and business promotion expenses, and provide that the amount of deductible advertising and promotion expenses shall not exceed 15% of the sales amount (business turnover), except for the provisions of the Ministry of Finance and the State Administration of Taxation to the contrary. The amount exceeding the prescribed 15%

can be carried over to future tax years for deduction.

The officials in charge explained that advertising expenses that possess the properties of one-off payment of a large sum and benefit the enterprise for a long period of time should be regarded as a capitalized payment and cannot be deducted in whole in the current tax year. Business promotion has similar properties and should be subject to limits on deduction. The Implementation Regulations permit the deduction of advertising and promotion expenses up to 15% of the sales amount (business turnover), and that the portion in excess of the 15% can be carried over to future tax

years for deduction. The administration has given due consideration to the advertising and business promotion expenses in some industry sectors that require specific

measures to be adopted. In the light of expert opinions and views from relevant departments, the qualification “except for the provisions of the Ministry of Finance and the State Administration of Taxation to the contrary” has been included in the Implementation Regulations with a view to making ministerial rules on the deduction of advertising and business promotion expenses for different industry sectors, in accordance with the provision for the delegation of rule making power in the EIT Law.

Indirect credit helps Chinese enterprises “go abroad”

In accordance with the EIT Law, the corporate income tax the resident enterprises bear indirectly on the dividend and bonus issues from equity investment outside China is eligible for indirect credit. The Implementation Regulations provide that the resident enterprise should hold 20% controlling interest in the equity of the foreign company. What are the policy considerations on this?

The officials said that the PRC EIT law retains the direct credit for tax paid on dividends and bonus issues at the shareholder level and it also introduces the indirect credit for tax on profits earned at the company level out of which the dividends and bonus issued are paid. The adoption of direct and indirect credits gives a helping hand to Chinese resident enterprises going international and increases their competitiveness

in international market. From the perspective of international practices, indirect credit are given on condition that resident enterprises should have actual equity investments in foreign companies. In accordance with the tax laws in the US, Canada, the UK, Australia, and Mexico, resident enterprises holding 10% or more voting rights in the equity investment in foreign companies are eligible for indirect credit. The tax law

requires the equity interest in foreign companies to be 25% for Japanese and Spain investors. It is the first time the PRC EIT law adopts the indirect credit method. The Implementation Regulations provide that the equity interest in foreign companies is 20% for resident enterprises to receive the indirect credit.

New and high technology enterprises by industry sectors

In the light of the requirement for national economic and social development,successful international experiences and the requirement for simple tax system, broad tax bases, low tax rates, and stringent tax collections and administration, the PRC EIT Law adjusts and integrates the tax preferential policies for both domestically and foreign funded enterprises, and gives effect to changes in two dimensions: the tax

policy changes from region-specific preferences to industry-specific preferences,which is to be supplemented by regional tax preferences; the form of tax preferential treatment changes from direct tax exemption and reduction to direct tax exemption and reduction, which is to be combined with reduction in tax bases for indirect taxes.The Implementation Regulations make clarifications on the scope, the conditions, and

the recognition criteria for tax preferential treatments as laid down in the EIT Law.

The officials in charge said that there are three important issues in the recognition of new and hi-tech enterprises. The first is the scope of new and hi-technology enterprises. The Implementation Regulations change the classification of new and high technology by products to classification of the new and high technology by sectors. The Implementation Regulations provide that the products (services) of new and hi-tech enterprises should fall under the scope of <the new and hi-technology industry sectors that receive prior supports from the State> so that it can avoid the problems that product listing and coverage under existing policies are too narrow and that the existing policy is not forward looking. The second issue is the recognition criteria. The Implementation Regulations provide those criteria in principle: the amount of research and development as a percentage to sales; the sales revenue of new and hi-tech products (or services) as a percentage of total revenue; the ratio of employees who possess technical qualifications to the total number of employees in

the company, and other conditions to be met. The Ministry of Science and

Technology, the Ministry of Finance, and the State Administration of Taxation shall formulate policies on this and give the detailed benchmarks with the flexibility to make adjustments for later development.

The third issue is the core proprietary IP rights. The Implementation Regulations lay down the primary requirement for getting recognized as new and high technology enterprises is the ownership in “proprietary IP rights”. In view of the fact that there is no official definition of “proprietary IP rights”, the inclusion of trademark rights, exterior design, copyright that may not have bearing on the core technological

competitiveness of the enterprise into the “proprietary IP rights” will make the scope too wide. The Implementation Regulations finally adopt the “core proprietary IP rights” as one of the criteria for getting recognized to be new and hi-tech enterprises. It is relatively easy to operate and has pointed out the direction for technological innovation. The key point is the IP rights that the enterprise owns and that give core

technical support to the main products and services of the enterprise.

Annual taxable income of small and low profit-making enterprise not exceeding

RMB300,000

The Implementation Regulations give the amount of annual taxable income, the number of employees and the amount of total assets as the benchmark for small profit-making enterprises. Specifically for production enterprises, the annual taxable income shall not exceed RMB300,000, total number of employees shall not exceed 100, and the total asset amount shall not exceed RMB 30 million; for non-production enterprises, the annual taxable income shall not exceed RMB300,000, the number of employees shall not exceed 80, and the total amount of assets shall not exceed RMB 10 million. The scope of the tax concession is larger and the magnitude of tax concession is higher than that as given under the old tax law for domestically funded enterprises.

The officials said that the dividing line that the annual taxable income is RMB300,000 drawn under the Implementation Regulations results from careful testing. About 40% of the enterprises shall be taxed at 20% given that this benchmark is adopted.

The business profits that non-profit making organizations earn are taxable

The PRC EIT Law provides that the income of qualified non-profit making

organizations is exempted from tax. Article 85 of the Implementation Regulations provides that the income of the qualified non-profit making organizations excludes the income derived from profit-making activities of the non-profit making organization. Why is it?

The officials in charge said countries all over the world make a distinction between profit-making and non-profit making activities and give tax preference to non-profit making activities. The relevant legal rules in China provide that non-profit making organizations cannot carry out profit-making activities. To regulate these organizations and plug the loophole that may arise from the profit making activities

carried out by these tax-exempt organizations, the Implementation Regulations expressly provide that the income derived from the profit-making activities would not be exempted from tax. Where some non-profit making organizations derive income from profit-making activities and use them in whole for charitable events, that should

be primarily encouraged under the national policies. Therefore, the Implementation Regulations include the qualification “except for the provision of the Ministry of Finance and the State Administration of Taxation to the contrary”.

Dividend and bonus issue derived from investment over 12 months being exempted from tax

The PRC EIT Law provides that dividends, bonus issues and income from equity investment are tax-exempt income if they are distributed by resident enterprises that satisfy prescribed conditions. What are differences between the conditions to be met by the resident enterprises and the provisions on the taxation of dividends and bonus issues in the old tax law for domestically funded enterprises? What are the policy

considerations?

The officials in charge said that the exemption of income tax on dividend and bonus issues that are distributed among resident enterprises is to eliminate double taxation. Under the old tax regulations for domestically funded enterprises, the distribution of dividends from an enterprise that pays tax at a lower rate to an enterprise that pays tax at a higher rate attracts additional taxes for the high-tax enterprise on the rate

differences. In order to make the tax preferential treatment available to enterprises created in the development of the Western region, the new and high technology enterprises, and the small and low profit-making enterprises, the new EIT Law scraps the practice of imposing additional tax on the rate difference and exempts the income tax on dividend and bonus issues that are distributed by unlisted companies and listed companies, of which the ownership in the investment in the listed companies is over

12 months. To encourage direct investment in production and business activities, the stock speculations in the secondary capital market that is characterized by short-term ownership (less than 12 months) without the primary objective of receiving dividends and bonus issues should not become targets for tax preferential treatments.

The tax exemption and reduction commencing in the year the first sales transaction is reported

The Implementation Regulations provide that enterprises deriving income from the investment in projects of public basic infrastructure that receive primary support from the state shall enjoy tax preferential treatment in the form of “three years’ tax exemption and three years’ tax reduction”, commencing from the tax year in which the first sales transaction for the project is reported. The old tax law for foreign

invested enterprises provided that the year for tax exemption and reduction commences from the first profit-making year. The EIT Law has changed the previous practice from the first profit-making year to the year the first sales transaction occurs. What is the reason for this?

