Doing Business in Fujian -- china.org.cn

I . Survey

(i) Geographical Position

The location of Fujian is between the east longitude 115 °50'to 120 120 °44',north latitude 23 °31' to 28 °19'. It lies i n the southeast coast of China, and it is the north eastern neighbour of the Zhejiang Province. It also connects in the northwest to the Jiangxi Province and the southwest connects to the Guangdong Province. The East China Sea lies in the east, and Taiwan Straits connects it with Taiwan Province.

The land area is 121,400 square kilometres,most of it made of mountains connected to each other. The sea area, according to international water lines, is 136,000 square kilometres. The continental coastline is over 3,000 kilometres, the second largest in China. The coastal land twists like silk floss with numerous harbours and islands.

(ii)Climate Characteristics

The majority of the Fujian Province is located in the middle of a subtropical zone. The southeast of Fujian is in the southern subtropical zone and belongs to the maritime monsoon climate. The climate is temperate in the whole province, the rainfall is plentiful, the average temperature of the whole year is 15.3 ℃ to 21.9℃, the annual precipitation is 1,351 to 2,645 millimetres. The yearly average sunshine is 1,400 to

2,000 hours, and 240 to 330 days of frostfree periods.

(iii)Population and Nationalities

The total population in Fujian is 35,350,000, of which 16,720,000 live in urban areas. The rural population is 18,630,000. Fujian has a mix of nationalities:besides the Han majority, there are the She, the Hui, the Man, and the Gaoshan and 31 ethnic minorities with population of 583,800, which accounts for 1.71% of the total in Fujian province.. Fujian has the largest population of the She and the second largest Gaoshan nationalities in China.

(iv)Communications and Infrastructure

Aviation

Fujian has two international airports,i.e Fuzhou airport and Xiamen airport. In 2005, their transportation ability reached to 3,391,800 and 6,285,700 people respectively.There are four branch airports in Wuyi Mountain, Jinjiang, Liancheng and Shanming.Fujian has already opened more than 200 domestic and international routes. Over 300 aircrafts operate on these routes. The airport in Xiamen became the fifth city in China to open air routes to America, following Beijing,Shanghai, Guangzhou and Shenzhen.

Harbors

Over 160 commercial shipping linesoperate from the Fujian province. Fujian has the most advantageous conditions in China to construct deep water harbours. Over 47 kilometres of the coastline is favourable to the installation of large deep sea ports, with 80 berths for ships of up to 200,000 tons.The largest deep water ports are in Xiamen,Fuzhou, Meizhou Bay and Sanduao, among which the Xiamen Harbor is one of the ten largest harbors in China. Furthermore,54 other ports can accommodate ships of 10,000 tons or more and they provide easy commercial shipping to all the domestic ports. Fuzhou and Xiamen offer direct sailing services to Taiwan and Gaoxiong.The coastal areas have regular daily ferry services to Jinmen and Mazu islands. Taking advantage of those features, the throughput reached 196 million tons with over 4.9248 million standard containers in 2005.

Road Transport

Up to the end of 2005, the road network totalled 58,286 kilometres. Most counties and urban areas are connected to a major highway within one hour drive.Nine prefecture-level cities in Fujian are all within four hours drive to the capital city. Fujian benefi ts from 1,210 kilometres of divided highways: the Fujian part of the Tong-San highway (i.e.Tongjiang,Heilongjiang Province to Sanya, Hainan Province) to Guangzhou, the Fujian section of the Fujian �C Beijing expressway, and the Tianjing-Fujian, Fuzhou-Xiamen-Zhangzhou-Zhao'an and Xiamen-Kunming expressways.

Railways

Fujian has 7 national railway linesl inkedtonat ionalrailwaynetwork ,totalled 1,630 kilometres, including the Ying-Xia, Heng-Nan, Mei-Kan and Gan-Long provincial railways. The volume of passenger traffic is 14.86 million people,and the freight amount is 36.01 million tones. There are fi ve 5 provincial railways serving within the province. In addition to those, two high-speed lines, the Fu-Xia (Fuzhou to Xiamen) has been started and the Long-Xia (Longyan to Xiamnen) railway will be started as well.

