According to Guide List of Overseas-Invested Industrial Projects (as revised in December, 1997 and approved by the State Council on December 29, 1997 and put into force on January 1, 1998), overseas-invested projects are divided into four categories, namely those to be encouraged, those that are restricted, those to be prohibited and those that are allowed.

• The projects to be encouraged are those that :

• Projects, which do not fall under the above-mentioned categories, go into the category that allows foreign investment.

Projects with the following features are being encouraged in Pudong New Area.

1. Able to absorb overseas investment and technologies;
2. Conducive to international trade, international division of labor and international competition;
3. Facilitating the development of an export-oriented and import-substituting industry;
4. Contributing to the complementation, coordination and integration between the manufacturing sectors on two sides of the Huangpu River;
5. Conducive to the target of building Shanghai into a multifunctional economic, trade and financial center in the country.

Prioritized areas:

1. Information technology;
2. Auto parts and components;
3. Up-to-date bio-pharmaceutical technology;
4. New materials;
5. Finance and trade institutions;
6. Environmental protection;
7. Commerce and tourism;
8. Infrastructure;
9. Urban Renewal;
10. Modern Agriculture.

The government of Pudong New Area is authorized to give approval to projects with investment of US$30million or under and not included in the "restricted" category.

Provisions of Land Administration in Shanghai Pudong New Area
(Promulgated by Shanghai Municipal People's Government on September 10th, 1990)

(English Translation for Reference Only)

Article 1 These regulations are formulated in accordance with relevant laws and regulations such as Law of the People's Republic of China on Land Administration to consolidate the administration of land in the Pudong New Area, make appropriate use of land resources and speed up the New Area's development and construction.

Article 2 As required by the economic and social development of the Pudong New Area, the land in this area shall be subject to rational development, utilization and operation according to the urban planning.

Article 3 Such system shall be implemented with the state-owned land within the Pudong New Area that land-use right may be obtained subject to payment of consideration. By means of granting or transferring of land-use right or of charging land-use fee, land-use right may be delivered to a land user. Granting of land-use right shall be implemented by Municipal Land Administration, and the contract for granting of land-use right shall be signed between the land user and Municipal Land Administration.

Article 4 Unless otherwise regulated by laws, corporations, enterprises, other organizations and individuals inside or outside the People's Republic of China may obtain the land-use right according to Provisional Regulations of the People's Republic of China for Granting and Transfer of Right to Use State-Owned Urban Land, Provisional Procedures for Administration of Development and Operation of Tracts of Land by Foreign Investors and Measures of Shanghai Municipality for Transfer of Land-use Right upon Payment of Consideration.
Enterprises invested by foreign investors in industry, agriculture, energy, transportation and infrastructure facilities may also obtain land-use right according to Measures of Shanghai Municipality for Administration of Land Used by Joint Ventures Using Chinese and Foreign Investment.
Use of land for urban roads, bridges, railways, tunnels, greenbelts and other public facilities shall be subject to separate stipulations of the Municipal People's Government.

Article 5 Land lots involved in granting of land-use right can be either land equipped with public utilities or tracts of land pending development.

Article 6 After the land users develop and construct the land plots according to the terms and conditions of the contract for granting of land-use right, such land-use right may be lawfully transferred, leased, secured and inherited or be used in other economic activities permitted by law within a stipulated term.
The right to use the land subject to development and operation in tracts may also be transferred separately according to the projected purpose, so long as its development and construction have been completed as provided for in the contract for granting of land-use right.
The land-use right obtained in a manner other than granting or transfer shall not be transferred, secured or leased.

Article 7 The maximum term for granting of land-use right is as follows:
1. Land for commercial, tourist and recreational purposes - - - 40 years
2. Land for industrial purposes - - - 50 years
3. Land for the purposes of education, scientific research, culture, public health and sports - - -50 years
4. Land for residence purposes - - -70 years
5. Land for comprehensive or other purposes - - -50 years
Term for use of land developed and operated in tracts shall be determined according to the purposes.

