Article 1 The provisions are formulated according to relevant stipulations on foreign investment of the state and situations of Qinghai.

Article 2 The provisions shall apply to the projects of Sino-foreign joint venture, Sino-foreign cooperative enterprises, and foreign-owned enterprises within Qinghai. They are also applicable to the investors from Hong Kong, Taiwan, and Macao.

Article 3 Foreign investors can choose the following forms of investment:

1. Sino-foreign joint ventures, Sino-foreign cooperative enterprises, and wholly foreign-owned enterprises;

2. Purchasing, leasing, holding share of, merging, and contacting state-owned and collective enterprises;

3. Compensation trade, material processing, processing supplied samples, assembling with supplied parts, and technology transfer;

4. BOT projects; and

5. Other forms allowed by laws and regulations.

Article 4 Foreign investment is encouraged in the fields of export, advanced technology, agriculture, forestry, animal husbandry, trade, tourism, energy, transportation and approved financial projects. Enterprises for the development and processing of local resources are encouraged.

Article 5 Foreign investment enterprises (FIEs) engaged in export, advanced technology, agriculture, forestry, animal husbandry, trade, tourism, energy, transportation and approved financial projects enjoy a refund of 50 percent of their local income tax from the local revenues. FIEs with an operation period over 10 years and an export volume of half of their output value and the FIEs in the field of advanced technology are exempt from income tax in the first two profit-making years. The FIEs can enjoy the exemption of local income tax, city housing and land tax, and car license tax for ten years. Beyond this period, the FIEs may get approval and continue to enjoy tax exemption and reduction.

Article 6 Ordinary FIEs whose income tax exceeds 24 percent of their income will get the exceeding amount from local financial departments. FIEs with an operation period of over 10 years and an investment of 5 million yuan enjoy the local income tax for three years and have the income tax refunded from the financial departments in the first profit-making year and half refunded in the second and third years.

Article 7 The overdue tax payment in the previous years of the state-owned enterprises, which are merged, share-held, and contracted by FIEs, can be treated in line with Article 6.

Article 8 When the FIEs with an operation period of five years invest their profit for the accumulation of the registration capital or the establishment of a new enterprise in Qinghai, they can have a refund of the business income tax and local income tax for the re-invested part.

Article 9 FIEs enjoy the following land-use policies:

1. FIEs are exempt from the land use fee in the fields of export, advanced technology, agriculture, forestry, animal husbandry, trade, tourism, energy, transportation and approved financial projects.

2. The ordinary FIEs pay half of the land use fee.

3. FIEs using the barren mountains, wilderness, and wasteland enjoy land transfer and use fee exemption.

Article 10 FIEs engaged in mineral exploitation enjoy 70 percent and 50 percent discounts of the mineral exploitation price during the investigation period and commercial exploitation period respectively. Governments at prefecture, county, and township levels are not allowed to push FIEs for cooperation, partnerships, and profit division.

Article 11 FIEs enjoy local administrative fee exemption upon approval.

Article 12 FIEs can settle their own cars in Qinghai. The sedans and motorcycles purchased by FIEs in China are exempt from the local surtax.

Article 13 FIEs are allowed to accelerate the fixed asset depreciation for special reasons with the approval of the concerned taxation bureau upon application from FIEs.

Article 14 FIEs have the decision-making power in operation and management. They can employ the needed managerial and technical personnel and workers in Qinghai and other places of China. As to the personnel from places rather than Qinghai, FIEs can get approval and settle them in Qinghai as needed. FIEs can legally set their product and service price.

Article 15 Relevant departments should give priority to the application of the establishment of FIEs. The examination and approval procedure should be completed within 10 days.

Article 16 No unit or individual is allowed to collect any unjustified fees and fines from FIEs. The administrative institutions can collect fees only with the approval of the price management departments. FIEs have the rights to turn down any fees if not given any relevant notice.

Article 17 Go-betweens of FIEs can be awarded with 0.5-3 percent of actual investment by the beneficiary units. Those who introduce large projects are also awarded by the provincial government.

Article 18 Organizations and relevant government departments solve the complaints of FIEs within seven days.

Article 19 The right of interpretation of these provisions belongs to the Qinghai Merchants Bureau.

Article 20 The provisions shall enter into effect on the date of promulgation. The Preferential Measures of Encouraging Foreign Investment in Qinghai issued on March 1, 1995 is repealed at the same time.

Reward Regulations on Encouraging Absorption of Foreign Investment (running on trial)

Article 1 The provisions are formulated to attract more overseas investment, upgrade the efficiency of foreign investment and promote the development of export-oriented economy.

Article 2 The provisions shall apply to the following go-betweens who introduce overseas investment through various means and channels: citizens on the Chinese mainland (excluding Party and government officials, department-level leaders and personnel in charge of local foreign investment), people from Hong Kong, Taiwan and Macao, and foreigners and foreign organizations.

Article 3 The go-betweens will be rewarded with 1.5 percent of the actual investment after the affirmation of local department in charge of overseas investment and other relevant units. The go-between will first receive 0.5 percent of the due reward fund within one month of trail operation of the foreign-invested project and after local government and department in charge of overseas investment examine and approve the report from local financial department. The rest 1 percent will be delivered after the foreign-invested enterprise or project turns in its taxation.

Article 4 A commending certificate will be issued by the Qinghai provincial government to those who manage to introduce a foreign investment of US$5 million or above. For projects below this figure, the go-between will get a certificate from the Qinghai Provincial Department of Foreign Trade and Economic Cooperation.