Finance and Insurance

At the end of 2005, there were over 5,673 banking financial institutions and agencies in Fujian, employing 80,100 people. The total assets had reached over RMB 1.0376 trillion, with RMB 765.4 billion in deposits and a loan balance of RMB 541.3 billion.

The insurance industry is healthy and developing well. There are 20 insurance companies in the Fujian market. Among

them, 10 are property insurance and 9 are life insurance companies. There are 52 insurance professional intermediaries and 317 branch organizations.

Main Financial Institutions

Main Insurance Companies

Electricity

Fujian is rich in natural resources to generate electricity power, and thus has abundant electricity supply. The Fujian electricity network connects with the East national network. The supply of electric power is abundant. In 2005 the installed capacity was 17,580,000 kilowatts. Plentiful electricity power resources make Fujian an exporter of electricity to other provinces.

Sister Province or City with the Fujian Province

Telecom

The telecom services in Fujian occupy a national leading position.In 2005, Fujian had 13,990,000 line phone subscribers in all urban and rural areas which could dial direct calls to more than 180 regions and countries. The mobile phone network covers the whole province.The number of mobile phone users

reached 13,020,000. The market penetration for users of line phones and mobile phones was 39.85 percent and 37.08 percent respectively.

Internet

The whole Fujian province has built 34 optical cable lines and 20 digital microwave lines are already. The total length of optical cable is 10,000 kilometres which connect all counties and cities. Fujian has over 3,190,000 Internet users.

(v)Foreign Contacts

Friendship Provinces or Cities with the Fujian Province

By the end of 2005, Fujian province and its 9 prefecture - l evelcities had separately become sister-cites of 44 states and provinces, counties or cities in 17 countries.

Trade and Investment Fairs and Exhibition

The Fujian Province regularly holds many large-scale investment and trade fairs every year. The most important are the China International Fair for Investment & Trade, the Fuzhou Crossstrait Conference on Economy and Trade and the China

(Fujian) Technology & Projects Fair.

The China International Fair for Investment & Trade (CIFIT for short), sponsored by the Ministry of Commerce of People's Republic of China, is held in Xiamen, China from Sep.8 to Sep. 11 every year. The Fair highlighted�� Attracting Foreign Investment�� and�� China Enterprises Going Global��. It is so far the only fair aimed at promoting bilateral investment in China. The CIFIT is also the largest and the only one fair of investment which is approved by the Global Association of the Exhibition Industry (UFI).

In addition, many areas in Fujian hold various economic

activities such as�� The Promotion of Trade and Investments Month��etc.

(vi)Higher Education and Scientific Research

Fujian has 66 state universities and colleges. It has 29 first class discipline centres and 252 second class discipline

centres for PhD education, and 500 Master Degree education centres in its universities. They cover 10 main disciplines. Among those, centres of studies in chemistry, oceans, environment and resources sciences have established their own institutions in their respective specialties, making Fujian a centre of excellence in those disciplines. Fujian has renowned national universities such as Xiamen University, Fuzhou University, Fujian Normal University.

Fujian is at the third position in China for the number of academicians in the Chinese Academy of Sciences. Fujian has now 15 scholars working at the Chinese Academy of Sciences and at the Chinese Academy of Engineering (in all 119 scientists from Fujian have worked there in these two organizations' history). Fujian has 5,200 types of research institutions and 1.43 million professional and technical people. Currently, Fujian has established 35 statelevel and provincial-level key laboratories,21 engineering (technical) research centres,

13 industrial technological development bases and test bases. There are 121 local government departments' independent research institutions, 100 provincial-level enterprise technical centres.

(vii)Tourism

Tourism

Fujian has beautiful natural sceneries and abundant cultural heritages. There are 13 national scenic spots and historical sites, 10 national nature reserves, 4 national historical cities, 19 national forest parks, 5 national geological parks, 2 national tourist resorts. Wuyi Mountain is classified as a world natural and cultural heritage site by UNESCO. Gold Lake World Geological Park, Quanzhou Maritime Silk Road, Gulang Island of Xiamen and Mazu island in Meizhou,Fujian Earthen Towers Cultural heritage have become well-known both at home and abroad. There are 19 provincial scenic spots and 167 offi ces of provincial Cultural Relic Unit under state protection. There are 14 temples of National Buddhism in Fujian, which give Fujian its fi rst position in China.