Article 8 Granting of land-use right shall be effected through public bidding, auction or negotiation. Such granting with respect to land used for the purposes of commerce, tourism, recreation, finance, real estate development and other projects shall be effected generally through public bidding and auction. In case of granting of land-use right through negotiation, the grantor and the grantee shall agree on the fee for such granting on the basis of different land developing cost, land efficiency, location classifications, purposes, projecting parameter, land-use term and other conditions.

Article 9 The fees for granting of land-use right shall be paid in currency, or foreign currency by foreign business persons.

Article 10 Upon expiration of the term of land-use right, a land user may apply for extension of such term according to the regulations.

Article 11 Land users in the Pudong New Area who have obtained land-use right gratis by means of governmental assignments, etc.. Shall pay urban land-use taxes. Land used for the purposes of administrative institutions financially supported by fiscal allotment and military facilities shall be administrated by the existing regulations.

Article 12 Land users who have obtained land-use right gratis by means of governmental assignment may transfer, lease or secure their land-use right, provided that approval is received for relevant application, a contract for granting of land-use right is executed and fees for such granting are paid.
With respect to land whose use right has been obtained gratis according to the law by means of governmental assignment, if the original purpose for the use of such land is changed or if the right to use such land is transferred as a result of buying and selling related to the housing thereupon, other than the private housing for personal use, a contract for granting of land-use right shall be executed and fees for such granting shall be paid, with an exception of the land other stipulated according to the construction of the Pudong New Area by Shanghai Municipal People's Government.
Fees for granting land-use right may be paid upon execution of the contract effecting such granting.

Article 13 Chinese enterprises that have obtained land-use right gratis according to the law by means of governmental assignment shall be encouraged to use such land-use right, according to the planning, as conditions of investment and cooperation for establishment of joint ventures with foreign business. Such land-use right shall be converted to share capital owned by the government in the joint venture, part of which may be assigned to the original land user. With respect to development in conjunction with foreign business in the sectors of industry, agriculture, energy, transportation and infrastructure facilities, as an alternative, land-use fees shall be paid according to Measures of Shanghai Municipality for Administration of Land Used by Joint Ventures Using Chinese and Foreign Investment.

Article 14 In case a land user that has obtained land-use right gratis according to the law by means of governmental assignment ceases to use the land as a result of removal, dissolution, disbandment or other causes, the municipal government shall revoke its land-use right and may lawfully grant it to others. Part of the fees from granting land use right shall be used to meet the demands of the production development of the enterprise in connection with its removal.

Article 15 As required by the construction of the State, the municipal government may revoke gratis the land-use right originally obtained gratis according to the law by means of governmental assignment. Appropriate compensation shall be made for the buildings and other attachments on such land according to real conditions.

Article 16 The revenues sourced from the payment for the land use in the Pudong New Area shall be put into financial budget as a special fund. And it shall be used primarily on land development and urban construction of the Pudong New Area.

Article 17 User of state-owned land and proprietors or users of collectively-owned land must follow relevant regulations to report and register their ownership and land-use right and register any alteration thereof.
Granting of land-use right and subsequent transfer, lease, exchange, inheritance, endowment, securing and termination thereof shall be registered with Shanghai Real Estate Registration Office.

Article 18 The land used for state construction, township and village enterprise and institution construction within the planned urbanized areas in the Pudong New Area shall all be examined and approved by the Municipal Government, while government of districts or counties shall be responsible for examination and approval of land used for farmers' housing.
Land used for non-agricultural construction within the boundary of the Pudong New Area shall remain subject to present limits of authority regarding examination and approval.

Article 19 Chinese and foreign consultancy agencies may be set up in the Pudong New Area to serve the real estate market.

Article 20 The Municipal Land Administration is responsible for the interpretation of these regulations.

Article 21 These regulations come into force as of the date of approval and promulgation.

