Investment Guide

BRIEF INTRODUCTION OF YUNNAN PROVINCE

I). Geographic Situation and Administrative Area Division

II). Population and Ethnic Groups

III). Natural Resources

IV). Infrastructure

V). Foreign Trade

VI). Social development

VII). Living Environment

VIII). The main aims of Yunnan Province in the new period for the development of economy and society

VIII). The main aims of Yunnan Province in the new period for the development of economy and society

Foreign Investment Law

INVESTEMENT POLICIES

I). Fields of investment

II). Taxation

III). Land

IV). Protection of rights and interests of Foreign Funded Enterprises

The Wonderful Land Chuxiong

CHUXlONG PREFECTURE'S PREFERENTIAL POLICIES FOR INVITING INVESTMENT (ABSTRACT)

BRIEF INTRODUCTION OF YUNNAN PROVINCE

I). Geographic Situation and Administrative Area Division

Yunnan Province is located on the southwest boundary of the People's Republic of China, situating at 20o8 ′ 32 ″ -29o15 ′ 8 ″ north latitude and 97o31 ′ 39 ″ -106o11 ′ 47 ″ ,east longitude. The south part of Yunnan Province is on the belt of the Tropic of Cancer. The widest distance from the east to the west is 864.9 kilometers and the longest distance from north to south is 900 kilometers with a total area of 394,000 square kilometers, it accounts for 4.1% of the total area of China. In the entire province, about 84% area is mountainous region, 10% area is plateau and hilly land and 6% area is basin and valley. The average altitude of the province is around 2,000 meters above the sea level. The highest point is 6,740 meters and the lowest is 76.4 meters above the sea level.

Yunnan borders on Guizhou province and Guangxi Zhuang Autonomous Region in the east, Sichuan province in the north, Tibetan Autonomous Region in the northwest, Burma in the west and Laos and Vietnam in the south. Geographically, Yunnan is connected to the rest of the Asian Continent in the north and faces the Southeast Asian Peninsula between the Pacific Ocean and the Indian Ocean in the south. Because of its geographical location, Yunnan is affected by the Southeast Monsoon and Southwest Monsoon as well as weather conditions from the Tibetan Plateau. As a result, Yunnan has a diverse favorable natural environment.

Of the 4,060 kilometers long border between Yunnan and the neighbouring countries, the Sino-Bumese section covers 1,997 kilometers, Sino-Laotian section 1,353 kilometers. Yunnan has long been a gateway from China to countries in Southeast Asia. There are over 20 roads leading to these countries. There are 15 ethnic groups in China where people of the same ethnic origin live in adjacent countries on both sides of the border.

Altogether Yunnan Province has total 16 prefectures, among which there are 8 ethnic minority autonomous prefectures (Chuxiong Yi Nationality Autonomous Prefecture, Honghe Hani and Yi Nationality Autonomous Prefecture, Wenshan Zhuang Nationality Autonomous Prefecture, Xishuangbanna Dai Nationality Autonomous Prefecture, Dali Bai Nationality Autonomous Prefecture, Dehong Dai and Jingpo Nationality Autonomous Prefecture, Nujiang Lisu Nationality Autonomous Prefecture, Diqing Tibetan Nationality Autonomous Prefecture), 3 Prefectures (Simao, Lijiang and Lincang), and 5 cities directly under the jurisdiction of the provincial government (Kunming, Qujing, Yuxi, Baoshan, Zhaotong). Yunnan province has 128 cities and counties, among which there are 29 ethnic minority autonomous counties.

II). Population and Ethnic Groups

At the end of the year 2000, the total population in Yunna Province reached to 42.408 millions. Yunnan has an ethnic minority population of more than 14 millions. Of the 55 minority groups in China, 51 inhabit in Yunnan. There are 25 ethnic minority groups living in compact communities and their respective population exceeds 5,000. Of these minority groups, 15 are indigenous to Yunnan, ranking the first place in China in terms of the number of indigenous ethnic minority groups, namely the Bai, the Hani, the Dai, the Lisu, the Wa, the Lahu, the Naxi, the Jingpo, the Bulang, the Pumi, the Nu, the Deang, the Dulong and the Jinuo. The people of different groups in Yunnan live and work happily and harmoniously together, ensuring ethnic unity and social stability on this frontier land.

III). Natural Resources

1. Weather Conditions

A plateau at low latitude, Yunnan is in a special geographical position market by diverse topographical features. It has a low-latitude mountain monsoon climate, affected by atmospheric circulation, the dry monsoon from the continent in winter and the wet monsoon from the ocean in summer. There are seven types of climates all over Yunnan-the north tropical climate, the south subtropical climate, the middle temperate climate and the highland climate, the climate in Yunnan is characterized by distinctive features which include: Marked regional differences and vertical changes of climate.

Slight variation in annual temperature changes in contrast to dramatic temperature changes during the day and the night.

There is ample of rainfall, but the distribution is not equal. There is a sharp difference between the dry and the wet seasons.

At a high elevation, Yunnan enjoys fresh air and a high-grade light and long sunshine. With its rich solar energy resource, Yunnan is insured bright prospects for solar utilization.