Wuyi Mountain is located in Chong'an, a town northwest of Fujian Province. It covers a area of 99,975 hectares, and is famous for its typical Danxia landscape. The scenic Mount Wuyi is one of the world natural and cultural heritage. It has the most outstanding, intact and largest subtropical forests as compared to those around same longitude. There are numerous archaeology sites and historical relics scatter in Mount Wuyi, including the ruins of Han city built 1st century B.C., a number of temples and study centres associated with the birth of Neo-Confucianism in the 11th century AD.

Taimu Mountain is situated within Fuding county, Northeast Fujian Province.The total area is about 300 square kilometres,

100 of which is for tourism. Taimu Mountain is famous for its precipitous mountains, odd rocks, bizzare caves, beautiful mist and rapid waterfalls. The ancient Chinese call Taimu Mountain a�� Grand Sight of Mountains and Sea��. Taimu Mountain was approved to be a famous national scenic site in 1988 by the state council.

Hakka earthen Buildings are oriental style village folk dwells. This kind of historical buildings have its name in the world folk dwell list for its unique style,large scale and complex constructions. The Hakka earthen buildings, almost square or round shaped, mainly scatter in Yongding county, Fujian. There are 360 round-shaped buildings and more than 4,000 square-shaped buildings in the whole county. The building, especially those round- shaped ones, are most heart touching.

Specialty

Fujian has an abundant production of beautifully intricate and well-known handicrafts. Fujian is the homeland of the Wulong tea. Wuyi has rock tea such as the�� black tea�� called Dahongpao,Anxi has�� Tie Guanyin��, which is an outstanding dark tea and enjoys a high reputation at home and abroad. Min cuisine,represented by Fuzhou dishes, is among eight most famous ones in China. The dishes named�� Fotiaoqiang�� (fish dish),��Jitanghaibang�� (sea food) are classifi ed as state banquet delicacies.

Fujian is the main producing region for workmanship with unique folk custom styles and strong local specialties. It has become a very important component of magnifi cent national culture and arts. For example, the reputed Fuzhou lacquers are classifieds in China among�� Three Best�� along with the JingTaiLan lacquers from Beijing and the Jing De-zhen porcelains from the Jiangxi Province. Fujian has also the Shoushan stone carvings from local limestone and intricate

cork sculptures.

II . Economy

(i)General Situation of Economic

Development

GDP

The Fujian province brought a total output value of RMB 656.893 billion in 2005. The increments in the primary, the secondary and the tertiary industries was respectively RMB 83.108 billion, RMB 320.026 billion and RMB 253.759 billion.

Per Capita GDP

Per capita regional GDP reached RMB 18,621.

(ii)General Resources Situation

Mineral Resources

Fujian already proved the reserves of 86 kinds of minerals (including sub minerals). Among them,energy minerals include 3 kinds, such as anthracite coal, sodium and subterranean heat; 34 kinds of metal minerals;47 kinds of non-metal minerals and 2 kinds of mineral water. There are also large quantities of other minerals such as gold, silver, lead, zinc, manganese,

kaolin, cement limestone, granite, alum stone, pyrophyllite and sulphur. The reserves and quality of quartz sand in Fujian are among the best of the whole country.

Natural Resources

Fujian is one of China's key forest regions. The forested areas are more than 100 million acres with a coverage of 57.3%

of the province, which is the highest in China. Forest resources are very abundant and the categories of trees are numerous.

The ocean resources are extremely rich. There are 6.19million acres of shallow sea, 2.99million acres of beaches and fi ve large inshore fishing grounds, where there are about 3,000 marine species with 750 types of fi shes, occupying the half of the national ocean fisheries. Particularly, categories of

marine products resources are abundant, the existing species represent more than 50% in the world.

Water Resources

Rivers densely cover much of the Fujian province, so the water resources are quite rich. There are more than 500 rivers

with a coverage area of above 50 square kilometres. They mostly flow within theprovince's boundaries, but have great capacities of water. In theory, the potential electric power that could be generated could reach 10.46million kilowatts. Currently, the amount of power that can be generated is 7.05million kilowatts, which resides the fi rst in the eastern part of China.