Provisional Measures on Administration of Planning and Construction in Shanghai Pudong New Area
(Ratified by Shanghai Municipal People's Government on September 6, 1990)

With a view to promoting the development and opening of Pudong, meeting the requirements of construction of the Pudong New Area and based on "The Law of the People's Republic of China on Urban Planning" and "Regulations of Shanghai Municipality Concerning Planning and Administration of Urban Construction". The Provisional Regulations are hereby formulated for administration of planning and construction of the Shanghai Pudong New Area (the planned urbanized area and controlled development zones).

1. In the light of requirements of Pudong development and with the approval of the Shanghai Municipal People's Government, key Zones for recent development shall be designated in batches within the Pudong New Area.
The construction of key development zones of the Pudong New Area should follow the principle of "unified planning, rational layout, comprehensive development and correlative construction". The development in the tracts shall be undertaken by Chinese, foreign and local investors in a concentrated and organized way by means of public bidding, negotiations or by other means approved by the Municipal Government.

2. When obtaining land-use right for development and operation by means of granting with payment, Chinese, foreign and local investors must include the detailed planning and designing requirements or planning and designing program in their bidding documents, agreements and contracts.

3. Chinese, foreign and local investors should carry out development of land tracts in accordance with the approved detailed planning. In case of alteration or adjustment, application must be submitted to relevant departments for approval. If investors feel it necessary to prepare the detailed planning by themselves, they must, according to the regulations, entrust a qualified planning and designing institution to make the planning, and submit the plan to the specified department for approval.

4. In undertaking various construction projects in the zones already under development, Chinese, foreign and local investors must, in accordance with the "Regulations of Shanghai Municipality Concerning the Planning and Administration of Urban Construction", submit their project designing program to the municipal planning bureau for approval. Construction can start only after the program is examined and approved and the construction engineering planning license is granted.

5. If entrusting a foreign enterprise to design a construction project in the zones already under development, a foreign investor should engage a Chinese institution as a consultant or cooperative designer. The Chinese consultant unit or cooperative designer may be entrusted to handle the formalities of submitting engineering design program and applying for the construction engineering planning license.

6. New construction projects in the planned urbanized area of the Pudong New Area should be arranged as a whole in the key zones for recent development. The reconstruction and expansion of existing enterprises and institutions should conform to the planning for comprehensive sub-areas and planning for the reconstruction of old areas.

7. Construction in the controlled development zones of the Pudong New Area shall be, in principle, arranged as a whole and relatively concentrated in the areas for town and village construction and should conform to town and village planning. A fragmentary layout and scattered use of land in rural areas shall be strictly controlled so as to avoid removal.

8. The municipal departments shall take up the administration for the key development zones of the Pudong New Area, including the preparation, examination and approval of their detailed planning land administration and planning and construction administration.
The construction of the key development zones in the Pudong New Area shall be organized by the relevant municipal departments.

9. The key development zones and important road sections within the planned range of the Pudong New Area shall be planned and administered in a unified manner by the municipality. Construction Projects using prerequisitioned land, with the exception of farmers' house construction administered by related district or county, shall be likewise planned and administered by the municipality in a unified manner. The planning and administration of other areas shall, in principle, be carried out by different levels in line with the regulations of "specified responsibilities and division of authority" between districts and counties.
Where development and construction are organized by district or county governments, such development and construction shall be carried out and administered by the district or county departments in charge of planning and administration in accordance with the approved detailed planning. In case that the detailed planning has not been approved, the district or county departments in charge of planning and administration shall verify and issue the planning license for construction land and planning license for construction engineering only after the site selection of the construction engineering and architectural designing program are submitted and approved by the municipal urban planning bureau.

Regulations on Shanghai Waigaoqiao Free Trade Zone
(Adopted by the 32nd Session of the Standing Committee of the 10th Shanghai Municipal People's Congress on December 19,1996)

Chapter I General Provisions

Article 1
With a view to further opening up to the outside world, developing international trade and promoting economic prosperity, the present Regulations are hereby formulated in accordance with the relevant State laws and regulations, in the light of international practice with regard to free trade zones and with due consideration given to the actual circumstances in Shanghai.