2.Biological Resources

Yunnna is rich in its various biological resources and it is also the most important treasure-house of China's biological resources. Yunnan is well known as "the Kingdom of plants", "the Kingdom of Animals", "the Home of Flowers", "the Home of Medicinal Herbs" and "the Gene Reserves of the Biological Resources". Because of is unique climate and geographical environment, Yunnan owns the biggest varieties of plants in China. Almost all the species of plants that grow in tropical, subtropical, temperate and even frigid zones can be found in Yunna. Of the approximately 30,000 species of higher plants in the whole country, Yunnan claims 17,000 species. Among which approximately 10,000 are tropical and subtropical plants, 2,000 are medicinal herbs and 400 are species from 69 families. In addition, there are 2,100 species of ornamental plants of which over 1,500 are rare flowers and plants. Yunnan is the ideal home to a wide variety of wild animals including 1,737 species of vertebrates. Among the vertebrates, there are 300 species of beasts, 793 species of birds, 143 species of reptiles, fish category, 5 families, 40 genera and 249 species are indigenous to Yunnan. For the animals and birds, 46 species are listed as first grade state protected and 154 species as under second grade protection.

3. Mineral Resources

Known as "the Kingdom of Non-ferrous Metals" in China, Yunnan has huge reserves of various minerals with high economic value. Until now, the reserved of 92 kinds have been proved. The reserves of 54 minerals are listed among China's top ten biggest reserves. Yunnan's superiority of minerals stands on the reserves of non-ferrous metals. The reserves of aluminum, zinc and tin are the biggest in China, the reserves of copper and nickel are in the third place. As for the noble metals and rare metals, the reserves of indium, thallium and cadmium are in the first place in China; its reserves of silver germanium and platinum are in the second place in the whole country. As for energy resources, its coal reserves are in the ninth place in China. And for the chemicals industries, it is the tenth in the country in reserves of phosphorus, salt mirabilite, solvate, iron pyrite, calcium carbide and serpentine. Based on the nonferrous metals, mining industry in Yunnan flourishes with substantial development in mining, ore dressing and smelting industries, making Yunnan an important production base of tin, copper, and phosphorus in China.

4. Power Resources

Yunnan has over 600 rives which provide an annual water supply of 222.2 billion cubic meters and an estimated hydropower reserve of 103.64 million kilowatts with an exploitable capacity of 90 million kilowatts. In the development of its hydropower resource, Yunnan has many advantages, including: a) there are high possibilities of setting up large sized as well as giant hydropower stations; b) it is easy to implement the hydropower project since the distribution of the water resources is comparatively concentrate and the target for developing is unified; there is a high rate of success in identifying projects since there is an amply room for selections as well; c) The construction scale of reservoirs are relatively small with limited inundating areas resulting in higher technological and economical indicators. The reserve of coal resources is abundant. The total reserve of coal in the province is equal to 67.904 billion tons and the confirmed reserve is equal to 23.2 billion tons. Yunnan is one of the most important coal producers in south of China. In addition, Yunnan also boasts great prospects for the development and utilizations of light energy, heat energy, wind power and geo-thermal energy.

5. Tourism Resources

Yunnan has owned high quality tourism resources. It has almost all the kinds of tourism resources except the marine resources. The beautiful natural landscape, the colorful ethnic diversity, the long history and splendid cultures contribute to more than 60 scenery sites in Yunnan, among which Dayan Old Town has been listed in the World Cultural Heritage. Lunan Stone Forest Park, Dali, Xishuangbannan, the three paralleled running River, Kunming Dianchi Lake, Lijiang, Jade and Dragon Snow Covered Mountain, Tengchong terrestrial heat volcano, Ruili River-Daying River, Yiliang Jiuxiang and Jianshui etc. are graded as the 10 national key scenery sites in Yunnan. Kunming, Dali, Lijinan, Jianshui, Weishan are graded as the 5 national historic and cultural cities. Tengchong, Weixing, Baoshan, Huize are graded as the provincial historical cities. Yunnan has already constructed more than 100 natural protection regions with the total area of 1.926 million hectares. There are 22 national and provincial forest parks with the total area of 85,500 hectares. Yunnan province attaches great importance to the development of tourism. Apart from that, the site of '99 Kunming International Horticultural Exposition-Kunming World Horticulatural Garden is very famous now in the world. Since 1990's, there have been concerted efforts to develop the tourism industry and to strength the construction of tourism infrastructure. As a result tourism facilities and services have been substantially improve and a number of colorful, interesting and high quality tour routes have been introduced to the public. In 2000, as many as 1 million overseas tourists and 38.41 million domestic tourists toured Yunnan. The total income of tourism reached 21.14 billion yuan RMB, earning 339 millions USD foreign exchanges. Tourism has become a flourishing industry in Yunna.

IV). Infrastructure

Since China adopted the policy of reform and opening up to the outside world, Yunnan Province has been focusing its financial strength and material resources on building its infrastructure. Remarkable improvements in civil aviation, railways, highways, navigation, post and telecommunications, electricity transmission and other infrastructures have been achieved. The improvements have created better conditions for Yunnan to expedite its economic development and further growth.

1. Civil Aviation

The civil aviation of Yunnan has witnessed a rapid development. Yunnan Airlines now has a fleet of 3 Boeing 767-300, 13 Boeing 737-300, 4 Boeing 737-700 aircrafts. It operates more than 108 air routes including 9 international routs to Singapore, Bangkok, Seoul, Macao, Vientiane, Chiangmai as well as Hong Kong. The airport can now accommodate 10 million passengers per year. In addition to the Kunming International Airport, Yunnan has 9 local airports in service which are located in Xaishuangbanna, Mangshi, Simao, Zhaotong, Baoshan, Dali, Lijiang, Diqing and Lincang. All these airports are equipped with advanced telecommunication and navigation facilities.