(iii)General Situation of Agriculture

Development

In 2005, the total output value of Fujian's agriculture, forestry, animal husbandry and fishery was RMB139.615 billion. The grain growing area is 1.4413 million hectares, and its total yield reaches 7.1518 million tons. The planting area of cash crops is 1,040,000 hectares. The marine products output is 6,022,200 tons. The forestation renewal total area is 104,800 hectares.

Output of Major Agricultural Products in 2005

(iv)General Situation of Industry

Development

In 2005, the gross value of industrial output in the Fujian Province was RMB 999.589 billion. The increment of industry was RMB 284.243 billion, occupying 43.3% in the whole provincial GDP. The three big leading industries of electronics, petrochemicals and machinery, increased RMB 85.814 billion in value. Traditionally dominantin dustries such as textile , metallurgy and building materials increased RMB 45 billion in value. Large scale industrial enterprises realized profits of RMB 40.755 billion.

The Main Products Otput of Large Scale Industrial Enterprises in 2005

The Main Classification of Imports and Exports in 2005

(v)General Situation of Business

Development

Imports and exports

The total amount of imports and exports in the Fujian province in 2005 was USD 54.431 billion, increasing 14.5% from

the previous year. The amount of exports was USD 34.845 billion and the amount of import was 19.586 billion.

The Situation of Imports and Exports to Main Nations or Regions in 2005

Diagram of Exports to Main Nations or Regions in 2005

Diagram of Imports from Main Nations and Regions in 2005

Foreign investment utilization

In 2005, the Fujian province approved 1,988 foreign-invested enterprises with USD 5.957 billion contracted foreign capital, and actually used FDI of USD 2.608 billion in that year. Among them, the approved projects with total investment of more than ten million dollars were 294, andcontracted foreign capital was USD 3.071 billions.

Industry Distribution of FDI in 2005

Overseas investment

There were 66 enterprises with approval to invest abroad. Their total amount of agreed investments was USD 105.1863

million. The amount of USD195 million of foreign contracted p rojects were completed,and the amount of foreign labou service cooperotion reaehed USE310million.

Circulation of commodities

The total volume of retail sales of consumer goods kept a remarkable growth in 2005. It realized a total volume of consumer goods retail sales of RMB 234.582 billion. The wholesale and retail industries realized a total retail sales volume of 201.187 billion. In 2005, there were many famous domestic and foreign supermarket enterprises opening new branches in Fujian, including 3 Walmart branches, 1 Metro branch, 1 Carrefour branch, 1 B&Q branch, 13 Gome branches, 1 Suning branch and 1 Yongle branch.

III . Investment

(i)Policy and Administrative Rules

Catalogue of Related Laws

Foreign Trade Law of the People's Republic of China

Customs Law of the People's Republic of China

Law of the People's Republic of China on Import and Export Commodity Inspection

Law of the People's Republic of China on Chinese-Foreign Equity Joint Ventures

Law of the People's Republic of China on Chinese-Foreign Contractual Joint Ventures

Law of the People's Republic of China on Foreign-Capital Enterprises

Company Law of the People's Republic of China��

Law of the People's Republic of China on the Entry and Exit Animal and Plant Quarantine

Law of the People's Republic of China on Control of the Entry and Exit of Aliens

Law of the People's Republic of China on the Control of the Exit and Entry of Citizens

Securities Law of the People's Republic of China

Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises

Individual Income Tax Law of the People's Republic of China

Law of the People's Republic of China on the Administration of Tax Collection

Environmental Protection Law of the People's Republic of China

Law of the People's Republic of China on Evaluation of Environmental Effects

Law of the People's Republic of China on Promotion of Cleaner Production

Law of the People's Republic of China on Prevention and Control of Desertifi cation

Marine Environment Protection Law of the People's Republic of China

Law of the People's Republic of China on the Prevention and Control of Atmospheric Pollution

Law of the People's Republic of China on Prevention and Control of Environmental Pollution by Solid Waste

Law of the People's Republic of China on Prevention and Control of Water Pollution

Law of the People's Republic of China on Prevention and Control of Environmental Noise Pollution