Article 2
Established with the approval of the State Council, Shanghai Waigaoqiao Free Trade Zone (hereinafter referred to as the Free Trade Zone) is situated in Waigaoqiao district of Pudong New Area of Shanghai. It is a zone for economic and trade activities with enclosure facilities where special administration is exercised.
Goods may be freely carried in or out between the Free Trade Zone and outside Chinese mainland territory, exempt from customs duties and import-related taxes and free from inspection of licenses and routine supervision procedures of the Customs, except for imports and exports prohibited and goods specially designated by the State.

Article 3
The Free Trade Zone mainly develops businesses such as import and export trade, entrepot trade, processing trade, storage and transport of goods, exhibition and transaction of commodities, financial services, etc..

Article 4
The Shanghai Municipal People's Government (hereinafter referred to as the Municipal People's Government) has authority over the Free Trade Zone and the Customs exercises supervision and control over customs proceedings.

Article 5
Enterprises, institutions, individuals and their respective economic activities in the Free Trade Zone must abide by the present Regulations.

Article 6
The Legitimate rights and interests of investors in the Free Trade Zone shall be protected by law.

Chapter II Administration and Service Agencies

Article 7
Shanghai Waigaoqiao Free Trade Zone Administrative Committee (hereinafter referred to as the Administrative Committee ) is the agency of the Municipal People's Government that shall keep unified control over administrative affairs of the Free Trade Zone and manage financial revenues and expenditures as an independent accounting unit.
The Municipal People's Government shall appoint the director of the Administrative Committee.

Article 8
The functions of the Administrative Committee are as follows:
1. To take charge of the implementation of the laws, regulations and the present Regulations in the Free Trade Zone, to formulate and promulgate specific rules for administering the Free Trade Zone;
2. To draw up plans of development planning and industrial policies of the Free Trade Zone and see to the implementation thereof upon approval of the Municipal People's Government;
3. to take charge of administrative work in such aspects as planning, state-owned assets, investment, foreign economic trade, public finance, local taxation, statistics, industrial and commercial administration, public security, labor and personnel, foreign affairs, transportation, infrastructure, land and real estate, environmental conservation and sanitation, and public utilities, etc..
4. To coordinate the work of such departments as the customs, State taxation, finance, commodities inspection, etc. in the Free Trade Zone;
5. To perform other functions and powers authorized by the Municipal People's Government.
Where the administrative work listed in Paragraph 3 above involves the examination and issuance of certificates and licenses, the relevant municipal regulatory departments shall entrust corresponding administrative departments of the Administrative Committee to handle such work.

Article 9
The Customs in the Free Trade Zone shall exercise special supervision and control over the Free Trade Zone : putting on file and checking goods and articles moving between the Free Trade Zone and places outside Chinese mainland territory and goods circulating within the Free Trade Zone; routine supervision and control over goods, means of transportation and articles moving between the Free Trade Zone and non-free-trade areas inside Chinese mainland territory (hereinafter referred to as non-free-trade areas).

Article 10
The Waigaoqiao Port Area and the Free Trade Zone shall be under uniform administration and the port authorities shall take charge of the port administration.

Article 11
The Free Trade Zone Development Corporation shall, as authorized by the Administrative Committee, undertake the construction and management of public works in the Free Trade Zone and provide services for the enterprises and institutions in the Free Trade Zone .

Article 12
Agencies for customs declaration, inspection, labor, notarization and lawyer service may be set up according to law by the Free Trade Zone to provide services for the enterprises and institutions in the Free Trade Zone .

Chapter III Establishment of Enterprises

Article 13
Investors may, according to the laws, regulations and the present Regulations, apply for establishment of enterprises in the Free Trade Zone.
Any projects that may cause environmental pollution, endanger national security or damage social public interests shall be prohibited in the Free Trade Zone.