2.Railways

There are main railways linking Kunming with Vietnam, Guiyang, Chengdu, Nanning, Yuxi and Dali. At the end of 2000, Yunnan had 2314 kilometers of railway in service, with 40.91 million tons of freight turnover and 19.52 million passengers for the year. At present, Kunming-Neijiang railway is now under the construction and the reconstruction of electric railway of Chengdu-Kunming is preparing. In addition, plans of the rail network include lines to the southeast countries are preparing now.

3. Roads transportation

By the end of 2000, the provincial road network had composed a total length of 109,600 kilometers of which 2316 kilometers were highways of Grade 2 and above. Expressways reached to 517 kilometers. From Kunming in the center, the network radiates through Yunnan and links the province to Sichuan, Guizhou, Guangxi and Tibet and the bordering countries of Myanmar, Laos, Vietnam and Thailand. During the tenth Five-Year Plan period, the province will place emphasis on the upgrading and extension of six of the trunk highways which link Yunnan to the outside, to form a high-standard and high quality network.

4. Navigation

In Yunnan, there are 6 main river systems: Jinsha, Lancang, Nujiang, Irrawaddy Rivers, Pearl River, Honghe whose water area cover almost all the province, and there are more than 30 lakes. The province has 8,000 kilometers of navigable water ways of which 1,324 kilometers are already in use. Up to date, the main routes which have been developed for navigation are on the Jinsha and Lancang Rivers, with Shuifu, Suijiang, Jinghong, Simao and Dali ports as the main ports for water transportation. The well-known Lancang (Mekong) River is the only international river in Asia flowing through six countries. Transportation has been started to meet the needs of the increasing economic cooperation in the region. The four countries of China, Laos, Myanmar and Thailand have signed an agreement of passenger/cargo transportation on the Lancang (Mekong) River this year. This will provide a convenient water access for Yunnan's products to the downstream countries. During the tenth Five-Year Plan period, the province will continue the construction of Jinghong and Simao Ports, build the Guanlei wharf from scratch and develop combined land and water transportation between China and Myanmar on the Irrawaddy River. In addition, the passage to the sea via the Tiger-Leaping Gorge on Jinsha River will also be developed. Apart from that, the attractive scenery of Dianchi, Erhai, Fuxian and Lugu Lakes and the Manwan and the Tianshengqiao hydropower station reservoir areas are ideal sites. The favorable conditions for developing water-based tourism industry is very obvious and the step of developing is more rapid than before.

Post and Telecommunications

Yunnan Province has witnessed rapid development of its post and telecommunications A computerized network for newspaper and journal distribution, computerization of the Post Office Saving Bank, a communication network for post dispatching, an inquiry network for express mail delivery have been established and put into operation. Atomation has been achieved in mail and parcel sorting.

Electronics is applied to facilitate front desk services in Post Office. The program -controlled telephone network, capital cable transmission net, mobile phone net, paging network, digital data net, packet network, TV conferencing net, signal 7 net, digital synchronous network and public multimedia network are taking shape. By the end of 2000, the total telephone capacity had reached to 3.88 million lines, with 2.92 million subscribers. The GSM mobile system had reached to a capacity of 2.58 million lines with 2 million subscribers, covering cities and towns at county level and above, most of the developed townships, main tourist attraction areas and trunk highways. The capacity of the paging system had reached to 2 millions and achieved connection with the nationwide network. During the tenth Five-Year Plan period, the telecommunications of the province will develop towards broad hand, digitization, personalization, intelligence and multimedia, to form a multidimensional transmitting network of optical fiber, digital microwaves and satellite communication, providing the public with audio data and visual services.

Power Industry

The exceptionally abundant hydropower resources and coal reserves of Yunnan guarantee the development since the reform and opening up of China, Yunnan's power industry has entered into an era which is market with installation of large electricity generating sets, huge power plants and super power voltage. Based on the policy of "Constructing the power plants by several enterprises, to be funded by several channels", Ynnan has built a number of power stations and plants, including Manwan Hydropower Station and Lubuge Hydropower Station, Yangzonghai Thermal Power Plant, Quijing Thermal Power Plant etc, also Yunnan has constructed super high-voltage and transmission lines. In 2000, the province had an installed power generating capacity of 7.59 million KW, with 31.75 billion kwh of electricity generated which basically met all power needs of the province. The province can also supply power to other provinces during the rainy season. In the future, Yunnan will increase its pace to exploit the hydropower resources of the Lancang River and expedite the development of thermal power in northeast Yunnan to modify its power structure, thus achieve balanced development of its power industry.

V). Foreign Trade

Since the adoption of opening-up and reform policies, Yunnan has undergone rapid economic and social development. The place With the rapid development of the opening-up and the economic trade, in 2000, the total international trade volume of Yunnan was equal to USD 1.813 billions, foreign-funded enterprises reached 1958, utilizing USD 1.348 billions of foreign investment. Yunnan has founded 11 first stated trade ports and 9 second stated trade ports, Since the year of 1993, uniting with other southwestern provinces and regions, Yunnan has successfully held the Kunming Export Commodities Fair for 9 times. At present, with the supporting of the Southwest of China, it is forming a structure that Kunming city is regarded as its center and the open border cities as its frontier to the Southeast Asia and the whole world. With the strategy of the development in China's West and closer cooperation of Lancangjiang great Mekong Sub-region, Yunnan province is becoming a gateway and frontier for Southwest of China.