The officials in charge said that the old tax law for foreign invested enterprises adopted the first profit-making year as the year in which the tax exemption and reduction period commenced. That would in practice encourage the postponement of the first profit-making year to avoid paying taxes and made the tax collection and administration a difficult job. The Implementation Regulations adopt a new method under which the tax exemption and reduction commence from the year in which the first sales transaction is recorded. On one hand, this policy change can avoid the

practices by the foreign invested enterprises of putting off the first profit-making year to later years. On the other hand, this policy change can address the issue that the investment scale is big with long period of construction. It is more realistic to the situation under which the domestically funded enterprises receive tax preferences from the date of incorporation. It also encourages the enterprises to shorten the construction period, make the project profitable at the earliest possible moment and improve the return on investment.

Tax adjustment to strengthen the anti-tax avoidance measures

To comply with the relevant provisions on special tax adjustments in the EIT Law and learn from international experiences, the Implementation Regulations expressly lay down provisions for the related parties or associated enterprises in the transactions

with related parties, the adjustment methods for related party transactions, the principle of arm’s length transactions, advanced pricing agreements, the obligations for providing information, collecting taxes as per prescribed profit margins, preventing the use of controlled foreign corporations, prevention on thin capitalization,

general anti-tax avoidance, and the imposition of additional interest on overdue taxes.

The officials in charge said that these provisions strengthen the measures to combat tax avoidance, help prevent and stop acts of tax avoidance and safeguard the interests of the nation. He specially emphasized that after tax adjustments taking effects, the taxpayer, in addition to the payment of additional tax, is liable to a penalty interest that is computed with reference to the bank’s lending rate plus 5% in the period for which additional tax is collected. Where the taxpayer can submit the information to

the tax authority on time, it can be exempted from the payment of additional interest on tax.

Separate rules to be made for filing consolidated tax returns

The EIT Law follows model of the income tax on legal persons. Organizations that are not legal persons should file income tax returns that forms part of the consolidated tax turn for the head office. The filing of consolidated tax returns by head offices would relocate the tax revenues between different regions in the country. Both the taxpayers and local governments are very much concerned about this issue. The Implementation Regulations only lay down one provision in principle. What are the

policy considerations for this?

The officials in charge told us that in accordance with the EIT Law, business organizations that are not legal persons should file tax returns to the tax bureau in the city where the head office is located. That will cause relocation of tax revenue among different regions in the country, and should be dealt with in a reasonable way. We have performed many studies in order to solve the problem of relocation of tax revenues among different regions in a reasonable and proper way and balance the

interests among them after the implementation of the EIT Law and the

Implementation Regulations. The detailed measures shall be formulated by the Ministry of Finance and the State Administration of Taxation, and submitted to the State Council for approval before taking effect. Therefore, the Implementation Regulations only state the principles in general.

Parent and subsidiary companies no longer file group tax returns

The EIT Law provides that except for the provisions by the State Council to the contrary, enterprises should not file group income tax returns. However, the Implementation Regulations do not make relevant provisions for group of companies to file tax returns on a group basis. How will this problem be solved in future?

The official in charge said that as from 1994, the State Council has given approval to 120 large groups of corporations/enterprises to file group tax returns on a trial basis. The policy objective at that period of time is to relieve the enterprises of tax burden and support the development for the groups of enterprises because the operating results of the parent and individual subsidiaries did not present the true information

and it is difficult to distinguish between the enterprises that are operated in accordance with commercial principle and the enterprises that form part of the governmental organizations. With the implementation of the EIT Law, the parent and subsidiary corporations that are legal persons shall file tax returns and pay tax separately. Where there is a requirement to file group tax returns, the State Council shall make separate regulations. Implementation Regulations need not deal with this again since the EIT Law has already made the provisions and delegated the authority on this.

Order of the President of the People’s Republic of China
(No. 63)

The Enterprise Income Tax Law of the People’s Republic of China, which was adopted at the 5th Session of the 10th National People’s Congress of the People’s Republic of China on March 16, 2007, is hereby promulgated and shall come into force as of January 1, 2008.

President of the People’s Republic of China Hu Jintao

March 16, 2007

Enterprise Income Tax Law of the People’s Republic of China

(Adopted at the 5th Session of the 10th National People’s Congress of the People’s Republic of China on March 16, 2007)

Contents

Chapter I General Provisions

Chapter II Taxable Amount of Income

Chapter III Amount of Payable Taxes

Chapter IV Preferential Tax Treatments

Chapter V Withholding by Sources

Chapter VI Special Adjustments to Tax Payments

Chapter VII Administration of Tax Collection

Chapter VIII Supplementary Provisions

Chapter I General Provisions

Article 1 Within the territory of the People’s Republic of China, the enterprises and other organizations which have incomes (hereinafter referred to as the enterprises) shall be payers of the enterprise income tax and shall pay their enterprise income taxes in accordance with this Law.

This Law does not apply to the sole individual proprietorship enterprises and partnership enterprises.

Article 2 Enterprises are classified into resident and non-resident enterprises.

The term “resident enterprise” as mentioned in this Law refers to an enterprise which is established inside China, or which is established under the law of a foreign country (region) but whose actual institution of management is inside China.

The term “non-resident enterprise” as mentioned in this Law refers to an enterprise established under the law of a foreign country (region), whose actual institution of management is not inside China but which has institutions or establishments inside China; or which has not any institution or establishment inside China but which has incomes sourced in China.

Article 3 A resident enterprise shall pay the enterprise income tax on its incomes derived from both inside and outside China.

For a non-resident enterprise with an institution or establishment inside China, it shall pay enterprise income tax on its incomes derived from inside China as well as on incomes that it earns outside China but which has real connection with the said institution or establishment.

For a non-resident enterprise without any institution or establishment inside China, or for a non-resident enterprise whose incomes have no actual connection to its institution or establishment inside China, it shall pay enterprise income tax on the incomes derived from inside China.

Article 4 The enterprise income tax rate shall be 25%.

The tax rate which applies to a non-resident enterprise’s incomes as mentioned in paragraph 3, Article 3 of this Law shall be 20%.

Chapter II Taxable Amount of Income

Article 5 The balance after deducting the tax-free incomes, tax-exempt incomes, all deduction items as well as the permitted remedies for losses of the previous year(s) from an enterprise’s total amount of incomes of each tax year shall be the taxable amount of incomes.

Article 6 An enterprise’s monetary and non-monetary incomes from various sources shall be the total amount of incomes, including:

(1)income from the sale of goods;

(2)income from the provision of labor services;

(3)income from the assignment of property;

(4)dividend, bonus and other equity investment proceeds;

(5)income from interests;

(6)income from rentals;

(7)income from royalties;

(8)income from accepted donations; and

(9)other incomes.

Article 7 The following incomes included in the total amount of incomes shall be tax-free incomes:

(1)The appropriations from the treasury;

(2)The administrative fees and the governmental funds which are charged according to the law and fall under treasury administration; and

(3)Other tax-free incomes as prescribed by the State Council.

Article 8 The reasonable disbursements which are actually incurred and in which have actual connection with the business operations of an enterprise, including the costs, expenses, taxes, losses, etc., may be deducted in the calculation of the taxable amount of incomes.

Article 9 With regard to an enterprise’s disbursements for public welfare donations, the portion which accounts for 12% of the total annual profits or less is allowed to be deducted.

Article 10 None of the following disbursements may be deducted in the calculation of the taxable amount of incomes:

(1)Dividend, bonus and other equity investment proceeds paid to the investors;

(2)Payment for enterprise income tax;

(3)Late fee for taxes;

(4)Pecuniary punishment, fines, and losses of properties confiscated;

(5) Disbursements for donations other than those provided for in Article 9;

(6) Sponsorship disbursements;

(7) Unverified reserve disbursements;

(8) Other disbursements that have nothing to do with the obtainment of revenues;

Article 11 When calculating the taxable amount of incomes, an enterprise is allowed to deduct the depreciations of fixed assets calculated under the relevant provisions.

