Article 16 The articles of association of a foreign-funded enterprise shall become effective upon the approval by the examining and approving authority. The same procedure shall apply whenever any amendment thereto is made.

Article 17 Any division or merger of foreign-funded enterprises or any of their significant changes in capital resulting from any other causes shall be subject to the approval by the examining and approving authority, and for which changes, the relevant enterprises shall engage a Chinese certified public accountant to make verification and render a capital verification report; upon approval by the examining and approving authority, the enterprises shall go through the procedures for the change of registration with the administrative department for industry and commerce.

Chapter III Form of Organization and Registered Capital

Article 18 The form of organization of a foreign-funded enterprise shall be a limited liability company. Other liability forms may be adopted by approval.

In case of a limited liability company, the foreign investor shall be liable for the enterprise to the extent of what he has contributed for the capital.

In case of any other liability form, the foreign investor shall be liable for the enterprise according to Chinese laws and regulations.

Article 19 The total amount of investment of a foreign-funded enterprise refers to the total amount of funds required for opening the foreign-funded enterprise, i.e. the sum total of the funds invested in capital construction in accordance with the production scale and the circulating funds for production.

Article 20 The registered capital of a foreign-funded enterprise refers to the total amount of capital registered with the administrative department for industry and commerce for the purpose of establishing the foreign-funded enterprise, i.e. the total amount of investment that the foreign investor undertakes to contribute.

The amount of registered capital of a foreign-funded enterprise must be in keeping with the enterprise's operation scale, and the ratio between the registered capital and the total amount of investment shall conform to the relevant Chinese provisions.

Article 21 In its operating period, no foreign-funded enterprise may reduce their registered capital. If however, it is really needed to make such reduction due to some changes such as those in the total amount of investment or production scale, it may be reduced upon the approval by the examining and approving authority.

Article 22 Any increase or assignment of the registered capital of a foreign-funded enterprise shall be subject to the approval by the examining and approving authority, and then the enterprise shall go through the procedures for change of registration with the administrative department for industry and commerce.

Article 23 Where any foreign-funded enterprise intends to mortgage or assign its assets or right and interests to a third party, the case shall be submitted to the examining and approving authority for approval, and then to the administrative department for industry and commerce for record.

Article 24 The legal representative of a foreign-funded enterprise is the person-in-charge who, in accordance with the enterprise's articles of association,executes his/her functions and powers on behalf of the enterprise.

If the legal representative is unable to execute his/her functions and powers, he/she shall entrust in writing an agent with the execution of his/her functions and powers.

Chapter IV Form of Investments and Time Limit for Contributing Investments

Article 25 The foreign investors may make their investments with convertible foreign currencies, or with machinery and equipment, with industry property rights and proprietary technology by appraising the values of them.

Upon the approval by the examining and approving authority, the foreign investors may also make their investments with their profits in Renminbi from any other enterprises established in China with their investments.

Article 26 Machinery and equipment to be contributed by the foreign investor as investment must be those needed for the production of the foreign-funded enterprise.

The appraised value of the machinery and equipment may not be higher than the normal price of machinery and equipment of the same kind in international market at that time.

An inventory must be made for all the machinery and equipment to be contributed as investment, it shall include the name, type, quantity and appraised value of the machinery and equipment, and shall be submitted to the examining and approving authority together with the application for the establishment of the foreign-funded enterprise as an attachment to the application.

Article 27 The industry property rights and proprietary technology to be contributed as investment by the foreign investor must be owned by the foreign investor.

Such industrial property rights and proprietary technology must be appraised in accordance with the relevant international rules, and the value amount of them may not exceed 20% of the registered capital of the foreign-funded enterprise.

Detailed information must be prepared for the industrial property rights and proprietary technology appraised to be contributed as investment, including the copy of certificate of the title, validity of the title, and their technical performance, practical value, and the basis and standard on and according to which the value has been appraised, and it shall be submitted to the examining and approving authority together with the application for the establishment of the foreign-funded enterprise as an attachment to the application.