VI). Social development

At present, there are 26 universities and institutes of higher learning, 27,000 primary and middle schools with more than 6 million students. 97.4% of the children of the school age have entered into schools. There are 6,400 medical services easily available to local people. The province has also established 170 scientific research institutes and many competent researchers.

VII). Living Environment

With its beautiful natural resources and special local products, Yunnan has preserved the unique variety of its cuisine. There are sufficient raw materials and ingredients for the preparation of the cuisine of all nations, ethnic groups and regions. In Yunnan, fresh vegetables and fruits are available all the year round. Visitors to Yunnan can not only taste the delicious Yunnan local food, but also enjoy the cuisines from other regions of China such as Sichuan, Guangdong, Shandong, and Yangzhou. In addition, western food, Japanese food, Korean Barbecue and other foreign flavors are all available.

At present, Yunnan has many starred hotels. In addition, there are a large number of small hotels, inns and hostels in the tourist areas. Vacation and leisure resorts exist throughout the province where business people and tourists can enjoy an short stay. In all the major cities of Yunnan, commercial addition, there are a large number of small hotels, inns and hostels in the tourist spots and vacation and leisure resorts throughout the province where business people and tourists can enjoy a short stay. In all the major cities of Yunnan, commercial buildings, villas and residential houses are all available for lease and sale.

The numerous commercial retail outlets and markets in the province make shopping very convenient and it can meet every need of the local people and the foreign investors.

VIII). The main aims of Yunnan Province in the new period for the development of economy and society

The main aims for the development of economy and society in Yunnan in the next long period can be concluded to try to realize the Three Goals, to develop Five Pillar Industries rapidly. That is to build Yunnan as "a province with great strength in green economy", "a major province characteristic of ethnical cultures", "an international gateway in linking with Southeast Asia and South Asia"; to support and build the Fiver Pillar Industries as "Biological resources development industry", "Tourism industry", "Tobacco industry", "Mining industry", and "Electric utility industry".

Three Goals

A province with great strength in green economy: To make profit of the advantage of the biological resources and the advanced biological technology, to foster green conception, to spread green technology, to establish the green standard, to exploit green resources, to produce green products, to protect green environment and to increase the density of the added value of the green no-pollution industries in the proportion of GDP, to realize the further development between economic ,society and population, resources and environment.

A major province characteristic of ethnical cultures: This is to insist on the direction of the advanced culture, to bring the initiative of the advantage of the various and colorful of Yunnan ethnical cultures, to protect, carry out and develop the excellent nationality culture, to remould the backward culture, to resist the corrosive culture, to initiate and develop the advanced culture characteristic of Yunnan society, to improve the moral level, scientific cultural qualification, and the social civilization and management of the all ethnic groups of Ynnan.

An international gateway in linking with Southeast Asia and South Asia: To make the telecommunication as a forerunner, highways as a base, railways as a mainstay, aviation as a help, navigation as a complement to combine all the ways to a body of multi-transportation and telecommunication and to form a developed multi-transportation system to extend to the two oceans of the Pacific Ocean and the Indian Ocean to link the three huge markets of China, Southeast Asia and South Asia.

Five Pillar Industries:

Biological resources development industry: The four important fields of the modern medicines based on the natural medicinal herbs, green foods and health protection foods, flowers and green horticulture, biological chemistry. To pace up the progress of the technology and improve the market system and form the new industries of the biological resources development industries to enforce its competition.

Tourism Industry: To further improve the transportation conditions, to attract the tourists as much as possible, to improve the quality of the production, to change the tourism environment to build Yunnan as a high level, unique international tourism destinations and distributing center.

Tobacco industry: To further improve the quality of "Two varieties of Tobacco" To enlarge the internal and external markets. To make the tobacco industry into a new step.

Mining Industry: To develop the refine process and the products chains. To improve the utilization rate and the added value of the products, to realize its further development.

Electric Utility Industry based on the water and electricity: To manly build the water and the electricity power industry. To optimize the electric power structure. To pace up the step of the construction of electricity networks and to realize the transmitting Yunnan electricity to East (Guangdong, Middle of China, East of China) and the transmitting Yunnan electricity to foreign countries (Thailand). To build Yunnan as an important base of Electric power in China.

Foreign Investment Law

Selected articles from the foreign investment code of Yunnan Province are offered below. Some of the key topics in the provisions are highlighted for easy searching. For the full text see the Yunnan Investment Affairs Office web site: www.invest-yunnan.com.

Chapter 1 General Provisions

Article 1: On the basis of the state laws and regulations and particularities of the province, these regulations are hereby set forth for the purpose of encouraging foreign investment in the province, protecting the legal rights and interests of foreign-funded enterprises, regulating the actions of the administrative organizations thus promoting foreign investment in the province.

Article 2: All the organizations and individuals falling under the jurisdiction of the province which are involved in foreign investment and its administration are subject to these regulations.

Article 3: The Foreign Investment Office of the Provincial Government is responsible for organizing and coordinating foreign investment in the province. The Provincial Government Departments for planning economic and trade, foreign trade and economic co-operation, foreign affairs, construction, environmental protection and administration for industry and commerce are obliged to provide their services to foreign investors in line with their respective areas of responsibility.