No depreciation may be calculated for any of the following fixed assets:

(1)The fixed assets which have not yet been put into use, excluding houses and buildings;

(2)The fixed assets rented in by way of commercial lease;

(3)The fixed assets rented out by way of finance leasing;

(4)The fixed assets for which depreciation has been allocated in full amount but which remain in use;

(5)The fixed assets which have nothing to do with the business operations;

(6)The land which is separately appraised and entered into account as an item of fixed asset; and

(7)Other fixed assets for which no depreciation may be calculated.

Article 12 When calculating the taxable amount of incomes, an enterprise is allowed to deduct the amortized expenses of intangible assets calculated according to the relevant provisions.

No amortized expense may be calculated for the following intangible assets:

(1)The intangible assets, for which the self-development expenses have been deducted in the calculation of the taxable amount of incomes;

(2)The self-created business reputation;

(3)The intangible assets which have nothing to do with the business operations; and

(4)Other intangible assets for which no amortized expense may be calculated.

Article 13 The following expenses incurred by an enterprise shall, in the calculation of the taxable amount of incomes, be treated as long-term deferred expenses. Those amortized under the relevant provisions are allowed to be deducted:

(1)The expenses for the rebuilding of a fixed asset, for which depreciation has been prepared in full amount;

(2)The expenses for the rebuilding of a rented fixed asset;

(3)The expenses for the heavy repair of a fixed asset; and

(4)Other expenses that shall be treated as long-term deferred expenses.

Article 14 During the period of external investment, an enterprise shall not deduct the costs of the investment assets when it calculates the taxable amount of incomes.

Article 15 Where an enterprise uses or sells its inventories, it is allowed to deduct the costs of the inventories calculated according to the relevant provisions in the calculation of the taxable amount of incomes.

Article 16 Where an enterprise transfers an asset, it is allowed to deduct the net value of the asset in the calculation of the taxable amount of incomes.

Article 17 When an enterprise calculates its enterprise income taxes on a consolidated basis, it shall not offset the losses of its overseas business institutions against the profits of its domestic business institutions.

Article 18 The losses incurred by an enterprise during a tax year may be carried forward and subtracted from the incomes during subsequent years for a maximum carry-forward period of 5 years.

Article 19 Where a non-resident enterprise obtains incomes as described in paragraph 3, Article 3 of this Law, it shall calculate the taxable amount of income through following approaches:

(1)The taxable amount of incomes from dividends, bonuses and other equity investment proceeds, interests, rentals and royalties shall be based on the total amount of incomes;

(2)The taxable amount of incomes from the assignment of property shall be the balance of the total amount of incomes less the net value of the property; and

(3)The taxable amount of any other income shall be calculated by reference to the approaches as mentioned in the preceding items.

Article 20 The specific measures for the scope and criterions of revenues and deductions, as well as the tax treatment of assets as provided for in the present Chapter shall be formulated by the treasury and tax administrative departments of the State Council.

Article 21 When calculating the taxable amount of incomes, if the enterprise’s financial or accounting treatment method does not conform to any tax law or administrative regulation, the taxable amount shall be calculated in accordance with the tax law or administrative regulation.

Chapter III Amount of Payable Taxes

Article 22 The amount of payable taxes shall be the balance of the taxable amount multiplied by the applicable tax rate minus the tax amounts deducted and exempted as provided for in the present Law .

Article 23 An enterprise may deduct from the taxable amount of incomes of the current period the amount of income tax it has already paid overseas for the following incomes. The limit of tax credit shall be the payable amount of taxes on such incomes computed according to this Law. The part exceeding the limit of tax credit may, during the five subsequent years, be offset by way of deducting the limit of tax credit of each year from the balance after the deduction of the limit of tax credit of the current year:

(1)A resident enterprise’s taxable incomes derived from outside China; and

(2)Taxable incomes earned outside China by a non-resident enterprise with institutions or establishments in China, but which have no actual connection with the said institutions or establishments.

Article 24 For the dividends, bonuses and other equity investment proceeds derived from outside China that a resident enterprise obtains from a foreign enterprise that it controls directly or indirectly, the portion of income tax on this income paid by the foreign enterprise outside China may be treated as the allowable tax credit of overseas income tax amount of the resident enterprise and be deducted within the limit of tax credit as prescribed in Article 23 of this Law.

Chapter IV Preferential Tax Treatments

Article 25 Preferential in enterprise income tax treatments are granted to the important industries and projects whose development is supported and encouraged by the state.

Article 26 The following incomes of an enterprise shall be tax-free incomes:

(1)The income from treasury bonds;

(2)Dividends, bonuses and other equity investment proceeds distributed between qualified resident enterprises;

(3)Dividends, bonuses and other equity investment proceeds which a non-resident enterprise with institutions or establishments in China obtains from a resident enterprise and which have actual connection with such institutions or establishments; and

(4)Incomes of qualified not-for-profit organizations.

Article 27 The enterprise income tax on the following incomes may be exempted or reduced:

(1)The incomes incurred from projects of agriculture, forestry, husbandry and fishery;

(2)The incomes incurred from business operations of the important public infrastructure investment projects supported by the state;

(3)The income incurred from the projects of environmental protection, energy and water saving, which meet the relevant requirements;

(4)The incomes incurred from the transfer of technologies, which meets the relevant requirements; and

(5)The income as prescribed in paragraph 3, Article 3 of this Law.

Article 28 The enterprise income tax on a small meagre-profit enterprise which meets the prescribed conditions shall be levied at a reduced tax rate of 20%.

The enterprise income tax on important high- and new-tech enterprises which are necessary to be supported by the state shall be levied at the reduced tax rate of 15%.

Article 29 The autonomous organ of an autonomous region of ethnic minorities may decide the reduction or exemption of the local portion of the enterprise income tax to be paid by enterprises within the said autonomous region. The decisions of deduction or exemption made an autonomous prefecture or county shall be submitted to the people’s government of the province, autonomous region, or municipality directly under the Central Government for approval.

Article 30 The following expenses of an enterprise may be additionally calculated and deducted:

(1)The expenses for the research and development of new technologies, new products and new techniques; and

(2)The wages paid to the disabled employees or other employees whom the state encourages to hire.

Article 31 A startup investment enterprise engaged in important startup investments which are necessary to be supported and encouraged by the state may deduct from the taxable amount of incomes a certain proportion of the amount of investment.

Article 32 Where it is surely necessary to accelerate the depreciation of any fixed asset of an enterprise because of technological progress or due to any other cause, it may shorten the term of depreciation or adopt an approach to accelerate the depreciation.

Article 33 The incomes generated by an enterprise from producing products conforming to the industrial policies of the state by way of comprehensive utilization of resources may be downsized in the calculation of the amount of taxable incomes.

Article 34 The amount of an enterprise’s investment in the purchase of special equipment for environmental protection, energy and water saving, work safety, etc. may be deducted from the tax amount at a certain rate.

Article 35 The specific measures for the preferential tax treatments as mentioned in this Law shall be formulated by the State Council.

Article 36 Where the national economic and social development so requires, or the business operations of enterprises have been seriously affected by emergencies and other factors, the State Council may formulate special preferential policies concerning the enterprise income tax and submitted them to the Standing Committee of the National People’s Congress for archival purposes.

Chapter V Withholding by Sources

Article 37 The payable income taxes on the incomes as described in paragraph 3, Article 3 of this Law which a non-resident enterprise earns shall be withheld by sources, with the payer acting as the obligatory withholder. The tax amount shall be withheld by the obligatory withholder from each payment or payment due.

Article 38 For the payable income taxes on the incomes which a non-resident enterprise obtains from undertaking an engineering project or providing labor services inside China, the tax organ may designate the payer of the project price or remuneration as the obligatory withholder.

Article 39 For the income tax that shall be withheld under Articles 37 and 38 of this Law but which the obligatory withholder has failed to withhold or is unable to perform the withholding obligation, the taxpayer shall pay them at the place where the income has occurred. If the taxpayer fails to do so, the tax organ may recover the payable tax of the enterprise from its other income items inside China for which the payer should pay.

Article 40 A obligatory withholder shall turn over the tax payments which it withholds every time to the state treasury within 7 days after the date of withholding and submit to the local tax organ a form of report on the withheld enterprise income taxes.

Chapter VI Special Adjustments to Tax Payments

Article 41 With regard to a transaction between an enterprise and its affiliate, if the taxable revenue or income of the enterprise or its affiliate decreases due to inconformity with the arms length principle, the tax organ may make an adjustment through a reasonable method.

