Laws of the People's Republic of China

Circular of the Ministry of Finance on Relevant Issues concerning Research and Development Fund for High Technology in Packaging Industry

Cai Qi [2005] No.107

Relevant Enterprises directly under the Central Authorities, Departments (Bureaus) of Finance in all provinces, autonomous regions, municipalities directly under the Central Government, and cities separately listed on the State plan:

In order to encourage the packaging industry to actively develop new products and adopt new technologies, and to promote the development of China's packaging industry, a research and development (R&D) fund for high technology in the packaging industry (hereinafter referred to as "this fund") will be allocated in the central financial budget to support the R&D of high products, the technological innovation, the promotion of new technologies etc. in the packaging industry as of the year of 2005. And this Circular on relevant issues is hereby given as follows.

1.

The Support Scope of this Fund

This fund shall mainly support such projects as are in line with the state's macro economic polices, environmental protection and recycling economy policies:

(1)

the research, manufacturing and industrialization projects of new-patterned packing products, materials and machines which has been verified by relevant authorities as high level projects with international standards or being capable of filling China's domestic blank.

(2)

R&D projects of high technologies that are characterized by an integration of industries, academic institutions and research institutes, new product research program at national level with verification by relevant authorities, design and development programs of new materials and technologies and application programs of new technologies set up by government departments at or above the provincial or municipal level;

(3)

projects on new-patterned packing materials that aim at guarantying safety and health of human beings;

(4)

projects on reduction of packing materials and energy-saving packing; projects on the dispose and utilization of packaging refuse;

(5)

projects on the research and establishment of packing regulations and technology standards and relevant testing methods; and

(6)

other projects of new technology in line with the state's policies on packaging industry.

2.

Fund-supporting Modes and Uses

There shall mainly be two fund-supporting modes, namely aid for free and loan with subsidy interest. Generally, where the investment of a R&D project is mainly based on self-financing, the mode of aid for free shall be adopted; where the investment of a R&D project is mainly based on bank loans, the mode of loan with subsidy interest shall be adopted. Each project shall only be subject to one mode, and no repeated application may be permitted.

The amount of an aid for free for each project shall be within RMB 5 million Yuan, and shall not exceed the amount of an enterprise's self-financing. The amount of a loan with subsidy interest shall be determined with reference to the loan amount of project and the loan interest of the corresponding period that are promulgated by the People's Bank of China, and the loan with subsidy interest shall be paid to an enterprise after it pays the interest in advance; the time limit of the subsidy interest shall be no more than 2 years and the amount of subsidy interest shall be no more than RMB 5 million Yuan for each project.

This fund shall mainly be used to pay the relevant expenses that arise during the R&D of a project, including labor cost, expense for key experiment equipments and software, expense for fuels and energy, lease charge, experiment expense, materials expense, expense for entrusted development, and other expenses that are in line with the provisions of the current regime and relate to the R&D of a project upon the approval of the Ministry of Finance.

3.

Fund declaration

(1)

An enterprise that applies for this fund shall meet all the qualification conditions as follows:

(a)

Being a domestic medium-sized or large-sized enterprise engaged in the manufacturing of packaging products, materials and machinery that possesses an independent legal person title , and a normative corporate management structure;

(b)

Having a sound financial management system and timely reporting its financial information to the finance authorities at the corresponding level; and

(c)

Having a good credit in accounting and tax-payment.

(2)

Aside from the aforesaid basic conditions, an applicant enterprise shall also meet one of the conditions as follows:

(a)

Having a technology center that has been certificated by authorities at a province level or above;

(b)

Having an R&D investment of the previous year that accounts for more than 3% in its proceeds of sale; or

(c)

Having an annual average R&D investment of more than RMB 5 million Yuan in the past 3 years.

(3)

An enterprise that applies for this fund shall submit its application in written form, and provide the documents as follows:

(a)

the ectype of the business license of the enterprise as a legal person as well as the articles of association thereof (duplicate);

(b)

A general presentation of its business performance, including its major products, manufacturing technologies, principal economic indexes etc.;

(c)

the feasibility study report of the project;

(d)

the accounting statements and auditing report of last annual year audited by an accounting firm;

(e)

the environmental evaluation opinion issued by the environmental protection authority at a province level or above;

(f)

the source of funds needed in the R&D of the project and valid vouchers (the valid voucher(s) of the self-financed funds that have been fulfilled or invested in the project, the project loan contract and the bank interest bill etc.) and

(g)

other documents required.

4.

Fund Examination and Allocation

Provincial finance authorities shall authorize the Packaging Technology Association at the corresponding level to conduct an examination on qualifications and relevant documents of applicant enterprises within the territory of its own jurisdiction, and shall, before August 31 of every year, submit to the Ministry of Finance the fund application reports and documents of the applied projects. And the fund application report and documents of the applied project of an enterprise directly under the Central Authorities shall directly be submitted to the Ministry of Finance.

The Ministry of Finance shall authorize China Packaging Federation to organize experts to conduct examinations on the application reports and the documents about the facts of the applied project that are submitted by enterprises directly under the Central Authorities and by the local authorities, and determine, upon the examination results, the supported projects, fund-supporting modes and amounts. The funds for enterprises directly under the Central Authorities shall directly be allocated by the Ministry of Finance; and those for enterprise under local authorities shall be allocated by the Ministry of Finance to the local finance authorities, who shall then allocate them to enterprises concerned.

5.

Accounting process of this fund

Such part of an aid for free that an enterprise receives as assets shall be reckoned in reserve fund, and such part that does not form assets shall be written off according to facts. The loan with subsidy interest that an enterprise receives shall be used to net off financial charges.

6.

Fund Supervision and Inspection

Project-bearing units shall exercise a special-account management and reckoning on this fund, which shall bear no withholding, occupation or misappropriation by any unit or individual in any excuse. The management and utilization of this fund shall be subject to the supervisions and inspections by the Ministry of Finance and the local finance authorities, and may also be subject to the auditing from the audit authorities or social audit institutions that are entrusted by the Ministry of Finance and the local finance authorities. Any enterprise that is detected having obtained funds through fraudulence and falsification or having used funds not in accordance with the prescribed means shall be deprived of the qualification to apply for funds and shall be severely punished in accordance with the Regulations on Punishment and Disciplinary for Illegal Financial Activities.

Ministry of Finance

July 26, 2005