Article 28 Upon arrival at any port of China of the machinery and equipment contributed as investment, the foreign-funded enterprise shall apply for inspection to China's commodity inspection authority, which shall render an inspection report.

Where the machinery and equipment contributed as investment are inconsistent with those listed in the inventory submitted by the foreign investor to the examining and approving authority in type, quality or quantity, the examining and approving authority may demand corrections by the foreign investor within a prescribed time limit.

Article 29 After the industrial property rights and proprietary technology appraised have been put to use, the examining and approving authority shall have the power to inspect them, and demand corrections by the foreign investor, within a prescribed time limit, if they are inconsistence with the industrial property rights and proprietary technology prescribed in the information submitted by the foreign investor.

Article 30 The time limit for the foreign investor to make his investment contributions must be clearly indicated in both the application for the establishment of the foreign-funded enterprise and the enterprise's articles of association. The foreign investor may contribute the investment in installments, provided that the last installment shall be made within three years from the date of issue of the business license. The first installment may not be less than 15% of the total amount to be contributed by the foreign investor, and shall be made within 90 days from the date of issue of the business license of the foreign-funded enterprise.

If the foreign investor fails to make the first installment within the time limit prescribed in the preceding paragraph, the approval certificate for the foreign-funded enterprise shall become invalid automatically, and the foreign-funded enterprise shall go through the procedures for cancellation of registration and hand in the business license for cancellation with the administrative department for industry and commerce or, if the foreign-funded enterprise fails to go through the procedures for cancellation of registration and fails to hand in the business license for cancellation, the administrative department for industry and commerce shall revoke the business license and make an announcement to the public.

Article 31 The installments other than the first one shall be made by the foreign investor within each prescribed time limit.

If an installment has not been made 30 days after the time limit, the second paragraph of the Article 30 shall apply.

If the foreign investor has any reasonable ground for the extension of time for making an installment, he should get the approval by the examining and approving authority and the extension of time shall be submitted to the administrative department for industry and commerce for record.

Article 32 For each installment made by the foreign investor, the foreign-funded enterprise shall engage a Chinese certified public accountant to make verification and render a capital verification report, which shall be submitted to the examining and approving authority and the administrative department for industry and commerce for record.

Chapter V Use of Land and the Land Use Fee

Article 33 The local people's government at or above the county level at the place where the foreign-funded enterprise is to be established shall make arrangements for the land to be used by the foreign-funded enterprise after examination and verification in the light of the local conditions.

Article 34 The foreign-funded enterprise shall, within 30 days from the date of issue of its business license, go through the procedures for use of land with and obtain land certificate from the department of land administration of the people's government at or above the county level at the place where the foreign-funded enterprise is to be established, by presenting the approval certificate and business license.

Article 35 The land certificate shall be a legal certificate by which the foreign-funded enterprise may use a certain piece of land. In its operating period, no foreign-funded enterprise may assign its right to use land without authorization.

Article 36 For obtaining land certificate, the foreign-funded enterprise must pay land use fee to the department of land administration at the place where the enterprise is to be established.

Article 37 For using developed land, the foreign-funded enterprise must pay land development fee.

The land development fee mentioned in the preceding paragraph includes the expenses for requisition of the land, and expenses for demolition and resettlement allowances, as well as expenses for the construction of infrastructure needed by the foreign-funded enterprise. The land development fee may be calculated and collected by the land development enterprise once for all or in yearly installments.

Article 38 Where a piece of land not yet developed is to be used, the foreign-funded enterprise may either develop the land by itself or entrust a relevant Chinese enterprise to develop the land. The people's government at or above the county level at the place where the foreign-funded enterprise is to be established shall make overall arrangements for the construction of infrastructure.