The costs of an enterprise and its affiliate for joint development or accepting the assignment of intangible assets, or jointly providing or accepting labor services shall, according to the arms length principle, be apportioned in the calculation of the taxable amount of incomes.

Article 42 An enterprise may file with the tax organ the pricing principles and computation approaches for the transactions between it and its affiliates, the tax organ and the enterprise shall enter into an advance pricing arrangement upon negotiations and confirmation.

Article 43 When an enterprise submits to the tax organ its annual enterprise income tax returns, it shall enclose an annual report on the affiliated transactions between it and its affiliates.

When the tax organ investigates into the affiliated transactions, the enterprise and its affiliates, as well as other enterprises relating to the affiliated transactions under investigation, shall provide the pertinent materials according to the relevant provisions.

Article 44 Where any enterprise refuses to provide the materials of transactions between it and its affiliates, or provides any false or incomplete materials which cannot reflect the true information about the affiliated transactions, the tax organ may decide its taxable amount of income upon check.

Article 45 With regard to an enterprise which is established by a resident enterprise or controlled by an resident enterprise or by a Chinese resident and which is located in a country (region) where the actual tax burden is obviously lower than the tax rate as prescribed in paragraph 1 of Article 4 of this Law, if the profits are not distributed or if less profits are distributed for a cause not attributable to reasonable business operations, the portion of the aforesaid profits attributable to this resident enterprise shall be included in its incomes of the current period.

Article 46 The interest disbursement for any credit investments and equity investments, which an enterprise accepts from its affiliates, in excess of the prescribed criterion shall not be deducted in the calculation of the taxable amount of income.

Article 47 Where an enterprise makes any other arrangement not for any reasonable business purpose, if its taxable revenue or income decreases, the tax organ has the power to make an adjustment through a reasonable method.

Article 48 If the tax organ makes an adjustment to a tax payment under the provisions of this Chapter and if it is necessary to recover the tax payment in arrears, it shall do so and charge an additional interest under the provisions of the State Council.

Chapter VII Administration of Tax Collection

Article 49 The administration of the collection of enterprise income taxes shall be governed by the Law of the People’s Republic of China on the Administration of Tax Collection in addition to this Law.

Article 50 Unless it is otherwise provided for in any tax law or administrative regulation, the tax payment place of a resident enterprise shall be the registration place of the said enterprise. But if its registration place is without China, the tax payment place shall be the place where its institution of actual management is located.

A resident enterprise which has established operational institutions without legal person status in China shall calculate and pay its enterprise income taxes on a consolidated basis.

Article 51 Where a non-resident enterprise obtains any income as described in paragraph 2, Article 3 of this Law, the tax payment place shall be the place where the institution or establishment is located. Where a non-resident enterprise has established two or more institutions or establishments within China, it may, subject to the examination and approval of the tax organ, choose to have its main institution or establishment pay the enterprise income tax on a consolidated basis.

For a non-resident enterprise which obtains any income as described in paragraph 3, Article 3 of this Law, the place where the obligatory withholder is located shall be the place for the payment of enterprise income taxes.

Article 52 Unless it is otherwise provided for by the State Council, enterprises shall not pay their enterprise income taxes on a consolidated basis.

Article 53 Enterprise income taxes shall be calculated on the basis of a tax year. A tax year commences on January 1 and ends on December 31 of the Gregorian calendar year.

Where an enterprise starts or terminates its business operations in the middle of a tax year so that its actual business operation period in this tax year is shorter than 12 months, its actual business operation period shall constitute a tax year.

At the time of liquidation of an enterprise, the liquidation period shall be a tax year.

Article 54 Enterprise income taxes shall be paid in advance on the monthly or quarterly basis.

An enterprise shall, within 15 days after the end of a month or quarter, submit to the tax organ an enterprise income tax return for advance payment and pay the tax in advance.

An enterprise shall, within 5 months after the end of each year, submit to the tax organ an annual enterprise income tax return for the settlement of tax payments and settle the payable or refundable amount of taxes.

When an enterprise submits an enterprise income tax return, it shall attach to it the financial statements and other relevant materials according to the relevant provisions.

Article 55 When an enterprise terminates its business operation in the middle of a year, it shall, within 60 days after the actual date of termination of its business operations, apply to the tax organ for calculating and paying the enterprise income taxes of the current period.

Before an enterprise goes through the deregistration formalities, it shall make a declaration to the tax organ on the liquidation and shall pay the enterprise income taxes.

Article 56 Enterprise income taxes to be paid under this law shall be calculated on the basis of RMB. For any income calculated on the basis of a currency other than RMB, the amount of taxes shall be calculated and paid after this income is converted into RMB.

Chapter VIII Supplementary Provisions

Article 57 The enterprises which have already been established prior to the promulgation of the present Law and enjoyed low tax rates according to the provisions of the tax laws and administrative regulations in force at that time may, according to the provisions of the State Council, continue to enjoy the preferential treatments within five years after the present Law is promulgated and gradually transfer to the tax rate as provided for in the present Law. Those which enjoy the preferential treatment of tax exemption for a fixed term may, according to the provisions of the State Council, continue to enjoy such treatment after the promulgation of the present Law until the fix term expires. However, for those that have failed to enjoy the preferential treatment due to failure to make profits, the term of preferential treatment may be counted as of the year when the present Law is promulgated.

Within the particular areas established by law for developing foreign economic cooperation and technological exchanges and the high- and new-tech enterprises that need the key support of the state newly established within the areas where the State Council has provided for the implementation of the abovementioned special policies may continue to enjoy transitional preferential tax treatments, with the specific measures thereof to be formulated by the State Council.

Other enterprises falling in the encouraged category as already determined by the State Council may enjoy the preferential treatment of tax reduction or exemption according to the provisions of the State Council.

Article 58 Where any provision in a tax treaty concluded between the government of the People’s Republic of China and a foreign government is different from the provisions in this Law, the provision in the said treaty shall prevail.

Article 59 The State Council shall formulate a regulation on the implementation of this Law.

Article 60 This law shall come into force as of January 1, 2008. The Income Tax Law of the People’s Republic of China on Foreign-funded Enterprises and Foreign Enterprises as adopted at the 4th Session of the Standing Committee of the 7th National People’s Congress on April 9, 1991 and the Interim Regulation of the People’s Republic of China on Enterprise Income Tax as promulgated by the State Council on December 13, 1993 shall be repealed simultaneously.

ICBC Peony Card instalments have the characteristics of lower instalments startpoint, more instalments choices, easy repayment, more flexible extension, zero-fee for repayment in advance, and return instalment fees when the goods are returned.

★Cards that could apply for instalments
ICBC Cards that could apply for instalments include Peony International Credit Card, Peony Credit Card, only for personal customers.

★Start amount for instalments
RMB/HKD 600, Dollar/Euro 100

★Instalments term choices and fee standard
There are 6 choices of 3, 6, 9, 12, 18, 24 terms provided to the customers, and the fees are charged corresponding to the terms.

Notes:
1. Instalment fees and extension fees are withheld for one-time from the cardholder’s account according to the standard during the transaction.

2. Instalment fees and extension fees of different regions may vary from each other because of the different sales activities, and please enquire local ICBC for detailed standard.

★Customers who have already applied for instalments could also apply for extensions for the remaining amount, only one extension is allowed in one installment and the fees ratio is equivalent to that of the instalments.

★If customers apply for repayment in advance, there is no fee.

★Application Channels
1. When you are consuming at ICBC designated special merchants, you could apply for instalments directly to the cashier.

2. From the next day of your consumption to three working days before the repayment due day, you could call 95588 and ask the operators to apply, or go to ICBC outlets to apply.

★Notes
1. The sum amount of instalments and fees could not transcend the available credits, and the withholding amount of each term is regarded as the consumption of the current month with interest-free repayment period.

2. If you apply for instalments through 95588, you should bring on your application during the period from the next day of your consumption to three working days before the repayment due day.

3. The current day of your application for instalments is the withholding day of the first term, that of the next terms are the same with the first term. If the next repayment month has fewer days than the withholding day of the first month, then the withholding day is the last day of this month.

4. The points counting regulation of instalments is the same as general consumptions, cumulating according to the withholding amount of each term.