Article 14
Investors who intend to establish foreign-invested enterprises in the Free Trade Zone shall apply to the Administrative Committee. The Administrative Committee shall, jointly with the relevant departments, decide on whether or not to approve within 20 days upon the receiving date of the complete and legally permissible application documents (hereinafter referred to as the application documents) and the industrial and commercial administration of the Administrative Committee shall issue the business license within 3 days upon the approval date.
Investors who intend to establish other enterprises in the Free Trade Zone shall apply to the industrial and commercial administration of the Administrative Committee, which shall, jointly with the relevant departments, decide on whether or not to approve the registration within 15 days upon the receiving date of the application documents and issue business licenses to those approved for registration.
The industrial and commercial administration of the Administrative Committee shall report the applications beyond its authority of examination and approval to the Administrative Committee for examination and approval. The Administrative Committee shall refer the applications beyond its authority of examination and approval to the relevant municipal department for examination and approval within 10 days upon the receiving date of the application documents.
Enterprises shall go through registration procedures for customs, taxation, foreign exchange control and commodity inspection, etc. within 30 days upon the obtaining date of business licenses.
Investors shall make contributions as scheduled and undergo verification of investment.

Article 15
Enterprises in the Free Trade Zone shall operate according to law within their authorized business scopes.
Enterprises shall establish sound statistical, financial and accounting systems, set up special account books for goods and regularly submit relevant reports and statements according to law to the Administrative Committee, Customs and the relevant departments.
Enterprises shall meet the requirements of environmental conservation in the process of construction, production and operation, and go through required procedures with the Administrative Committee according to law.

Chapter IV Rules on Business Operation

Article 16
Enterprises in the Free Trade Zone may freely carry on trade between the Free Trade Zone and outside Chinese mainland territory, being free from quotas and licenses unless otherwise stipulated by the State.
Enterprises in the Free Trade Zone may freely carry on trade within the Free Trade Zone.
Enterprises in the Free Trade Zone may, according to the relevant State regulations, carry on trade with non-free-trade areas and with other domestic free trade zones or bonded areas.
Enterprises in the Free Trade Zone may, subject to the approval of the department in charge of foreign economic cooperation and trade of the State, act as import and export trade agents for enterprises in non-free-trade areas.

Article 17
Enterprises inside and outside China (including enterprises in the Free Trade Zone) may hold international commodities exhibitions in the Free Trade Zone.
Enterprises in the Free Trade Zone may set up commodities trade markets, freely take part in import and export commodities exhibitions, engage in commodities exhibitions and wholesale businesses in the Free Trade Zone, and may take part in import and export commodities exhibitions and fairs in non-free-trade areas.
Subject to approval, enterprises in the Free Trade Zone may engage in bonded commodities exhibition activities in non-free-trade areas.

Article 18
Enterprises inside and outside Chinese mainland territory are encouraged to store goods in the Free Trade Zone. The storage period shall have no limit.
Enterprises may do processing business of a commercial nature such as grading, packing, sorting, sub-packaging, labeling and marking of goods in the Free Trade Zone.

Article 19
Products manufactured by enterprises in the Free Trade Zone shall be mainly sold to places outside Chinese mainland territory.
Processing projects with raw materials imported from abroad and with products exported overseas are not subjected to restrictions in the Free Trade Zone unless prohibited by the State industrial policies.
Subject to approval, enterprises in the Free Trade Zone may commission enterprises in non-free-trade areas to process materials and parts brought in from abroad and also may be commissioned by enterprises in non-free-trade areas to do processing business.

Article 20
Enterprises in the Free Trade Zone are encouraged to undertake international transshipment and delivery of goods.
Subject to approval, enterprises in the Free Trade Zone may engage in container transport, forwarding agency, shipping agency and bonded transport entering and/or departing via the Free Trade Zone.

Article 21
Other international service trades may be carried on in the Free Trade Zone.

Chapter V Administration Over Exit and Entry

Article 22
Goods and articles transported directly into the Free Trade Zone from outside Chinese mainland territory or from the Free Trade Zone to places outside Chinese mainland territory shall be filed with the Customs in the Free Trade Zone for record. Goods that may adversely affect security, public sanitation and environmental conservation shall be subjected to legal tests and inspections.
Goods and articles transported from the Free Trade Zone to non-free-trade areas shall be regarded as imports and those transported into the Free Trade Zone from non-free-trade areas shall be regarded as exports. Such goods and articles shall go through import and export procedures.
Machinery, equipment, components, spare parts, raw materials, means of transportation, building materials and office appliances that are brought into and used in the Free Trade Zone from non-free-trade areas shall be passed after registration of the Customs in the Free Trade Zone.