Article 4: Foreign investors should propose their investment projects in accordance with the Investment Guide and Guidelines for Foreign Investment published by the province and the state respectively. Foreign investment is encouraged in the following fields: infrastructure, agriculture, bio-industry, mining, new-technology, tourism, dormitory housing projects, and environmental protection.

Article 5: Foreign investment is encouraged in various forms including equity joint ventures, contractual ventures and solely funded enterprises. Other forms are also possible such as joint shareholdings, majority shareholdings, joint operations, mergers, outright purchases, leasing, trusteeships, contracting out, renovations, restructuring and mixed ownership of state owned, collectively owned, or private enterprises. Build-Operate-Transfer, purchase of operation rights and utility fee collecting rights are also options for infrastructure projects.

Article 6: Foreign-funded enterprises are under the jurisdiction of the state laws and regulations and must not endanger national security or public interests. The contractual obligations of all parties will be overseen by the relevant government departments.

Chapter 2: Establishing, Adapting and Terminating Foreign-Funded Enterprises

Article 8: For the convenience of foreign investors, there will be a highly efficient one-stop assessment, approval and registration procedure to be used when establishing foreign-funded enterprises.

Article 9: For projects which are in line with the guiding policy, the relevant government offices at various levels should finish all the formalities relating to the approval of project proposal, feasibility study, contract and articles of association followed by the issue of the business license within 15 working days after receipt of all the required documents.

Article 10: Those projects which are in line with the guiding policy and whose total investment is within provincial approval limits falling into the following categories will be registered directly: 1) solely foreign funded enterprises; 2) equity joint ventures and contractual joint venture enterprises with no state contribution; and 3) scientific enterprises encouraged by the state, export-oriented enterprises whose production and construction requires no provincial input. For the above-mentioned enterprises, the industrial and commercial administration should finish all the registration formalities within five working days after receipt of all required documents.

Article 11: The above-mentioned enterprises whose business requires operating permits will obtain their business license before applying for any permits.

Article 12: Any alterations to the major terms of contracts will be handled by the original approval departments, and must be finished within 15 working days after receiving all required documents. Those enterprises that are registered directly will have their alterations approved by directly approaching the original registration organization.

Article 13: Upon termination, foreign funded enterprises will go through liquidation procedures before submitting the termination for approval to the original departments. Those enterprises that are registered directly will have their termination approved by directly approaching the original registration organization.

Chapter 3: Protection of Rights and Interests of Foreign Funded Enterprises

Article 14: Within their scope of business, foreign funded enterprises are entitled to conduct their business activities independently. Personal rights and property of foreign investors and employees are protected under state laws.

Article 15: The patents, copyrights, trademarks, knowledge, confidential technology and business information, computer software and brand names of foreign investors are protected under state laws.

Article 16: Foreign funded enterprises must enjoy equal treatment in use of water, electricity, gas and telecommunications as well as from financial, insurance, legal, employment, consultancy, design and advertising services.

Article 17: Foreign funded enterprises may reserve in their bank account foreign exchange from their operational income. They may also sell their foreign exchange income to the bank or buy from the foreign exchange pool in case of need. Foreign investors may remit their legitimate income abroad directly from their foreign exchange account or by buying foreign exchange from designated banks.

Article 21: Should foreign funded enterprises consider their legitimate rights and interests to be infringed by the conduct of any government department or staff, they may lodge a complaint with the Complaint Centre for Foreign Funded Enterprises. They may also apply for re-examination or file a lawsuit in the courts.

Chapter 4: Preferential Treatment for Foreign Funded Enterprises

Article 22: Foreign Funded Enterprises concerned with energy, communication, water conservancy, environmental protection, agriculture, forestry and animal husbandry and other related industries with terms of operation longer than 10 years will be exempt from corporate tax for two years starting from the first profit-making year. These enterprises will receive a full tax rebate from the financial bureau for the third, fourth and fifth years of operation.

Article 23: Those foreign funded enterprises which have been approved as technologically advanced enterprises with terms of operation longer than 10 years will be exempt from corporate tax from the first profit-making year. They will receive a full corporate tax rebate from the financial bureau for the third to the seventh years of operation. For the first three years of operation the proportion of V.A.T designated to the local financial departments will be rebated by these departments. Upon expiry of the above-mentioned preferential terms, favorable tax rates may still be obtained for enterprises that fulfill requirements from the provincial tax department.

Article 24: Foreign funded enterprises involved in energy, communication, environmental protection and urban public utilities whose actual investment exceeds 10 million dollars will have the proportion of their V.A.T. designated for the local financial departments rebated for the first three years of operation upon approval.

Article 25: Foreign funded enterprises re-investing their profits in the province and with terms of operation longer than five years, the local financial bureau will rebate corporate tax according to the amount re-invested.

Article 26: Foreign funded enterprises involved in agricultural projects that do not encroach on farming land will be exempt from agriculture tax for the first three years. For the fourth and fifth years, the above taxes paid will be rebated by the local financial bureau.

Article 27: Foreign funded enterprises will be given priority in the allocation of land use rights. Allocation of these rights will be at the same price level for all enterprises (domestic or foreign). Arrangements can be made to pay by installments if necessary. When foreign funded enterprises invest in Dormitory Housing Projects, they may sell 30 per cent of the floor area at a higher profit margin.