China Industrial and Commercial Bank hereby extends its deep respect to you and thanks you for your persistent confidence and support to Peony Card.

To adapt to the development trend of global bank card business, provide you with more quality service and ensure your lawful rights and interests, ICBC has revised the ICBC Peony International Debit Card Regulation and the revised regulation (hereinafter referred to as the new Regulation) has been approved by China Banking Regulatory Commission and was published on Financial Times and took effect on December 18, 2003. ICBC hereby makes the following statements about matters after the new Regulation takes effect.

1. After the new Regulation is published and takes effect, ICBC will no longer issue relief printed peony international debit card (hereinafter referred to as relief printed international debit card). Where your relief printed international debit card needs to be renewed upon maturity date, ICBC will renew the card with lithographic peony international debit card (both in RMB/USD, same as hereinafter). If your relief printed international debit card needs to be replaced due to loss reporting or damage of card during the card’s term, ICBC will renew the card with lithographic peony international debit card; if you still wants to replace relief printed international debit card, ICBC will renew card for you, and the term of the renewed card is consistent with that of the original card.

2. To improve service level, ICBC will, by combining implementation of the new Regulation after systemic reconstruction and preparation is completed, collectively add RMB account to the original relief printed international debit card on April 20, 2004 and update it into the bank card that can be used both in China and abroad.

Before adding RMB account, relevant provisions about RMB account in the new Regulation do not apply to relief printed international debit card with single currency for the time being. During this period, provisions that loss reporting by telephone takes effect instantly and account query and request for correction shall be replied within 30 days in the new Regulation apply equally to your relief printed international debit card.

3. After RMB account is added into your relief printed international debit card, deposit, withdrawal, account transfer in RMB can be conducted at ICBC business offices in China; cash withdrawal in RMB can be made at ATMs with ICBC mark or Union Pay mark; consumption by charging to card can be made at appointed stores with ICBC mark or Union Pay mark; account query can be made via ICBC internet banking (www.icbc.com.cn); if you lose the card in China, you also can enjoy emergency cash withdrawal service provided by ICBC. For deposit in RMB account, ICBC shall compute interest for you according to demand deposit interest rate stipulated by the People’s Bank of China and shall deduct interest tax for you according to law.

In order to prevent operative risks and ensure the safety of your capital, after RMB account is added, the relief printed international debit card no longer has functions of on-line shopping, pre-authorization and petty amount transaction. Other functions of relief printed international debit card held by you remain unchanged.

4. After RMB account is added, if you make consumption in appointed organization with peony international debit card in China, draw cash in RMB at appointed business offices or ATMs (including ATMs of other commercial banks) or conduct account transfer with your other RMB accounts, RMB account shall be used for settlement for all these transactions. If you make consumption or draw cash at international credit card organization outside China, draw cash in foreign currency at appointed business office in China or conduct account transfer with your other foreign currency accounts, foreign currency account shall be used for all these transactions. RMB account and foreign currency account shall not be mixed.

5. Notification period of the new Regulation is from December 18, 2003 to February 15, 2004. During notification period, if you do not want to use the peony international debit card any more due to modification of regulation, you can handle account cancellation procedure at card issuing institution and ICBC will refund annual fee pro rata according to the annual fee receipt provided by you. If you apply for account cancellation after expiration of the notification period, ICBC will not refund annual fee any more.

To ensure your normal use of the peony international debit card, if you have any question, don’t hesitate to call ICBC 24hour customer service telephone (010-95588).

ICBC Peony Card Center
December 18, 2003

ICBC Peony International Debit Card Regulation

Article I
Peony international debit card is issued by the Industrial and Commercial Bank of China (hereafter referred to as the “ICBC”), generally accepted in China Mainland and foreign countries, settled in both RMB and a certain designated foreign currency, and has such functions as consumption, account transfer and settlement, cash deposit and withdrawal etc.

Article II
Any of ICBC business offices handling Peony international debit card business, appointed units, and holders of Peony international debit card should abide by this regulation.

Article III
Peony international debit card is classified into Peony Visa Card and Peony MasterCard by brand.

Article IV
Peony international debit card can be used at any of appointed units, designated business offices, local registration authorities (LRA) of domestic and foreign credit card organizations.

Article V
Any person with complete civil capacity and steady income can apply to the card issuing institution for a Peony international debit card by his/her own valid identity certificate and related data.

Article VI
Any transaction by use of password will be deemed the cardholder’s own conduct by the card issuing institution, and any of electronic information records produced by various settlement transactions by use of such electronic information as password etc. will be valid evidence for these transactions. The receipt for any transaction without the use of password will be valid evidence for this transaction if recording the signature of the cardholder. The card issuing institution has right to record income and expenses incurred by the use of Peony international debit card into the cardholder’s account.

Article VII
Any cardholder can deposit his/her cash or wages, or transfer personal legal labor income, investment yields, and other income into the RMB account of Peony international debit card.
Any cardholder can deposit his/her foreign cash, or transfer funds from his/her foreign exchange account (foreign currency account inclusive) into the foreign currency account of Peony international debit card, but should abide by the Management

Measures on Personal Foreign Exchange of the State Administration of Exchange Control in any way, and follow the personal foreign management system of the P.R. of China when withdrawing foreign cash no matter in China Mainland or foreign countries.

The deposit in the account of Peony international debit card accrues interest at the rate of RMB or foreign currency demand deposit provided by the People’s Bank of China (hereafter referred to as the “PBC”), and the card issuing institution will withhold and remit the interest tax according to the laws.

Article VIII
Any cardholder can use his/her RMB account to settle his/her consumption at domestic appointed units, RMB cash withdrawal at designated business offices or ATMs (those of other commercial banks inclusive), fund transfer to/from any other of his/her own RMB accounts.

Any cardholder can use foreign currency account to settle his/her consumption or cash withdrawal at any LRA of domestic or foreign international credit card organizations, foreign cash withdrawal at any of domestic designated business offices, or fund transfer to/from any other of his/her own foreign currency accounts.

The use of RMB account and foreign currency account should be separated.

Article IX
Any cardholder can use his/her Peony international debit card in foreign countries only for the payment under the service trade account, but not for the investment and trade payment under the capital account, or the illegal transactions and acts prohibited by the international laws.

Article X
Any cardholder can but withdraw RMB cash for five times and accumulatively RMB 5,000 at most every day at any of domestic designated ATMs by card and password.

Any cardholder can but use his/her Peony international debit card in foreign countries to withdraw cash accumulatively no more than USD 1,000 or equivalent foreign currency every day, and accumulatively no more than USD 5,000 or equivalent foreign currency every month.

Article XI
Peony international debit card can not be overdrawn. If there is any overdraft incurred by the acceptance of foreign banks or appointed units, or the commissions, the card issuing institution has the right of resource to the cardholder for the amount of overdraft, and also has right to freeze the use of card. The card will return to normal use only after the cardholder pays off the amount of overdraft.

Article XII
The useful life of Peony international debit card is eight years, the card issuing institution will charge the annual fee for the first year from the cardholder’s account after the cardholder deposits money for the first time, and initiatively debit and collect the annual fee for the years to come when sufficient balance is available based on the collecting date in the first year. If wanting to continue the use of card after maturity, the cardholder should replace it with a new card.

Article XIII
The card issuing institution should provide the cardholder with such services as consulting, inquiry, loss-reporting, processing complaints, and issuing bank statements for the cards involving transactions (except otherwise agreed with the cardholder) etc., and give a reply to the requirements of the cardholder for inquiring and correcting transactions and accounts within 30 days after the date of acceptance.

Article XIV
The cardholder of Peony international debit card can only use the card him/herself, but not lease or lend it out, and should not refuse paying the amount due to the card issuing institution by the reason of any dispute with any of the appointed units.

Article XV
Any cardholder should advise the card issuing institution about any change of his/her correspondence address, telephone number, dwelling place etc. in written or other forms agreed by both parties in due course so that the change procedures can be handled. Otherwise, the card issuing institution assumes no responsibility for any consequence accrued hereof.

Article XVI
Any cardholder should cancel his/her account and apply for a new card if his/her card gets damaged.

