The Preferential Public Policies for

Market Initiative of Daqing Municipal Government

Article I. In order to implement the opening up strategy, attract foreign businesses to invest in Daqing and realize the aim of Daqing's second economic boom, Daqing Municipality has stipulated the following preferential public policies in accordance with the corresponding regulations promulgated by the central and provincial governments based on the local circumstances.

Article II. The preferential public policies herein are suitable to the overseas and domestic corporations, enterprises, institutions and individuals that invest in Daqing excluding the local companies, enterprises and institutions that belong to Daqing's various governments or authorities and individuals in Daqing.

Article III. The Preferential Public Policies on Taxation:

(I).The proportion and term concerning the retained proportion of the value-added tax levied on the new industrial enterprises or the process-oriented enterprises will be determined by the city's financial authorities according to the production scale and operation period of the enterprises. After the term of the income tax exemption expires in line with the state regulations, the city's financial authorities will determine the proportion and term of the tax to be postponed or returned at the request of the investors.

In terms of the postponement and return, the proportion and term of other local taxes to be levied on the new industrial enterprises and process-oriented enterprises will be determined by the city's financial authorities at the request of the investors.

(II). The tax levied on the new commercial businesses with the invested fixed assets totaling 10 million RMB yuan or more will be reduced to fifty(50)per cent.

(III). Those who purchase the whole property right of a medium-or small-sized company will enjoy thirty (30)per cent of price reduction and the contract tax will be exempted. If the purchased company is a closed enterprise, the local taxes levied will be totally returned to the purchasing enterprise in three year's time.

If the new company employs fifty (50) per cent or more of the purchased company's employees, surplus labors and unemployed youths, it will have its local taxes returned in three years' time starting from its business license being issued, and it will also enjoy other corresponding preferential public polices.

Article IV. The Preferential Public Policies on Land Use:

(I). Those who purchase the land use right will have the exemption of the fees for land investigation, registration, survey, design and price evaluation. The fees concerning land purchase will be reduced by one to two grades of the price depending on the project's nature, scale and location. If the investors purchase the land by one payment, ten per cent of discount will be enjoyed. If a purchaser has difficulty in paying for the land at one time, the payment can be made at the original price by yearly installments after its enterprise starts to make profits.

(II). Those who invest in the construction of public utilities shall be provided with the needed land under allocation.

(III). Those who purchase the total property right of the existing state-owned and city-run enterprises that are profit-losing, shut-down or bankrupt will enjoy the land price reduction by two to three grades.

Article V. The Preferential Public Policies on Purchasing of the Unused Hills, Unused Land, Unused Grassland, Unused Sand Bank and Unused Surface Water (Referring to as "the Five Unused"):

(I). The term for the land use right can be as long as seventy (70) years and the land use right can be renewed when the term expires.

(II). The exemption, reduction, postponement and return of all the taxes for reclaiming and developing of the Five Unused will be undertaken with the proportion and term determined by the city's financial authorities.

(III). Those who conduct afforestation on the unused land can gratuitously use the land and have the proprietary rights to the woods. The proprietary rights to the woods can be inherited, transferred or sold.

Article VI. The Preferential Public Policies on Finance:

(I). When the investor applies for a loan from a financial institution with the terms and conditions in line with the state's loan policies, the financial institution shall grant the loan in three days' time so long as the funds are available. If the funds are not available, the active steps shall be made to grant the loan within thirty (30) days.

(II). The convenience shall be offered to the investors to withdraw cash from the banding institution in which the accounts have been opened.

Article VII. The Preferential Public Policies on Levying Fees:

(I). The operation expenses charged by the administrative institutions will be undertaken according to the relative regulations of the central and provincial governments and will be charged at the lowest level if there is bound.

(II). For the operation fees, it will be levied according to the bottom lines.

(III). The items for exemption from charges include: registrations, construction project approvals, some sectors' consultations, and advertisement within thirty (30) days if not engaged in the sectors of commerce, service and entertainment.

Article VIII. The Other Preferential Public Policies:

(I). In terms of the establishment of enterprises in Daqing, the investors are offered the rights to decide the ways of employment and the standards of salary and welfare in line with the relative laws and regulations.

(II). The enterprises established by the investors can have the fixed assets depreciated in a shorter period upon approval.

(III). If an investor purchases a city-run and state-owned enterprise with all the retired and the resigned employees of the purchased enterprise, certain amount of costs will be allocated from the existing net fixed assets of the purchased enterprise. If an investor purchases the enterprise with all present employees, the investor shall have the rights to decide the standards of salary and to offer a lump sum to buy out the former employees' working opportunity in the purchased company in line with the relative laws and regulations.

Article IX. If some special issues arise in the implementation of the preferential public policies, the measures will be taken based on the principle of "dealing with one issue singly and dealing with the issues of one enterprise singly."

Article X. The Law Promotion Bureau of Daqing Municipality has the rights to explain the regulations and the policies.

Article XI. The above preferential public policies come into effect starting from the date of January 1,1998.