Chapter 5: Regulations for Administrative Departments

Article 29: When foreign funded enterprises go through formalities for land use rights, city planning permission, design, provision of water, electricity and gas, telecommunications and fire prevention, the local construction administration bureau will be responsible for co-ordination. The following time limits apply: a) if the area of land required be within the approval limit of the province, the land use administration bureau will issue the Certificate of Approval of Land for Construction or Certificate of Land Use Rights within five working days; b) the City Planning Bureaus will issue planning permission for the land and the license to begin construction within 10 working days; and c) departments for provision of water, electricity and gas, telecommunications and fire prevention will approve and issue certificates within five working days.

Article 30: The Economic and Trade Commission at various levels will be responsible for co-ordination to resolve the difficulties arising from the operation of foreign funded enterprises.

Article 31: The Provincial Foreign Affairs Office will be responsible for certifying the status of foreign experts working in foreign funded enterprises. The office should complete these formalities within two working days after receipt of required documents. Upon certification, Confirmation for Employing Foreign Experts and Foreign Expert Certificates will be issued.

Article 32: Government departments at various levels will strictly abide by the following stipulations: a) no inspections or penalties and punishment of foreign funded enterprises are allowed unless clearly stipulated by law and regulations; b) it is not permitted for law enforcement departments to order banks to transfer money or freeze bank accounts of foreign funded enterprises and foreign investors unless stipulated by law; c) not to use their privileges to appoint enterprises of institutional departments to monopolize operation or promote hidden monopolies and unethical competition; and d) no infringement on the legal rights and interests of foreign funded enterprises is permitted.

Article 34: The annual monitoring of foreign funded enterprises will be carried out by the departments in charge of foreign investment at various levels.

Article 35: The fees charged to foreign funded enterprises by administrative departments will be collected in accordance with relevant laws and regulations.

Article 37: The government regulatory bodies at various levels are responsible for overseeing the practices of the administrative departments. The complaint Centre for Foreign Funded Enterprises should carry out its duty in accordance with the law to safeguard the legal rights and interests of foreign funded enterprises.

Chapter 6: Legal Obligations

Article 39: Any violation of the regulations herewith, in particular the case set out below, will result in the individual responsible and their superior receiving administrative punishment according to the severity of the consequences.

a) Illegal inspection of any foreign enterprise

b) Illegally appropriating money from foreign funded enterprises

c) Forcing foreign funded enterprises to buy particular products

d) Forcing foreign funded enterprises to pay to participate in training courses in order to reap a financial benefit

e) Appointing or covertly appointing intermediary agencies to foreign funded enterprises

f) Forcing foreign funded enterprises to contract out construction projects to particular corporations

g) Leaking business secrets and confidential information of foreign funded enterprises

h) Infringing on the personal or propriety rights of foreign investors, their employees and dependents

i) Other actions infringing on the rights and interests of foreign funded enterprises. Any losses incurred by foreign funded enterprises will be compensated. Should the violation break the law, the individuals responsible will be prosecuted.

Article 40: Should a foreign funded enterprise suffer losses due to false or undue services provided by the intermediary agencies, these agencies will compensate such losses. In serious cases, the responsible persons will be punished and their credentials revoked. Legal proceedings will follow should the behavior break the law.

Chapter 7: Appendix

Article 42: These regulations also apply to investment from enterprises and individuals of Hong Kong Special Administrative Region, Macao and Taiwan.

Article 43: The Yunnan Provincial People's Government is responsible for the interpretation of these regulations.

INVESTEMENT POLICIES

I). Fields of investment

1. Apart from the fields that are prohibited by the State laws, there is no limitation on the fields and projects for investment. In-bound investment enterprise (Referring to enterprises by foreign investors, Hong Kong, Macao and Taiwan compatriots and investors from other provinces of China) are allowed to prosper and utilize rare species of biological resources in Yunnan. To encourage in bound investment in geological exploration, mining and processing of minerals. In bound investments are encouraged to transform traditional industries of Yunnan province with advanced technology. In bond investments are encouraged in service sectors, including import and export business, retail, information, finance, insurance, tourism, transportation, legal service, accounting as well as culture, education, sports and medical care. For involvement of foreign investment in some business which is conducted on trial basis in coastal regions, such experiment can also be carried out in Yunnan.

2. There is no limitation on establishment of enterprises by in-bound investment in qualification, operation areas and proportion of investment. Lose control on entry by in-bound investment (enterprises and individuals from other provinces and other countries) into following industries: Planting, irr5igation, infrastructures, pharmaceuticals, minerals, retails and tourism. There will be no ceiling for ration of in-bound investment, which can be decided by parties to joint ventures. When in-bound investors invest with patents or high-tech, restrictions on their ratio in enterprises can be further loosed. There will be no restriction on lawful cross-region operation of in-bound investment inside the province.

3. In principle, there is no restriction on scope of operation for in -bound investment. They are encouraged to conduct operation in various fields. In case they need to conduct other business after their major business in no tract, no restrictions will be imposed. The original approval departments and commercial and industrial administration departments should respect their demand by proceeding formalities for extension of business scope. In -bound investment apart from exporting their products, can also export other enterprises' products (except those commodities under administration of export quotas, for which prior approval for quotas must be obtained beforehand) subject to approval from foreign trade administration departments. In-bound investment are encouraged to explore the markets of neighbouring countries. After obtaining their business licenses, in-bound investment enterprises may apply for approval of handling border trade and economic cooperation with neighbouring countries.