Article XVII
Any cardholder should go to the nearest ICBC business office and handle written loss-reporting or telephone loss-reporting immediately getting his/her Peony international debit card lost. The cardholder assumes no responsibility for any transaction arisen after completing the loss-reporting procedures. If wanting to replace with a new card after loss-reporting, the cardholder can conduct the replacement procedures by the written loss-reporting application and his/her own valid identity certificate.

Article XVIII
The card issuing institution has right to cancel the qualification of any cardholder disobeying this regulation, and authorize a competent authority to take back his/her Peony international debit card.

Article XIX
Any amendment to this regulation or adjustment on the interest rate of Peony international debit card will be announced on the newspaper within 30 days after getting approved by the China Banking Regulatory Committee, and any cardholder can choose whether to continue the use of Peony international debit card within 60 days after the date of announcement; if not, the card issuing institution will refund the collected annual fee proportionally, and handle the cancellation procedures.

Article XX
This regulation is subject to the constitution and construction of the ICBC, and shall come into effect after the approval of the China Banking Regulatory Committee.

Article II
Any of ICBC branches handling international card business, appointed units, or international card holders should follow this regulation.

Article III
The international card can be used at any of the domestic appointed units, the designated business offices, or the accepting points of domestic and foreign credit card organizations or international credit card companies and settled in both RMB and a certain designated foreign currency.

Article IV
The international card is classified into Peony Visa Card, Peony Master Card and Peony Express Card by brand, business card and personal card by issuing objective, and Platinum Card, Golden Card and Classic Card by credit line.

Article V
Any legal person or other economic organization authorized by the legal person (hereunder referred to as the “unit”) able to legally possess foreign exchange can apply to any of ICBC International Card Issuing Institutions (hereunder referred to as the “card issuing institution”) for business cards by virtue of its bank account license issued by PBC. Any unit can apply for several business cards but should designate their cardholders respectively on the application form.

Any person with complete civil capacity and steady income can apply to the card issuing institution for personal cards by virtue of his/her own valid identity certificate and relevant data. He/she can apply for either personal principal card with different brands or different credit lines or supplementary cards for his/her spouse or relatives with complete civil capacity.

Article VI
Any corporate or personal applicant for an international card should complete the application form, and sign the Peony Credit Card Use Agreement with the card issuing institution. The card issuing institution will determine whether to issue the card, the variety of card issued and the credit line according to its application data and credit status.

Article VII
The card issuing institution will set up a RMB account and a foreign currency account for the cardholder and authorize credit lines for the RMB account and the foreign currency account respectively. The card issuing institution has right to adjust the credit lines of his/her accounts according to the situations of the cardholder’s card use and the changes of his/her credit status.

Different card varieties have different credit lines, and the credit line (monthly overdraft balance) of all personal cards underlying the same one account should not exceed RMB50 thousand (or equivalent foreign currency). The credit line of business card will be included into the integrated credit line for unified management, and should not exceed 3% of the integrated credit line provided by the card issuing bank for this client. The monthly overdraft balance of the client without any integrated credit line should not exceed RMB100 thousand (or equivalent foreign currency). Any international card underlying the same one account will jointly use the credit line of this account.

Article VIII
Any transaction conducted by the aid of password will be deemed as the cardholder’s own act by the card issuing institution. Any electronic information record incurred by various settlement transactions conducted by the aid of password and other electronic information will be deemed as the valid certificate for these transactions. For any transaction without the aid of password, any transaction receipt recording the cardholder’s signature will be deemed as the valid certificate for this transaction.

Article IX
Any client can transfer funds from his/her basic account to the RMB account of his/her business card, but cannot conduct cash deposit or withdrawal, or deposit his/her sales revenue into the account of his/her business card. When settling the payment for goods or labor services, the client cannot use the credit line.
Any corporate client can transfer funds from its foreign exchange account to the foreign currency account of its business card, but cannot deposit or withdraw foreign cash in China, and its foreign exchange account should meet the following conditions.
(I) It is opened according to relevant provisions of domestic foreign exchange account management issued by PBC;

(II) There include corresponding payment contents within the income and expenditure scope of foreign exchange account. The single overdraft amount of the same one cardholder’s business card should not exceed RMB50 thousand (or equivalent foreign currency).

Article X
Any personal card holder can deposit his/her cash or transfer his/her wage funds from his/her income accounts such as personal legal compensation for services and returns on investment into the RMB account of his/her personal card, or deposit his/her foreign cash or transfer from his/her foreign exchange account (or foreign currency account) into the foreign currency account of his/her personal card. Both account transfer and deposit of this account should be conducted according to the Management Measures on Personal Foreign Exchange promulgated by the State Administration of Foreign Exchange. The foreign cash withdrawal in China should follow the relevant personal foreign exchange management system of the P.R China.

When withdrawing cash at domestic designated ATMs by virtue of card and password, any cardholder can only withdraw RMB cash for five times at most every day, with an accumulative amount of not exceeding RMB 5000. The cash that the cardholder uses the credit line to withdraw by each card every day should not accumulatively exceed RMB 2000 (or equivalent foreign currency).

Article XI
Except cash and account transfer transactions, any other transactions conducted by the cardholder is interest free from the date of transaction to the date of repayment at maturity advised on the bank statement (hereunder referred to as the “date of repayment at maturity”) (inclusive), which is the 25th day after the date of generating the bank statement. The cardholder should repay any amount payable before the completion of business at the date of repayment at maturity (business day, the same as below) without the necessity of paying any overdraft interest.

The cardholder can make repayment according to the minimum repayment amount provided by the card issuing institution, which should not be lower than 10% of the overdraft balance. Any cardholder failing to make full repayment before the date of repayment at maturity (inclusive) can not enjoy the treatment of interest-free repayment period; for the paid part, the interest will be charged from the date of overdraft transaction to the date of repayment, and for the unpaid part, the interest will continue to be accrued from the date of overdraft transaction. The overdraft will be charged a compound interest by month. If failing to fully repay the minimum repayment amount before the completion of business at the date of repayment at maturity, the cardholder should also pay an overdue fine according to 5% of the unpaid part of the minimum repayment amount besides paying an overdraft interest according to the interest accrual method stated above. If the cardholder fails to fully repay the minimum repayment amount before the completion of business at the date of repayment at maturity for no less than two times in succession, the card issuing institution has right to stop the use of this card.
The overdraft interest rate follows the relevant provisions of PBC.

The card issuing institution pays no interest for the deposit in the account.

Article XII
Any cardholder using the credit line to withdraw cash or transfer funds into other personal account can not enjoy the treatment of interest-free repayment period and should pay an overdraft interest according to five ten-thousandth of the payment amount every day from the date of transaction to the date of repayment.

Any cardholder overusing the credit line authorized by the card issuing institution and failing to repay the overrunning part before the completion of business at the date of account overrun (namely the date of entering the amount of this transaction into account by the card issuing institution) should pay an overrunning fee according to 5% of the overrun part.

The overdraft interest, fee (overrunning fee, overdue fine, account transfer fee etc.) will enter the account of cardholder as a debit item.

Article XIII
Any cardholder’s consumption at the appointed units or RMB cash deposit & withdrawal at the designated savings office will be credited or debited into the RMB account; any foreign cash deposit & withdrawal at the designated savings offices, or consumption or cash withdrawal at the accepting point of domestic and foreign credit card organizations or credit card companies will be credited or debited into the foreign currency account.

Article XIV
The useful life of international card is five years at most, any cardholder needing to continue its use after maturity should conduct new card replacement procedures. Any expired international card cannot be used any more, but the use agreement continues to take effect. The card issuing institution continues to reserve the right of management and recourse to the international card. Any cardholder not replacing his/her expired card with a new card or suspending his/her card use in the midway should return the international card to the card issuing institution and conduct the cancellation procedures.

The useful life of the replaced card is the same as that of the original card.

Article XV
The card issuing institution should handle the cancellation procedures for the cardholder according to the relevant business provisions after accepting the cardholder’s application for cancellation and return the funds in the business card account to his/her basic deposit account after cancellation.

Article XVI
Any cardholder should timely repay the principal & interest and the expense of bank loan underlying the international card, otherwise the card issuing institution has right to press or claim for payment according to the laws.

Article XVII
Both the card issuing institution and the cardholder should abide by the Peony Credit Card Use Agreement. If any party fails to perform the agreement, the other party has right to prosecute its legal responsibility according to the agreement. If the cardholder fails to follow the regulation and the use agreement, the card issuing institution has right to cancel his/her qualification, and authorize the competent authorities to recall his/her international card.

