Laws of the People's Republic of China

   Article 1 Objectives and Basis

These procedures are formulated with a view to improving the administration of the land use by FFEs and paid land use system of the municipality on the basis of relevant laws and regulations such as "Rules of the People's Republic of China on the Implementation of the Sino-Foreign Joint Equity Ventures", "Detailed Rules of the People's Republic of China On the Implementation of the Sino-Foreign Joint Contractual Ventures", "Detailed Rules of the People's Republic of China on the Implementation of the Law of the Sino-Foreign Joint Ventures", and "Procedures of the Shanghai Municipality on the Implementation of the 'Law of the People's Republic of China on the Administration of Land Use'".

   Article 2 Scope of Application

These procedures shall apply to all FFEs which use State-owned or collectively-owned land in Shanghai municipality except those which obtain the right of using State owned land through the way of transfer.

   Article 3 Administrative Departments

The Shanghai Municipal Real Estate and Land Administration (hereinafter referred to as SMURELA) is the competent department for the administration of land used by FFEs.

The Pudong New Area and district and county land administrative departments are in charge of the actual administrative work with regard to the land use in their respective areas in accordance with these procedures and the city's relevant regulations on the use of land by construction projects.

   Article 4 Form of Land Use

In addition to land use rights obtained from the way of transfer according to law, FFEs may also obtain the land use right through the following ways:

(1) Land use rights allocated by people's government at or above the county level for the use of requisited collectively or State owned land;

(2) The Chinese partner of a Sino-overseas joint equity venture put in its use right of the collectively or the State owned land as its part of capital;

(3) The Chinese partner of a Sino-overseas joint contractual venture uses its State- or collectively-owned land use right as a condition of cooperation;

(4) Use rights of lands annexed to the houses acquired by FFEs from original State- or collectively-owned through sale or other means of transfer; and

(5) Land use rights obtained through other ways as stipulated by laws and regulations.

FFEs may use the land through leasing the real estate or the site on the land.

   Article 5 Restrictions on Use of Collectively-Owned Land

In one of the following cases collectively-owned land shall be requisited according to the relevant stipulations on the administration of the city's land for construction:

(1) In establishing Sino-overseas joint equity or contractual ventures with overseas counterparts, the rural collective economic entities concerned may use the collectively-owned land which has been covered by the city's urbanization program; and

(2) When FFEs obtain the ownership of a real estate through sale or other means of transfer and then acquire the right of using the collectively-owned land occupied by the real estate.

Shares of rural collective economic entities in Sino-overseas joint equity or contractual ventures through the putting in by the entities of collectively-owned land not covered by the city's urbanization program are not allowed to be transferred.

   Article 6 Appraisal of Prices of the Land Use Right

In one of the following cases, prices of the land use right should be appraised by qualified real estate appraising agencies:

(1) When the Chinese partner of a Sino-overseas joint equity venture puts in its right of using the State- and collectively-owned land as shares; and

(2) When the Chinese partner of a Sino-overseas contractual joint venture uses the right of using the State-owned and collectively-owned land as a condition of cooperation.

   Article 7 Land Use Application and Approval

Except leasing of houses or sites for the use of State- or collectively- owned land in Shanghai by FFEs, the overseas investors, or the Chinese partners should apply to the land administration departments for land use according to the city's regulations or construction use of land upon the presentation of certificates of approval for the project and the licenses for construction use of land.

Upon approval after examinations, the people's government at or above the county level shall issue a certificate of approval for construction use of land to the FFE concerned.

   Article 8 Appraisal of Land Use Fee

After an approval to the use of land, the FFE concerned should handle the registration of the land use right with the real estate registration agencies within 30 days beginning from the date of obtaining the enterprise legal person business license, and handle the formalities of land use fee appraisal in line with the following stipulations:

(1) handle the formalities with SMURELA when using the State-owned land and with the Pudong New Area Land Administrative Department if the land is in the area; and

(2) handle the formalities with local county, district or the Pudong New Area land administrative departments when using the collectively-owned land.

In the cases of leasing real estates or sites, FFEs should get registered for record with the real estate registration agencies upon the presentation of the leasing contracts, and go through the appraisal formalities of paying land use fees with land administrative departments as stipulated in the preceding section.

   Article 9 Payers of the Land Use Fee

The approved FFEs should pay the land use fee to the land administrative departments through which they have performed the appraisals of land use fee payments. But when the land use fee should be paid by the Chinese partners, which enter their shares in the FFEs with their right of using State- or collectively-owned land and in the case of Sino-overseas joint contractual ventures, the fee may be paid by payers as agreed in the contracts.

   Article 10 The Beginning Date for Paying the Land Use Fee

Beginning dates for paying the land use fee are set as the following:

(1) The approved FFEs should begin to pay the fee from the date of obtaining the business licenses as the enterprise legal persons; and

(2) FFEs which lease real estate or sites should begin to pay the fee from the date when the leasing contracts go into effect.

For the first year, a FFE may be exempted from paying the land use fee if its use time in that year is less than six months and pay a six-month fee if the use time is more than six months in the year.

   Article 11 Deadlines for Paying the Land Use Fee

Land use fees should be paid in two installments every year:

(1) The first installment should be paid before June 30; and

(2) The second installment should be paid before December 31.

   Article 12 Rates of Land Use Fees

Rates of land use fees should be decided in categories and grades on the basis of the nature of the planned use and geographical and environment conditions of the land.