4. There will be no limitation on forms of in-bound investment. In bound investment is encouraged to invest in various forms. Apart from the prevailing forms of joint venture, contractual joint venture and solely owned, they are restructuring of state-owned enterprises by purchase, meager, joint stock and acquiring predominant share, etc. In bound investment are also encouraged to established research and development centers with local non-state-owned enterprises, education and research institutes by ways of joint venture and cooperation. In-bound investment are encouraged to set up investment, risk investment corporations in specific areas. In bound investment are allowed to launch develop for large pieces of land. They are allowed to carry out regional comprehensive development of natural resources.

5. There will be no limitation on proportion of internal and external sales for products of in -bound investment. The enterprises may decide on their own proportion of internal and external sales in accordance with their need and their marketing capability.

II). Taxation

Except to enjoy the preferences in taxes of 'Foreign-funded enterprises and foreign-funded enterprises income tax' etc. Decided by the state. As Yunnan is one of the key province in the middle and west of China encouraging the foreign investors, the foreign-funded enterprises can also enjoy the favorable taxes as follows:

1. All the foreign-funded enterprises established in Yunnan Province will be exempt from 3% local enterprise income tax.

2. For technologically advanced enterprises for production established in Kunming Economic and Technology Development Zone and Kunming National High-Tech. Industrial Zone, enterprise income tax rate 15% will prevail. Foreign-funded enterprises for production established in the open border cities of Hekou, Wanding and Ruili will be subject to 24% preferential tax rate. Foreign-funded enterprises for production established in Kumming Diahchi Tourism And Vacation Zone will enjoy a preferential rate of 24% for enterprise income tax.

3. Foreign-funded enterprises established in the western 19 provinces, cities and autonomous regions of Yunnan, Tibet, Shanxi, Gansu, Ningxia and Xingjiang etc., which are involved in the industries set forth as encouraged and restricted second grade by Catalogue for the Direction of Foreign Investment will be entitled to 15% preferential enterprise income tax rate in the following 3 years upon the expiring of existing preferential treatments. During the 3-year-period, if the enterprises are approved as export-oriented enterprises and the annual export exceed 70% of its yearly output, 10% preferential rate will prevail.

Foreign-funded enterprises involved in energy and communication facility construction will be subjected to 15% preferential enterprise income tax rate upon approval of the General Tax Bureau of the State.

When the cost spent by the foreign-funded enterprises on technical innovations is increased by 10% or more from the previous years, upon approval of the tax departments, 50% of the increase in expenditure will be deducted from the taxable total for enterprise income tax.

When the cost spent by the foreign-funded enterprises on technical innovations is increased by over 10% in a year, should 50% of the actual expenditure exceed the enterprise income tax. The amount which is equivalent to the payable yearly tax will be reimbursed from the enterprise income tax, with the exception of the surplus amount which will not be increased either in the same year or in the coming years.

III). Land

1. Priority will be given to in-bound investment enterprises in allocation of land. For those enterprises in high-tech, infrastructures construction, biological resource utilization and innovation, mining, tourism, important foreign exchange earners and high tax payers, fee concerning land use will apply the lowest class.

2. For those in-bound invest involved in energy, transportation, environmental protection, water conservancy, education and social welfare, the land they need will be obtained by administrative allocation and corresponding compensation they have to pay will apply to the lowest class.

3. Apart from paying fees for compensation for land, resettlement, unharvested crops, building, farm land reclamation, land purchasing administration, in-bound investment enterprises are exempt from any other fees concerning land-use. Hitch-hiking fee collection is prohibited. Should compensation fee be stopped by local governments, if it were higher than the standard. Maximum prices will be worked out for land in economic and technological development zones, high technology industrial zone and Tourism and Vacation Zone in consideration for category and usage. Details will be worked out by provincial land administrative department.

4. In-bound investment involved in planting, forestry, animal husbandry and fishery are permitted to rent collectively-owned land after fulfilling necessary formalities.

5. When in-bound investment enterprises involved in operation activities acquire land use right by way of purchasing, to reduce enterprises' costs, the money they have to pay can be handled in following methods:

a. Determine purchasing fee. Purchasing fee should be determined by competent evaluation agencies and confirmed by land administrative departments. If determination is difficult, the purchasing fee can be calculated according to the base price approved by the government without determination.

b. Payment by installment. In case enterprises have difficult paying fees on one-time basis, upon approval of land administrative departments, such fees can be paid by installments. The down payment will cover 25% of the total and the rest will be paid within five years.

c. Deferred payment by paying interests. If enterprises have difficulty paying by installment upon approval of land administrative departments, such payment can be deferred within three years. But enterprises must pay the interests incurred; that proportion of purchasing fee which belong to local governments will be returned to there shares in the enterprises.

e. State-owned land acquired by in-bound investment enterprises by way of purchasing can be transferred in whole or in parts. It can also be rented. After paying taxes, income from transferring land belong to the enterprises.

IV). Protection of rights and interests of Foreign Funded Enterprises

1. Within their scope of business, foreign funded enterprises are entitled to conduct their business activities independently. Personal rights and property of foreign investors and employees are protected under the state laws.

2. The patents, copyrights, trademarks, knowledge, confidential technological and business information, computer software and brand names of foreign investors are protected under state laws.