Article XVIII
The card issuing institution should provide consulting, inquiry, loss-reporting, complaints and other services for the cardholders, give reply to the cardholder’s inquiry about the account information or request for change within thirty days, and keep the cardholder’s credit data confidential according to relevant laws of the state.

Article IXX
The cardholder should provide the card issuing institution with real and authentic application data, and offer up-to-standard guarantees according to the requirements of the card issuing institution; abide by the ICBC Peony International Credit Card Regulation, and perform the Peony Credit Card Use Agreement; keep well the international card and password; should not rent and lend his/her international card; should not refuse to repay the amount due to the card issuing institution by reason of any dispute with the appointed units; and should advise the card issuing institution in written or in other forms agreed by both parties if there occur any significant change in his/her correspondence address, contact number, address, occupation, income etc.

Article XX
Any cardholder should go to the nearest ICBC business office to conduct written loss-reporting or telephone loss-reporting immediately after getting his/her international card lost, and will assume no responsibility for any transaction conducted after the completion of loss-reporting procedures. If needing to replace it with a new card after the loss reporting, the cardholder can carry his/her written loss-reporting application form and his/her own valid identity certificate to conduct the replacement procedures.

Any cardholder can carry his/her own valid identity certificate and international card, and apply to the card issuing institution for password resetting in written if getting his/her password forgotten.

Article XXI
If any adjustment on the charging items and standards is announced on the newspaper within 30 days after authorized by China Banking Regulatory Committee, any cardholder can choose whether to continue his/her bankcard use within 60 days after the date of announcement; if the cardholder choose not to continue his/her bankcard use, the bank will proportionally refund the collected annual fee and handle the cancellation procedures.

Article XXII
This regulation is to be constituted and constructed by ICBC, and will be put into effect after authorized by China Banking Regulatory Committee.

　　But before you liquidate your financial assets, buy gold bullion, and move to a cave in Montana, you may wish to consider that current predictions of global economic collapse may be simply hyperbole. It has happened before. Clinton’s quote above actually refers to the collapse of Long Term Capital Management in 1998 —— right before NASDAQ clocked an 88% gain in 1999. Nor does this global crisis stand up to the scrutiny of historic comparison. Remember the S&L crisis in the early ’80s? It cost the U.S. economy about 3.5% of GDP —— about 5x the size of subprime write-offs so far. Or how about the dark days of 1981, when the Federal Reserve drove its key interest rate to 19% in an effort to whip inflation? Bill Clinton’s “Great Depression of 1998″ doesn’t even merit mention.

　　Global Financial Crisis: The Current State of Play

　　Comparing economic statistics is inevitably a “glass is half empty” versus “glass is half full” kind of game. Both Pollyannas and Cassandras can marshal endless statistics to support their version of events. But since it’s the Cassandras’ views that are the flavor of the day, let’s look at some “glass is half full” statistics on the U.S. economy.

　　Companies in the U.S. private sector added 130,000 jobs in January and the unemployment rate eased to 4.9%. The Institute for Supply Management’s index of manufacturing activity rose to 50.7 in January —— back above the 50 threshold that indicates expansion consistent with GDP growth of roughly 2%. Nearly 93% （!） of purchasing managers said that turmoil in financial markets was having no effect on their companies’ ability to obtain regular or additional financing. That situation indicates that the turmoil is restricted to Wall Street and subprime households.

　　True, that after rip roaring performances in Q2 and Q3, the U.S. economy has stumbled. But a look behind the headline numbers is revealing. Good news came from the consumer sector （spending increased by 2%）, business investment （jumping 7.5%）, and exports （up 3.9%）. It was declines in residential investment （down 23.9%） and in inventory investment that almost wiped out those gains. All of this indicates that the economy stands less at the precipice of the next Great Depression than at a cyclical purging of excesses —— particularly in the housing sector.

　　Global Financial Crisis: Professor Bernanke’s Report Card

　　Aware that the financial crisis could spread to other sectors, the Fed has moved remarkably aggressively, cutting rates by 1.25 percentage points in eight days —— a rate-cutting spree almost unheard of in central banking history. The Fed now has cut rates five times by a cumulative 2.25 percentage points —— and there is no sign that the Fed is done. Thanks to the maneuverings of Hank Paulson, George Bush soon will sign a bill that will pump some $150 billion into the American economy for U.S. consumers to spend. That kind of coordination between fiscal and monetary authorities is as unprecedented as it is both prompt and impressive.

　　Sure, the Cassandras are vilifying the Fed’s actions. Bernanke has been criticized for everything from pandering to Wall Street traders to still being behind the curve. But opinions are like a nose —— everybody has one. The current din of criticism against Bernanke is a lot like baseball fans, screaming “throw the bum out” at the game or venting their frustrations on post-game AM radio talk shows. But it’s a lot easier to criticize than to step up to home plate and swing the bat. The reality is that few of Bernanke’s most vitriolic critics were even smart enough to make it into an introductory economics class taught by Bernanke at Princeton —— let alone to run the world’s most influential Central Bank. And to assume that Fed policy is based on responses to such criticism would be as absurd as for baseball star Alex Rodriguez to walk over and hand his bat to an obnoxious, beer-swilling critic in the bleachers of Yankee Stadium to take his place at home plate. Thankfully, airline pilots guiding a plane through rough turbulence play to a less vociferous crowd.

　　Here’s the reality. Neither Bernanke’s interest rate cuts nor the federal stimulus package likely will hit the policy nail right on the head. But no real-time decision making is perfect. As John Maynard Keynes, himself an academic with plenty of real world experience, observed: “It’s better to be approximately right than exactly wrong.” The Fed can’t stop a downturn, but it can help it be short and shallow. This is a complex, fast-changing situation. Let’s give the Fed and the U.S. government some credit for acting swiftly and decisively.

　　Global Financial Crisis: The Investment Strategy of the World’s Top Traders

　　So are things really that bad? What has gotten lost in the din is that credit markets have returned to normal. Foreclosures are at record levels, but aren’t as numerous as originally forecast. And even if policy responses by the Fed only slow the rate of decline in U.S. housing prices, that alone will already have a dramatic impact on U.S. economic growth. And the Fed has shown that it is willing to act quickly to reverse course and hike interest rates once it is clear that the economy is through this bout of weakness.

　　Uncertainty means that it is reasonable to pull your horns in a bit —— and diversify away from stocks, emphasizing a diverse group of assets that are less correlated to the stock market. The top hedge managers I know are more focused on playing defense until the dust settles. The most bullish signal is that investors are almost uniformly bearish. And it is precisely during periods of panic that the greatest fortunes are made.

   Following the correction in February, the market will likely trade sideways until there is better clarity on government policy regarding possible measures to control property prices and excessive market speculation. Policy risk remains high over the short term. However, China’s strong economic fundamentals remain intact. The corporate income tax unification could translate into substantial tax reductions for many listed companies which in turn would boost corporate earnings growth. Further Renminbi appreciation, the expansion of the QDII scheme, corporate M&A and the implementation of management incentive plans are positive factors that would lead the market higher over the longer term.

        The Hang Seng Index (HSI) dropped 2.3% for the month, with a sharp plunge around the end of February. The fall was triggered by the sell-off in the China A-share market, the reversal of Yen carry trade as well as a rebound in the emerging markets credit spread. Finance was the worst performing sector as its performance was dragged down by the bell-weather HSBC which issued a profit warning regarding the increased provisions on its US mortgage books. The property sector also underperformed due to profit-taking whilst utilities and commerce and industrial sectors fared relatively better.
    Concerns over fund outflow and high market velocity will see the market entering into a consolidation period over the short term. As the underlying economic fundamentals continue to improve and stock valuations remain reasonable, any major correction would be a good buying opportunity. Positive management guidance in the forthcoming corporate reporting season will be the near-term catalyst for the market to resume its uptrend. We prefer property developers, retailers, hotels, selective industrials and China related stocks, while cautious on utilities, property investors and selective large cap banks.

In the meeting, Chen Deming, the minister of the Ministry of Commerce of the PRC, delivered a working report named “Enhance Confidence and Consolidate Works to Keep the Development of Commercial Businesses Efficient and Rapid”.