The rates shall be set and adjusted by the SMURELA and city pricing and financial departments according to the actual situations and then reported to the approval of the Municipal People's Government for implementation.

Readjustments of the rates should be made at most once every three years and the one time readjustment should not be greater than 30% of the original.

   Article 13 Scope of the Application of the Rates

FFEs may pay the land use fee at the rates of first year in a period of five years beginning from the first year and, beginning from the sixth year, pay the rate of the year.

In one of the following cases, FFEs may pay the land use fee at rates set for the first year during the entire term of operation.

(1) The Chinese partner of a Sino-overseas joint equity venture pays its share of capital with its right of using the State- or the collectively- owned land; and

(2) The Chinese partner of a Sino-overseas joint contractual venture uses its right of using the State- or collectively-owned land as a cooperation condition, and the Chinese partner pays the land use fee as agreed in the contract.

   Article 14 Land Use Fees for Two Categories of Businesses

Export-oriented and advance technology businesses outside the downtown areas of Shanghai (hereinafter referred as two categories of businesses) are exempted from paying land use fees in three years beginning from the date of their establishment, and beginning from the fourth year, pay the land use fee according to the preferential rates set for the two categories of businesses, except what is listed in the second section of Article 13.

The two categories of businesses shall make up for the land use fee for the year according to the rates set for ordinary FFEs should they fail to pass the yearly appraisals or be rovoked their certificates of such kind of businesses.

The area of Shanghai's downtown shall be decided by the SMURELA and the city planning administrative department and be reported to the Municipal People's Government for approval.

   Article 15 Delayed, Reduced and Exempted Payments of Land Use Fees

FFEs approved by land administrative departments as stipulated in Article 8 of these procedures may pay 50% of the due land use fee when they begin operations or prior to operations, except what is listed in the second section of Article 13.

In one of the following cases, FFEs may make delayed, reduced or exempted payment of their land use fees:

(1) because of difficulties to pay the land use fee caused by force majeure upon approvals by land administrative departments and financial departments of the same level as stipulated in Article 8 of these measures;

(2) because of land used for urban infrastructure construction upon approvals by the Municipal People's Government; and

(3) other cases as stipulated by the Municipal People's Government.

   Article 16 Conditions for Land Use

When approved to use land, the FFE concerned should abide by laws and regulations governing land administration, and are not allowed to sell or buy or illegally transfer the land use right through other means.

   Article 17 Changes of Land Use

FFEs should report to the original approving planning department and land administrative department for approval when there is the need to change the nature or area of the land use during its operational term. When approved, it should register the change with the real estate registration agency and go through again formalities of appraisal of paying the land use fee in accordance with the stipulations in Article 8 of these procedures.

When changes of leased real estate, in area and use or other kind, during the operational term, the FFE concerned should report to the real estate registration agency for record upon the presentation of the contract about the change of lease or the new lease contract, and go over again the formalities of appraisal of paying the land use fee in accordance with the stipulations in Article 8 of these procedures.

   Article 18 Termination of Land Use

Upon the expiration of the business term or other reasons to terminate the use of land, the FFE concerned should cancell the registration of the land use right or the leasing contract upon the presentation of the certificate issued by the administration for industry and commerce or other certificates, and pay the land use fee to the land administrative department as stipulated in Article 8 of these procedures in accordance with the time of land use (it is calculated as one month if the land use time is less than one month).

   Article 19 Uses of Land Use Fees

The land administrative department shall hand over the land use fees it takes in to the financial department of the same administrative level to be uniquely used for the purposes of urban and rural infrastructure construction.

   Article 20 Penalties on Illegal Land Use

FFEs shall be punished by the land administrative department in line with the relevant regulations on the construction use of land for its use of land without approval or illegal transfer of land use right.

FFEs shall be penalized by the land planning department in line with relevant laws and regulations for its change of the planning use of the land without approval.

   Article 21 Handling of Cases of Overdue Delayed Payment of Land Use Fees

Payers of the land use fee shall be ordered to make payments in a given period of time by the land administrative department if they fail to meet the payment deadlines and should add 3% of the due amount as the delayed fund based on the days beginning from the date of the due payment.

   Article 22 Reconsideration and Lawsuits

Persons concerned who disagree to the actions of the land administrative department or the land planning department may apply for administrative reconsideration or bring a lawsuit to the court in line with "Regulations on Administrative Reconsideration" and the "Administrative Procedural Law of the People's Republic of China".

Departments which take the actions may also apply to the people's court to force the execution of the action in accordance with the "Administrative Procedure Law of the People's Republic of China" if the person concerned fails to apply for reconsideration, to bring lawsuit or to perform the actual action.

   Article 23 Reference Applications of the Procedures

These procedures can also apply to the following businesses which use the State- or collectively-owned land within the city:

(1) businesses established by investors from Hong Kong, Macao and Taiwan regions; and

(2) limited-liability companies applying laws and regulations governing FFEs.

   Article 24 Meaning of the Land Use Fee

The land use fee as referred to in these procedures does not include expenses for the resettlement of the people having to remove as their houses having to be pulled down because of land requisited, nor expenses for infrastructure construction.

   Article 25 Department Responsible for Interpretation of the Procedures

The SMURELA is entitled to interpret these procedures with regard to their actual implementation.

   Article 26 Promulgation Date and Nullification

These procedures go into effect as of July 1, 1996, and the "Administrative Procedures of the Shanghai Municipality on the Land Use by Sino_Overseas Eqiuty Joint Ventures" be annulled at the same time.