3. Foreign funded enterprises must enjoy the same treatments as other enterprise in the use of water, electricity, gas and telecommunications as well as from financial, insurance, legal, employment, consultation, design and advertising services.

4. Foreign funded enterprises may reserve in their bank account of foreign exchange from their operational income. They may also sell their foreign exchange income to bank or buy from the foreign exchange center in case of need.

Foreign investors may remit their legitimate income abroad directly from their foreign exchange account or by buying at designated banks.

5. The family dependents of foreign investors and foreign employees enjoy equal rights to the residents of the province in public transportation, recreation, medical treatment, education and tourism service etc.. The aforesaid people should apply to the public security bureau for permanent residence permits. The same applies to non-local Chinese employees according to relevant stipulations.

6. Unless required by law, foreign funded enterprises may make their own decision whether to join social organizations or participate in competitions, commendations, donations or sponsorship.

7. Foreign funded enterprises are entitled to refuse unlawful inspections or other activities which may affect their daily operation. They are also entitled to refuse any extortion or sponsorship or fundraising. Apart from items for fees stipulated by the laws, regulations and provisions, no departments are permitted to charge other fees unless it is following Administrative Measures of Yunnan Province on the Charging Card for Foreign Funded Enterprises.

8. Should foreign funded enterprises consider their legitimate rights and interests to be infringed by the conduct of any government departments or staff, they may lodge a complaint with the Complaint Center for Foreign Funded Enterprises. They may also apply for re-examination or file a law suit in the courts.

The Wonderful Land Chuxiong

Chuxiong Yi nationality Autonomous Prefecture is between Dianchi Lake beside Kunming and Erhai Lake in Dali. it's an important hub of middle Yunnan. ChengKun railway, GuangDa railway and Kun - Wan road cross it.

Here are One of the well- known birthplace of humanity and a treasure house of ancient living things fossils. The fossils of lama ancient ape of Lufeng about 80 million years ago, " Yuanmon Man " about 17 million years ago and Lufeng dinosaurs of 1.8 billion years ago were excavated here. Many archaeologists from home and abroad regard Chuxiong Prefecture as the cradle of humanity and " The home of ancient living things ". Huge Mallet white tower of Dayao built in the Tang Dynasty has a rare shape in Chinese ancient buildings. The large bronze statue of Confucius at Wen Temple Shiyang town is the only one that well preserved in Chinese mainland.

Wuding Lion Mountain is precipitous and beautiful. Colorful Yuanmou Earth Forest is a important scenic spot in Yunnan.

The traditional festivals of the Yi nationality here are rich and colorful. There are the Third Month Festival, the Torch Festival on 24th held in the sixth month of the lunar year, which last three days. At that time, every villagers are singing and dancing and all villages are ablaze with torches.

Welcome, guests from home and abroad !

CHUXlONG PREFECTURE'S PREFERENTIAL POLICIES

FOR INVITING INVESTMENT

(ABSTRACT)

Any organization, department or individual who has met following conditions will be awarded l% of the capital actually introduced in and put into the project;

a. Having invited foreign investment to run enterprise with a running period of over 10 years.

b. having invited foreign capital, the interest rate of the capital is not higher than the domestic bank rate, and the capital using length is not shorter than 3 years;

c. Having invited foreign technology which has technological competence as high as the ones of domestic, and which will be converted into money;

If the projects invited are of donation, the inviter will be awarded 3% of the total.

If the foreign-funded enterprise's products win state-level awards, the prefectural government will give the enterprise an award of 50,000 yuan in a lump sum; if they win province-level awards, the prefectural government will give the enterprise an award of 30,000 yuan in a lump sum.

If they win prefecture--level awards, the prefectural government will give the enterprise an award of 1 0,000 yuan in a lump sum.

All the above awards are to be drawn from the prefetural rolling development foundation.

Projects which are engaged in deve1oping energy resources, traffic, growing, breeding or participating in technological renovation of the enterprise will obtain land using right in form of

selling or transfering. In the case of selling, the price will be set at a lower level. In the case of land transfering. the land use cost could be exenpted within 5 years, and be reduced to half after 5 years.

Investment to run enterprise with land using right in form of selling will be given a compensation of 20% of the total form the same level of financial authorities.

Outside capital, advanced technology or key poverty-alleviation project which have been approved will be given the priority to counterpart loan and production current found from the bank.

Foreign-funded enterprise which are engaged in foreign exchang earning agricultural, growing or breeding industries will not be charged of special agricu1tural and forestry tax. Foreign-funded enterprise which aims to build roads, hydropower station or reservior with a running period of over l5 years will be exempted from enterprise income tax for 5 years from the year when the enterprise makes prfits, and will be charged of enterprise income tax for another 5 years at a discount of 50%.

The foreign invested enterprises which are of manufacturing industries and have a running period of over 10 years will enjoy preferential po1icies of exemption for 2 years and at reduced level for 3 years regulated by the state central government, and will enjoy an income tax discount of l5-30% in following 10 years.

If a non-prefecture investor wants to jointly run, collaborate with others in Chuxiong and if it invests over 50% of the total capital, its income tax will be refunded back for 3 years.

Investors form outside of the prefecture who contract, lease, take care of or merge a state-owned owned enterprise in loss operation of the prefecture will enjoy a who1e compensation of income tax funded from the financial authorities for 3 years.