He expressed that, in 2008, under the right leadership of the State Council, the cadres and staff in all the commercial systems of China focused on their own jobs, served the overall situation, effectively managed the server natural disasters and the impacts brought by the national financial crisis, and achieved an efficient and rapid development of commercial businesses. In 2008, the domestic market was active and booming. In the first 11 months, the total retail sales of consumer goods reached 9.7759 trillion yuan, the year-on-year growth rate is 21.9%, and it was the fastest-growing period in the last ten years. The trend that the prices of commodities increased fast was effectively restrained. The increment of the Consumer Price Index (CPI) dropped to 2.4%, and it is expected that the increment of the Consumer Price Index of the whole year will be limited within 6%. The foreign trade increased steadily. In the first 11 months, the total export-import volume was US $ 2.3794 trillion, which had increased by 20.9%; the total export volume was US $ 1.3172 trillion, which had increased 19.3%; the total import volume was US $ 1.0612 trillion, which had increased by 22.8%. It is expected that the total export-import volume of the whole year will exceed US $ 2.5 trillion, which would have increased by about 18% over last year. The absorbed foreign capitals kept on increasing. In the first 11 months, the total amount of the foreign capitals absorbed was US $ 86.4 billion, which had increased by 26.3%, and it is expected that the total amount of the foreign capitals absorbed in the whole year would exceed US $ 90 billion; China has been the largest foreign capital absorbing country in all the developing countries for 17 years in succession. The capitals that were invested in foreign countries and the cooperation with foreign countries were both accelerated. In the first three quarters, the total amount of the non-financial direct investments to foreign countries was US $ 32.7 billion, which had increased by 1.5 times, and the accumulative total assets of the Chinese-funded enterprises in foreign countries exceeded US $ 300 billion. In the first 11 months, the total finished turnover of the contracted projects in foreign countries was US $ 47.1 billion, which had increased by 42%; the total finished turnover of the foreign labor cooperation was US $ 7.2 billion, which had increased by 24.2%. The commercial system had achieved remarkable successes in coping with important events, guaranteeing the supplies of markets, enhancing the construction of market system, expanding the domestic consumptions, optimizing the pattern of imports and exports, promoting the healthy development of foreign trades, improving the environment for investments, upgrading the quality of the absorbed foreign capitals, enhancing the management, standardizing the services, accelerating the development of investments to foreign countries and the cooperation with foreign countries, carrying out multilateral and bilateral cooperation, solving the disputes in international trades, deeply studying and practicing the scientific outlook on development, and enhancing the construction of itself.

Chen Deming pointed out that the severe impact brought by the economic depression of the whole world will still go on, so, the domestic and foreign circumstances that the development of Chinese commercial businesses will face in 2009 will be much more complex. The situation for exports will be quite severe. It will be much harder for domestic consumptions to increase. Much more difficulties will be met when absorbing foreign capitals. The situation of trade frictions will not be optimistic. But the basic development situation and the long-term development trend will not change, and there will also be a lot of advantages for keeping the commercial businesses developing steadily and rapidly. First, the positive financial policies and quite easing monetary policies implemented by the government of China will have promoting effects on stabilizing the exports and expanding the consumptions. Especially, the policies such as raising the export rebates, improving the processing trades, adjusting the customs duties, supporting the developments of the medium and small-sized enterprises and so on, will directly promote the foreign trades to develop steadily. Second, the developments of industrialization and urbanization and the quick upgrading of industrial structure and consumption pattern of China will bring strong domestic demands for economic development. Third, the comprehensive national strength of China is rising, the supporting system for the industries of China is quite integrated, the financial system is steady and health generally, the financing supply is sufficient, the qualities of labor forces are increasingly rising, the enterprises’ adaptive abilities to the changing market and environment are being increasingly enhanced, and the systems for allocating the resources in the market are being improved gradually. Fourth, the industrial chain of export is quite integrated, and the comparative advantage is clear. Most of the export products are essentials of lives, and the demand for them is not quite flexible. The strategy of market diversification has got enterprises acquired abundant experiences for exploring international markets. Multilateral and bilateral economic and trade relationships are being improved increasingly, and the international economic and trade circumstance is generally advantageous. The economic adjustment of the world will bring many new opportunities for China to accelerate the upgrading of economic structure, absorb advanced technologies and personnel and use the resources of foreign countries.

Chen Deming emphasized that our thoughts and activities must be practically unified with the analysis and judgment made by the central government on the foreign and domestic economic situations, unified with the decisions and arrangements made by the central government, and unified with the requirements that the scientific outlook on development ask for on the commercial works. Our confidence and determinations for successfully finishing the commercial works must be confirmed, the difficulties and challenges that we are facing must be adequately estimated, and every arrangement made by the economic work meeting of the central government must be firmly implemented. The domestic demands must be positively expanded, and the growth of foreign trades must be kept steady. Meanwhile, the transition of development pattern and the adjustment of economic structure must be accelerated, the stamina of development could be enhanced, and great efforts must be made to achieve a rapid and efficient commercial-business development.

Chen Deming said eight aspects of commercial works must be successfully done in 2009. First, the construction of circulation network must be enhanced to expand the consumptions of urban and rural residents. The construction of the circulation network in rural areas must be accelerated, and the circulation networks in urban areas must be improved continuously. The works of promoting home appliances in rural areas must be firmly done, the circulation network for the renewable resources must be standardized and developed, and a large batch of distribution enterprises must be positively developed. Second, the commodity circulation must be boosted, and market adjustment and control must be improved. The monitoring to operation must be enhanced, the guiding function of the information must reinforced, the connections between productions and sales must be enhanced, and circulation of agricultural products must be promoted. The reserves system must be improved, and great efforts must be made to guarantee “collecting and reserving them in boomer harvest time, putting them into market in poor harvest time”. The market orders must be regulated, and the fair competition in market must be safeguarded. Third, the steady growth of imports and exports must be maintained, and the transition of foreign trade pattern must be accelerated. The support of tax policies and financial policies must be enhanced, great efforts must be made to explore the emerging markets, the export commodity composition must be optimized, the service trades must be greatly developed, and the imports must be positively enlarged. Fourth, the scale of foreign capitals that are used must be stabilized, and the quality of the foreign capitals that are used must be raised. The investment environment must be improved and perfected, the composition of the foreign capitals that are used must be optimized, the geographical distribution of foreign capitals must be improved, and the utilization patterns of foreign capitals must be innovated. Fifth, actively and steadily push the development of the capital invested in foreign countries and the cooperation with foreign countries, the level of economic cooperation with foreign countries must be raised. The steps to develop the investment to foreign countries must be accelerated, great efforts must be made to undertake contracted project in foreign countries and carry on the labor service cooperation in foreign countries, and facilitation of investing in foreign countries and the cooperation with foreign countries, and the system for supervising the investment in foreign countries and the cooperation with foreign countries must be improved. Sixth, multilateral and bilateral economic and trade cooperation must be deepened, and outstanding exotic environment must be constructed. The multilateral and bilateral economic and trade relationships must be enhanced and improved, the Doha Round must be positively and increasingly promoted, the construction of free trade areas must be promoted positively and steadily, the opening-up in border areas must be accelerated, the economic and trade cooperation among the Chinese Mainland, Taiwan, Hong Kong and Macao must be promoted, the works of providing assistances to foreign countries must be reinforced and improved. Seven, trade friction must be properly managed to guarantee the safeties of domestic industries. All the operations must be planed as a whole, so risk of trade friction will be reduced. The strengths of all the aspects must be wholly arranged to raise the ability for coping with trade frictions. The trade remedy must be carried out according to the laws, and the effect of trade remedy must be raised. The scientific outlook on development must be deeply studied and practiced, and the systems for commercial works must be further constructed.

Over 300 people including the representatives from the relevant departments of China’s State organs, every province, autonomous region and municipality directly under the Central Government of China, the cities specifically designated in the state plan, the management departments of the Xinjiang Production and Construction Corps, the national-class development areas, and the Border Economic Cooperation Zones, attended the meeting. And during the meeting, the representatives carefully discussed such issues as coping with the financial crisis, expanding the domestic consumption demands, stabilizing the growth of foreign trades, and accelerating the adjustment of economic structure and the transition of development pattern.