Article 5 The regulations shall be put into effect on the date of promulgation, June 26, 2000, and should be stuck to when any past regulation runs different from them.

Article 6 The right of interpretation of these provisions belongs to the Qinghai Provincial Department of Foreign Trade and Economic Cooperation.

Regulations on Encouraging Investment from Outside of Qinghai Promulgated on September 9, 2001

The regulations stipulate that all the markets in Qinghai are open to investors except for those specially designated by the state and the province. Investors are encouraged to invest in any form in the fields of infrastructure, ecological and environmental protection, development of salt lakes, hydropower, oil and gas, exploitation of local advantageous resources, the advantageous industries of metallurgy and building materials, Tibetan medicine and processing of animal-husbandry products, hi-tech industry, science and technology, education, tourism and trade. Investors who establish hi-tech enterprises in the province are allowed three years for trial operation.

Invested enterprises engaged in the encouraged fields and industries enjoy 15 percent discount of business income tax within the first 10 years of operation. Enterprises that involve a large amount of investment and greatly promoted local economy shall be exempt from business income tax within a certain period after the approval of the provincial government. They shall also be exempt from the taxes for vehicle and ship use, city housing, education added fee and urban construction fee in a certain period, and shall be exempt from land-use tax during the construction period. Enterprises involved in exploiting mineral resources shall enjoy five-year exemption of resource-use tax and those involved in comprehensive development of mineral resources shall enjoy eight-year exemption of resource-use tax. The geological prospecting cost can be amortized within five years. Enterprises of farming and animal husbandry enjoy five-year exemption of the taxes of agriculture, animal husbandry and agricultural products. Companies purchasing, merging and renovating the once profit-losing or low-profit enterprises shall enjoy 10-year tax exemption of city housing, education added fee, land-use and urban construction. Enterprises which get the land-use right in the form of land transfer and has an operation plan of over 20 years shall enjoy 40 percent discount of the land-transfer fee. Enterprises using barren mountains, wild land and wasteland enjoy 80 percent exemption of land-transfer and use fee. Enterprises, which use barren mountains, wilderness and wasteland to engage in public welfare undertakings and eco-environment protection, shall enjoy exemption of land-transfer fee and land-use tax. Investors who involved in the construction of rated highways precede all others in developing the roadside land. Investors, who invest their technology or hi-tech achievements in hi-tech enterprises, can make their registered funds in place within five years if they don’t have the required funds for registration.

The regulations also provide that administrative departments at all levels should offer one-stop and all-round services for investors, while simplifying procedures and opening charging standard.

Regulations on Improving Investment Environment Issued by the People’s Government of Qinghai Province

I Simplify examination and approval procedures and improve office efficiency

1. Foreign-invested enterprises (FIEs) and Sino-foreign cooperative enterprises shall be put on file except those specified by law and state regulations; the state-assets of FIEs and Sino-foreign cooperative enterprises shall be registered by state-assets management departments or relevant authorizing departments.

2. The application for establishing FIEs shall be handled by the provincial business invitation department, where one-stop service shall be guaranteed.

II Collect fees legally and unjustified fee collection is not allowed.

The fee collection license system should be followed. The items and standard of charges shall be examined and approved by the provincial government and the relevant invoices shall be printed by the provincial financial department. The fee-collection license shall be issued by the government at or above the county level. Enterprises have the rights to turn down any charge if not given any relevant notice, for items not listed, or with risen standard. Any unit or individual who collects fee illegally shall be punished accordingly.

III Protect the legal rights of enterprises

1. The annual inspection of FIEs should be conducted strictly according to relevant state regulations. No random inspection is allowed.

2. Administrative organizations should produce their certificate and notice when inspecting FIEs. The inspection notice should include the inspection grounds, items, period and names of the inspection personnel.

3. FIEs should be informed of the right of hearing before they are given administrative sanction by local administrative department including approval certificate confiscation, license suspension, forced production stop and large amount of fine. A hearing must be organized if demanded by the litigants.

IV Provide top-notch service

1. The foreign-investment department should provide follow-up service for foreign-invested projects and help solve problems emerged.

2. Take effective measures to regulate the foreign-investment agencies and provide transparent, efficient and good service for investors in line with international practices.

3. Public security departments should go through settling and visa procedures on the very day of application for overseas investors and inspectors, including those from Hong Kong, Taiwan and Macao, if materials are ready. Chinese personnel working in foreign-invested companies who go abroad for business shall be given priority by public security department in relevant issues. Foreign investors enjoy the same treatment as local residents in matters of children’s schooling, medical service, entertainment and other spheres of life.

V Intensify law supervision and upgrade administration

1. The provincial government will conduct an annual inspection of the implementation of the regulations and will list the inspection result into the appraisal contents of the performance of governments at various levels.

2. Any individual who violates the regulations shall receive due penalty according to laws.

3. The complaint center for foreign investors has set open telephones for FIEs’ complaints. Citizen, legal representatives and other organizations are encouraged to supervise the performance of relevant administrative departments, and to complain and inform against the offenders to supervisory departments or the complaint center for foreign investment.

4. The media should play a full role in exposing unlawful acts of administrative departments. Investigation should be encouraged and the results should be open to public.

VI The provisions shall enter into effect on the date of promulgation. (June 24 2000, the People’s Government of Qinghai Province)