Article 23
Motor-driven vehicles entering or leaving the Free Trade Zone shall go through designated gates at checkpoints after presenting the pass issued by the public security department of the Administrative Committee and be subjected to inspection by the spot inspection authorities. Trucks carrying bonded goods shall meet the requirements for supervision stipulated by the Customs.

Article 24
International ships calling at or leaving the wharves of the Waigaoqiao Port Area shall apply to the port authorities in advance and be subjected to the port inspection.

Article 25
Persons entering and leaving the Free Trade Zone shall pass through designated checkpoints by presenting valid certificates permitted for use by the public security department of the Administrative Committee.

Article 26
No person may reside in the Free Trade Zone without permission of the Administrative Committee.

Chapter VI Financial Management

Article 27
Subject to approval by the department in charge of State financial affairs, the use of the designated foreign currencies may be allowed in the Free Trade Zone.

Article 28
Enterprises in the Free Trade Zone may open spot exchange accounts in foreign exchange according to provisions.
Goods brought into or taken out of the Free Trade Zone in a trade item shall be denominated and settled in foreign currency; fees of administrative agencies in the Free Trade Zone shall be settled in Renminbi; other fees may be settled either in foreign currency or in Renminbi.

Article 29
Enterprises in non-free-trade areas shall undertake verification and canceling procedures in collecting export proceeds and import payments for goods moving between the Free Trade Zone and non-free-trade areas.
Enterprises in the Free Trade Zone need not undertake foreign exchange verification and canceling procedures for goods moving between the Free Trade Zone and outside Chinese mainland territory but shall make statistical reports of international balance of payment.

Article 30
Subject to approval by the department in charge of State financial affairs or its authorized agency, domestic or overseas financial institutions may establish branch operation offices in the Free Trade Zone to conduct relevant financial transactions.

Article 31
Subject to approval by the department in charge of State financial affairs or its authorized agency, wholly foreign-owned banks in the Free Trade Zone may engage in Renminbi transactions, Chinese and foreign financial institutions in the Free Trade Zone may engage in off-shore finance, overseas financing, foreign guaranteeing and other specially permitted businesses.

Chapter VII Construction and Real Estate Management

Article 32
Enterprises and institutions in the Free Trade Zone that need to use land shall sign land-use transfer contracts with the Free Trade Zone Development Corporation and go through land-use procedures with the Administrative Committee.

Article 33
Enterprises and institutions in the Free Trade Zone that need to build construction projects shall apply to the planning department of the Administrative Committee for the construction project planning permits according to laws and regulations. The planning department of the Administrative Committee shall decide on whether or not to approve within 25 days upon the receiving date of the application documents. When approval is granted after examination, project planning permits shall be issued.
The administration of construction projects in the Free Trade Zone shall be carried out according to the relevant laws and regulations.

Article 34
Enterprises and institutions in the Free Trade Zone shall, according to law, apply to the real estate department of the Administrative Committee for registration within 30 days after the construction project is completed and the final acceptance is passed. The real estate department of the Administrative Committee shall issue the real estate title deed within 10 days upon the receiving date of the application documents.

Article 35
Enterprises and institutions in the Free Trade Zone may transfer, lease or mortgage the real estate that is legally obtained but shall register with the real estate department of the Administrative Committee and pay taxes according to law.

Article 36
Within 30 days after the building in the Free Trade Zone is made available to users, the owner of the building shall set up a property management organization to undertake property management according to law after reporting to and gaining approval from the real estate
department of the Administrative Committee or shall entrust a property management company with the necessary qualifications to manage the property.

