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CIRCULAR OF THE MINISTRY OF FINANCE CONCERNING THE RELATED MATTERS ON IMPLEMENTING THE AMENDED GENERAL RULES FOR ENTERPRISE FINANCE

Circular of the Ministry of Finance Concerning the Related Matters on Implementing the Amended General Rules for Enterprise Finance

Cai Qi [2007] No. 48

For the purpose of implementing the amended General Rules for Enterprise Finance (Decree No. 41 of the Ministry of Finance), doing well in the conversion from the old enterprise financial system to the new one, and propelling the reform of the enterprise financial system, the related matters are hereby informed as follows:

1.

On the Link-up Matter on Employees' Welfare Funds in the Financial System Reform

After the amended General Rules for Enterprise Finance comes into effect, an enterprise may not reserve the employees' welfare funds at a rate of 14% of the total wage amount, and shall charge back the employees' welfare funds as reserved in 2007. Up to December 31, 2006, the book balance of payable welfare funds (not including the balance of employees' welfare funds and awards that are reserved by foreign-invested enterprises from the after-tax profits) shall be dealt with in accordance with the following conditions. In the case of any separate provisions formulated by listed company, such provisions shall prevail:

(1)

Where the balance is in red ink, it should be converted into the undistributed profits at the beginning of 2007, and they shall be made up by free or statutory common reserve funds if the undistributed profits at the beginning of 2007 thus become negative, , and where there is still balance, such balance shall be made up by the net profits generated in 2007 or later.

(2)

Where there is surplus, the surplus shall be used in accordance with the original provisions, and after the surplus has been used up, the amended General Rules for Enterprise Finance shall apply. Where an enterprise restructures into a corporation or alienates its property rights, it shall increase the capital reserves in accordance with the Supplementary Circular of the Ministry of Finance on the Related Matters about the Provisional Provisions on the Administration and Financial Treatment of the Corporation Restructuring of Related State-owned Assets (Cai Qi [2005] No. 12).

2.

On Organizing the Implementation of the Amended General Rules for Enterprise Finance

Each region, department and enterprise group shall earnestly organize the implementation of the Amended General Rules for Enterprise Finance, conduct business trainings in light of their respective situations, do well in disseminating the policies for the enterprise financial system reform, and adjust, amend and perfect the enterprise financial management systems in accordance with the amended General Rules for Enterprise Finance (Order No. 41 of the Ministry of Finance), and guarantee the smooth conversion of new and old enterprise financial systems.

The Ministry of Finance

March 20, 2007

  The Ministry of Finance 2007-03-20  


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