Law of the People's Republic of China on Prevention and Control of Radioactive Pollution

Frontier Health and Quarantine Law of the People's Republic of China

Labour Law of the People's Republic of China

Trade Union Law of the Peoples Republic of China

Searching Website for the Related Laws

1 . Searching System of Law sand Regulations of China (website of National People's Congress of China)

http://law.npc.gov.cn:87/home/begin1.cbs

2. China Legislative Information Network System

http://www.chinalaw.gov.cn/jsp/jalor/index.jsp

3. Ministry of Commerce

http://www.mofcom.gov.cn

The above-mentioned websites are for reference only.

(ii)Guidance for Foreign Investment

(1)Key Encouraged Industries with Foreign Investment

Electronic & Information Industry

The development of har dware production has been inclined to such fields as telecom products, computers and network products, digital video and audio products, new modes of display, and newtype electronic components, in particular

the integrated circuit and auto electronic products. The development of the software industry, on the other hand, is led by two software parks in Fuzhou and Xiamen that specialize in the development of application software and operating systems.

Machine Building Industry

Automobile: Mid-upper class passenger cars as produced by South-east Auto and Daimler Chrysler Fujian, buses of large and medium capacity as produced by Xiamen King Long, remodelled vehicles and dumpers produced in North-west Fujian as well as the development of key assembled and accessory parts.

Ship-Building and Maintenance:The four established shipbuilding bases of Xiamen, Mawei, Quanzhou and Fu'an have enabled Fujian to become the shipbuilding building centre of the southeast coast. The versatility of Fujian's ship-building industry can be seen not only in the efforts to optimise the series of cargo containers, high-power towboats and tunny fishers, but also in the development of 53,800-ton bulkers and 4,900-ton roll-on/rolloff ships for cars. Besides, the manufacture of shipping devices is another concern in the

industrial development.

Electric device and Equipment Manufacture: Utilizing advanced technology, this industry has placed great emphasis on strengthening the manufacture of devices for electricity transmission and distribution as well as the controlling devices, electrical equipment and electric motors.

Engineering-Machinery Building:The development has been focused on the fi ve main product series as loaders, excavators, road roller, forklifts and road building machinery. Efforts have also been made to forge the relevant chains of production in this sector.

Petrochemical Industry

Fujian is speeding up the development of its oil refinery-petrochemical integrated projects, placing the priority on constructing Meizhou Bay and Haicang Petrochemical

Bases as well as Fuzhou Jiangyin Advanced Chemical Park. The Province attaches special importance to the manufacture of synthetic resin, synthetic fiber and synthetic rubber together with their subsequent processing and also encourages the production of organic and advanced chemical products with high added value and in high demand.

Petrochemical Sector: Focusing on the oil refinery-petrochemical integrated project, affords have been made to coordinate the development of the upper stream with that of the lower stream in this industry, and to form six main industrial chains such as engineering plastics and synthetic resin.

Advanced Chemical Sector: Supporting the construction of advanced chemical production bases manufacturing such products as sodium silicate, silica, oxalic acid and fl uoride with the emphasis on eight major classes of products such as plastic

additives and coating products.

Chemical Raw Material and Fertilizer Industry: Emphasizing development the production of basic chemical raw material

such as formaldehyde and liquefi ed ammonia and on raising the portion of non-fertilizer chemical products in the total output.

Hi-Tech Industry

Biotech and Biomedicine: Importance is attached to the R&D of transgenic feed enzyme, diagnosis reagent, marine specific

medicine, new type of bio-pesticides and bio-fertilizers.

New Materials: Focusing on the R&D of electronic material, semiconductor material, crystal material, nano material,

material of membrane function, micromolecular material of new functions, ecomaterial, bioceramic material and other special ceramic materials.

Environmental Protection: Special attention is paid to this area, in particular the water and air pollution control technique, solid waste processing technique, clean production and low emission technique, the energy-saving techniques and new processing craft integrated in the production of the high energy consumption industries, the new energy-saving techniques applied in industrial kiln and furnace as well as the key techniques in saving or replacing the petrol oil.

Optoelectronics: Focusing on the R&D of integrated auto controlling system, intelligent industrial controlling parts, new types of sensors, numerical controlling machine tools and the open numerical controlling system.

