Laws of the People's Republic of China

Ministry of Finance, Ministry of Commerce

Circular of the Ministry of Finance and the Ministry of Commerce on Relevant Issues concerning Financial Interest Subsidy to Loans for Foreign Contracted Projects in 2005

Cai Qi [2006] No.5

Departments (Bureaus) of Finance, Commerce Authorities in Charge in all provinces, autonomous regions, and municipalities directly under the Central Government, and cities specially designated in the state plan, Bureau of Finance and Bureau of Commerce of the Xinjiang Production and Construction Corps, all the enterprises administered by the Central Government, and all the economic and commercial authorities stationed in foreign countries:

In order to support and encourage the enterprises with comparative advantages to "go global", and to further expand the business of foreign contracted projects, and in accordance with the budget arrangement of the Central Government, interest subsidy will be granted to commercial loans acquired from the domestic banks to fulfill the foreign contracted projects of Chinese enterprises. And a circular on relevant issues are hereby given as follows:

I.

Required Qualifications for the Enterprise and Project Applying for Interest Subsidy

(i)

These qualifications as follows are required for the enterprise applying for interest subsidy:

1.

Legally registered and having an independent status of a legal person;

2.

Having the qualification approved by the Ministry of Commerce in foreign economic cooperation business;

3.

Having not committed such activities as falling into arrears of and misappropriating fund for joint venture or cooperation program of foreign aid; and

4.

Accepting the guidance and coordination from the finance and commerce authorities in charge and the Chinese economic and commercial authorities stationed in foreign countries

(ii)

The program applying for interest subsidy shall meet these conditions as follows:

1.

Submitting the statistical materials in accordance with the provisions in the Statistical System on Foreign Contracted Projects, Labor Service Cooperation, Designing and Consulting; and

2.

The program contract shall be valid within the period from January 1, 2005 to December 31, 2005, and the contracted value of each program shall be not less than $5 million USD (or equivalent in other currencies); and

3.

The loan contract of a program shall be valid within the period of from January 1, 2005 to December 31, 2005, and the amount of each loan shall be not less than RMB10 million Yuan (or equivalent in other currencies); and

4.

The contract-signing enterprise shall be identical with the loan enterprise; and

5.

According with China's policies in foreign trade and economic cooperation.

II.

The Application Document and Procedure

(i)

An enterprise applying for interest subsidy shall provide these documents as follows:

1.

An application letter for interest subsidy;

2.

A specification of the enterprise's application (refer to Annex I for details);

3.

Basic information of the foreign contracted project and a list of interest payment for bank loans in 2005 (refer to Annex II for details);

4.

A copy of the duplicate of Business License for Enterprises as Legal Persons;

5.

A copy of the commerce part of the program contract (Chinese version or a translated version in Chinese);

6.

The written opinions concerning the implementation of contract from the Chinese economic and commercial authorities stationed in foreign countries, including the contracted value, date of starting construction, progress of implementation, and expected date of completion etc.;

7.

A copy of the loan contract from the bank; and

8.

A duplicated copy of the voucher of clearing for bank loan, interest payment and loan repayment.

(ii)

Procedure of Application

1.

The enterprise administered by the local government shall, before February 28, 2006, submit the aforesaid documents to the local provincial finance and commerce authorities in charge respectively, who then shall conduct a first-instance examination on the programs applying for interest subsidy in accordance the provisions in this Circular, fill in the Summary Statement of the First-instance Examination on Interest Subsidy for Loan of Foreign Contracted Project (refer to Annex IV for details), and together submit them to the Ministry of Finance and the Ministry of Commerce before March, 31 2006;

2.

The enterprise administered by the central government shall submit, together with other relevant application documents, the Summary Statement of the First-instance Examination on Interest Subsidy for Loan of Foreign Contracted Project to the Ministry of Finance and the Ministry of Commerce respectively before March, 31 2006;

3.

The Ministry of Finance and the Ministry of Commerce shall together release the documents on funds subject to interest subsidy, after they entrust the intermediary institutions to examine the applied programs. And the Ministry of Commerce shall, within 15 days as of the date of the release of these documents concerned, directly appropriate the funds subject to interest subsidy to the applicant enterprise.

III.

Standard for Interest Subsidy

(i)

The interest subsidy rate per year for the RMB loan shall be no more than the benchmark interest rate of the corresponding period promulgated by the People's Bank of China, and the one for the foreign currency loan no more than 3%;

(ii)

The term limit of interest subsidy shall be calculated in accordance with the actual loan term limit on month of the Gregorian calendar;

(iii)

The time of interest subsidy for a program shall be no more than 3 years;

(iv)

Interest subsidy shall not be granted to interest increase and interest penalty outside normal loans;

(v)

Interest subsidy shall only be granted to one loan for each foreign contracted project; and

(vi)

The amount of interest subsidy shall be calculated in RMB.

IV.

The economic and commercial authorities stationed in foreign countries shall, in accordance with the requirements in item 6, paragraph I, Article II of this Circular, issue written opinions for the applicant enterprises (refer to Annex III for details).

V.

In order to do well the work of financial interest subsidy in 2005 and to enhance the efficiency, all the enterprises are required to prepare the application documents concerning interest subsidy and bind up them into volumes, and to compile catalogues upon program in accordance with the provisions in this Circular.

VI.

The enterprise, upon receiving funds subject to interest subsidy, shall utilize them to subtract the financial expense of the year concerned. Any unit may not defraud and withhold the funds subject to interest subsidy in any form or with any reason. With regard to those in violation of the provisions, the Ministry of Finance and the Ministry of Commerce shall draw back all the funds subject to interest subsidy and revoke their qualifications for interest subsidy, and give them serious treatment in accordance with the Penalty Regulations on Financial Offences against the Law,

Annexes:

1.

The Specification of the Enterprise's Application

2.

Basic Information of the Foreign Contracted Project and List of Interest Payment for Bank Loans in 2005

3.

Opinions of Office of Economic and Commercial Counselor Stationed in

4.

Summary Statement of the First-instance Examination on Interest Subsidy for Loan of Foreign Contracted Project

Ministry of Finance, Ministry of Commerce

January 9, 2006 htm/e04740.htm

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Annex I.

Specification of Enterprise¡¯s Application

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¡¡¡¡Notes:

¡¡¡¡1. The legal representative or his/her entrustee shall sign his/her name in hand, and personal seal is invalid.

¡¡¡¡2. In case that an entrustee signs, the original copy of the certificate of entrust signed in hand by the legal representative and attached with the company¡¯s seal is required;

¡¡¡¡3. The bank account used for appropriated funds subject to interest subsidy shall be the company¡¯s, and it shall be correctly filled in.

Annex II.

Basic Information of the Foreign Contracted Project and List of Interest Payment for Bank Loans in 2005

¡¡¡¡Nota Bene : This form is a pattern, in case that there are not enough columns for ¡°Drawings¡±, ¡°Repayments¡±, and ¡°Interest Payment in 2005¡±, additional pages may be allowed, which shall be attached with the company¡¯s seal.

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Annex III.

Opinions of Office of Economic and Commercial Counselor Stationed in             

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Annex IV.

Summary Statement of the First-instance Examination on Interest Subsidy for Loan of Foreign Contracted Project