Chapter VIII Tax Provisions

Article 37
The following goods and articles brought into the Free Trade Zone from outside Chinese mainland territory shall be exempted from customs duties and import-related taxes unless otherwise stipulated by the State:
1. Imported goods;
2. Transit goods;
3. Goods stored in the Free Trade Zone;
4. Raw materials, components, spare parts and packing materials needed for production by enterprises in the Free Trade Zone;
5. Machinery, equipment and capital construction materials needed for construction projects in the Free Trade Zone;
6. Machinery, equipment and reasonable quantities of office appliances, fuel and spare parts for maintenance and repair to be used by enterprises and institutions themselves in the Free Trade Zone.

Article 38
Goods transported to places outside Chinese mainland territory from the Free Trade Zone shall be exempted from customs duties unless otherwise stipulated by the State.
Goods exported via the Free Trade Zone shall have tax refunded according to the State regulations on export tax refunds.

Article 39
When goods are transported to non-free-trade areas from the Free Trade Zone, customs duties and import-related taxes shall be levied thereon according to the State regulations governing goods importation unless otherwise stipulated by the State.

Article 40
Products manufactured by enterprises in the Free Trade Zone to be sold in the Zone or to be transported to places outside Chinese mainland territory shall be exempted from production-related taxes. Production-related taxes of products shall be levied on products to be sold in non-free-trade areas and customs duties and import-related taxes shall be levied in proportion to amount of imported materials and parts used in the said products.

Article 41
The enterprise income tax on enterprises in the Free Trade Zone shall be levied at the rate of 15 per cent. An enterprise with a period of operation of over 10 years shall be exempted from enterprise income tax starting from the first profit-making year for 2 consecutive years and shall then be allowed a 50 per cent reduction in enterprise income tax during the third to the fifth years.

Article 42
The enterprise income tax on enterprises of a non-manufacturing nature such as trading and storage business in the Free Trade Zone shall be levied at the rate of 15 per cent. Any enterprise with a period of operation of over 10 years shall be exempted from enterprise income tax for 1 year starting from the first profit-making year and shall then be allowed a 50 per cent reduction in enterprise income tax during the second to the third years.

Article 43
Apart from the provisions from Article 37 to Article 42, the tax regulations of the State and Shanghai Municipality for Pudong New Area shall be applicable to other business operations.

Chapter IX Labor Management

Article 44
Enterprises in the Free Trade Zone may determine, at their own discretion, their organizational pattern and personnel establishment as required by production and operation. They may decide the qualifications, wages standards and distribution forms of their employees according to law.
Enterprises shall practise the labor contract system.

Article 45
Enterprises in the Free Trade Zone shall do a good job in labor safety and hygiene according to the relevant regulations of the State and Shanghai Municipality. Enterprises shall provide social insurance for and protect the legitimate rights and interests of their staff and workers.

Chapter X Legal Liability

Article 46
Should any enterprise, institution or individual in the Free Trade Zone violate the provisions of the present Regulations, it is subject to administrative punishment. The administrative department concerned of the Administrative Committee or the Customs shall give punishment according to law in accordance with its respective functions.

Article 47
Should any staff member of the Administrative Committee or other agencies commit negligence of duties, abuse of power or malpractice for selfish ends, he/she shall be given administrative discipline by his/her work unit or the higher-level organization. Those found guilty of a crime shall be prosecuted according to law for the criminal liability.

Article 48
If the party concerned finds unacceptable any specific administrative action of the relevant administrative department of the Administrative Committee or of the Customs, it may apply for administrative reconsideration or may file an administrative suit according to the provisions in the Regulations on Administrative Reconsideration or the Administrative Procedure Law of the People's Republic of China.

Chapter XI Supplementary Provisions

Article 49
The establishment of enterprises in the Free Trade Zone by investors from Hong Kong, Macao and Taiwan and Chinese citizens residing abroad and, economic trade activities between the Free Trade Zone and Hong Kong, Macao and Taiwan shall be handled by reference to the present Regulations.

Article 50
The Municipal People's Government is responsible for the interpretation of the present Regulations in its implementation.

Article 51
The present Regulations shall become effective on January 1, 1997.

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