(2)The policy on foreign exchange

According to�� the Foreign Exchange Management Regulations of People's Republic of China��:

(1)The profits of the foreign-invested enterprises, after legally taxed, are allowedto be remitted outside of China;

(2)The Foreign-invested enterprises may exchange the Chinese currency (RMB) into foreign currency under the current

items.

(3)The foreign-invested enterprises in bonded areas and export processing areas are allowed to establish the special-purpose foreign currency of the current items and the capital items, and a reserve of foreign currency.

(iii)Establishing Stipulations Related to Foreign-invested Enterprises

(1)The form of establishment

According to requirements of�� Company Law��, there are mainly two forms for companies the register in China, namely

limited company and limited liability company.

(2)The lowest registration capital

According to the stipulations of ��Company Law��, the lowest registration capital of a limited liability company is RMB30,000. Other related laws, administration laws that have a higher stipulation to the lowest registration capital of the limited liability company set up by the foreign investment

rules must be obeyed. The investment amount of all shareholders should not be less than 30% of the limited liability company's registration capital. The limited liability company's registration capital of one person is RMB100, 000. The shareholder must pay the money that�� Company Law�� requires one time.

The registration capital of incorporated company set up by foreign investment should not be less than RMB30, 000,000.

The registration capital of an investment company set up by foreign investment should not be less than USD30, 000,000.

(3)The investing method

Sino-foreign equity joint ventures, Sino-foreign cooperative joint ventures and foreign-funded enterprises are the main foreign investing modes, others are foreign incorporated companies, investment companies, carving investment enterprises, research and development centres, fi nancial property management companies, Build Operate Transfer (BOT) and Transfer-Operate-Transfer (TOT).

(4) Examination and approval

National examination and approval: the encouragement class and permission projects with more than USD100 million (including USD 100 million) of total investment, and the limited projects with more than USD50 million (including USD 50 million) of total investment.

The Fujian provincial examination and approval: The encouragement class and permission projects with less than

USD100 million and more than USD30 million (including USD 30 million) of total investment, and the limited projects with less than USD50 million of total investment.

County, city examination and registration approval: The encouragement class and permission projects with less than USD30 million (including USD 30 million) of total investment.

(5) The examination and registration approval procedure

(iv)Residence Environment

Education

A nine-year compulsory education program is implemented in Fujian. There are 66 institutions of higher education and 9 adult education-oriented colleges. In addition, there are 2,422 high schools of various kinds, 11,560 primary schools and

67 special schools for physically challenged people.

Culture, Physics & Medical Care

The traditional operas are retained and developed in Fujian, Min, Puxian, Liyuan, Gaojia, and Xiang constitute its five major local operas, Moreover, there are over 20 minor kinds of operatic folk shows in the province. Fujian has 94 art ensembles, 74 theatres, 86 museums, 88 cultural halls, 84 libraries, 58 newspapers, and 174 periodicals. There are about 30,000 gymnasums and stadiums. The Fujian Provincial Sports Center accommodates 30,000 people. In 2005, Fujianese athletes won 8 gold medals in world competitions and took the fi rst place in 7 Asian events.

Entertainment

Fujian has 8 golf courses up to the international standard and more than 300 star hotels, including many fi ve star ones in

Fuzhou and Xiamen.

Shopping

The convenient shopping environment has been enabled by business outlets dotting throughout the urban and rural areas, and malls of multinational scale such as Metro, Wal-Mart, Carrefour and Trust-Mart have long settled in Fujian.

Government Services

The local governments in Fujian are committed to building a legal system that is open, just and fair, a government

mechanism that enables transparent and efficient operations; they are also devoted to protecting intellectual property rights and investors' rights and interests. Both the provincial and municipal organizations are set up to provide one-stop services for foreign investments, from negotiation,

consultation, application assistance, to legal and fi nancial services.

Intermediary Services

Fujian's environment is rendered even more attractive by its easy availability of convenient professional services of premier quality provided by accounts, auditors, lawyers, customs brokers, shipping agents and consultants.

Reference Price of Factors for Investment in 9 prefectur-level cities of the Fujian Province