Article 39 The standards for calculating and collecting the land use fee and land development fee paid by foreign-funded enterprises shall abide by the relevant provisions of China.

Article 40 The term for land use by the foreign-funded enterprise shall be the same as the approved operating period of this enterprise.

Article 41 In addition to the present Chapter, a foreign-funded enterprise may obtain the right to use land in accordance with other regulations in China.

Chapter VI Purchasing and Marketing

Article 42 Any foreign-funded enterprise may make decisions by itself on the purchase, for its own use, of machinery and equipment, raw materials, fuels, parts and components, auxiliary equipment, primary parts, means of transportation, office appliance （hereinafter referred to as goods and materials in general）。

When purchasing goods and materials in China, any foreign-funded enterprise shall enjoy the same treatment as that enjoyed by Chinese enterprises under the same conditions.

Article 43 Any foreign-funded enterprise may sell its products in Chinese market. The state encourages all foreign-funded enterprises to export their products.

Article 44 Any foreign-funded enterprise may export their products either by themselves or by entrusting a Chinese foreign trade company or a company outside China with the sale of their products.

A foreign-funded enterprise may sell their products in China either by themselves or by entrusting any commercial organization with the sale of their products.

Article 45 Where any machinery and equipment contributed by a foreign investor as his investment is subject to import license according to the Chinese provisions, the relevant foreign-funded enterprise shall, by presenting the relevant approved inventory of equipment and goods and materials to be imported, apply for import license to the license issuing authority either directly or through an agency.

The foreign-funded enterprise shall prepare their annual import plans for goods and materials that are to be imported for their own use and necessary to their production within the approved scope of business, and apply for the import license to the license issuing authority every six months, if the import of goods and materials is subject to import license according to the Chinese provisions.

The foreign-funded enterprise shall prepare their annual export plans for products that are to be exported, and apply for the export license to the license issuing authority every six months, if the export of products is subject to export license according to the Chinese provisions.

Article 46 The price of goods and materials and any technical service imported by the foreign-funded enterprise shall not be higher than the normal price for goods and materials and technical services of the same kind in international market at that time. The price for the export products of a foreign-funded enterprise shall be determined by the enterprise itself in the light of the relevant prices in international market at that time, provided that they shall not be lower than reasonable export prices. If any enterprise evades taxes by importing products at a high price or exporting products at a low price, the legal responsibility of the relevant enterprise shall be investigated according to tax law by the tax authority.

Article 47 Any foreign-funded enterprise shall provide statistical data and submit statistical statements to the departments concerned in accordance with the provisions of the Statistics Law of the People's Republic of China and the relevant provisions of China concerning the statistical system for the utilization of foreign capital.

Chapter VII Taxation

Article 48 Any foreign-funded enterprise shall pay taxes in accordance with Chinese laws and regulations.

Article 49 Workers and staff members of a foreign-funded enterprise shall pay individual income tax in accordance with Chinese laws and regulations.

Article 50 Taxes on the following goods and materials imported by a foreign-funded enterprise shall be exempted or reduced in accordance with Chinese tax law:

（1） machinery and equipment, parts and components, materials for construction, and materials needed for installing and fixing the machinery, which are contributed as investment by the foreign investor;

（2） machinery and equipment, parts and components, means of transportation for production, and production management equipment, which are imported, for their own use in production, by the foreign-funded enterprise with funds within its total amount of investment;

（3） raw materials, auxiliary materials, primary parts, parts and components and packing materials imported by the foreign-funded enterprise for producing export products.

Where any goods and materials imported as mentioned in the preceding paragraph are, upon approval, resold in the territory of China or used for producing products to be sold in China, the relevant foreign-funded enterprise shall, in accordance with Chinese tax law, pay the taxes that were exempted or reduced.

Article 51 The export commodities produced by the foreign-funded enterprises may enjoy tax reduction, exemption or refund according to the relevant provisions of Chinese tax law, except those whose export is restricted by China.