For all domestic enterprises of different ownership and foreign-invested enterprise established in Chongqing, which cover the state encouraged industries, the Corporate Income Tax shall be levied at 15% from 2001 to 2010.

From 2001, the Corporate Income Tax of newly established domestic enterprises in Chongqing covering areas of traffic, communication, electric power, water conservancy, post service and broadcasting shall be exempted for the first 2 years starting from the profitable year, followed by a levy at half of the rate for another 3 years. Among them those who have a rather low profit margin but have made significant social contributions may be given a further 5 years' levy at half of the rate, subject to the approval of local taxation authority or the state taxation authority if required. Same shall apply to the foreign-invested enterprises who comply with the Item 1 of Article 8 of the Chinese Law on the Corporate Income Tax of Foreign-Invested Enterprises and Foreign Enterprises.

The Corporate Income Tax of domestic enterprises and foreign-invested enterprises established in the 5 minority areas including Qianjiang District, Shizhu County, Xiushan County, Youyang County and Pengshui County may be levied or exempted flexibly on a regular basis from 2001 to 2010 subject to the approval of Chongqing Municipal Government. Industries or enterprises which are banned, restricted or to be closed down by the state excluded.

In the event of domestic and foreign-invested enterprises (inclusive of natural person) investing in the projects covering the state encouraged industries; in the event of foreign-invested enterprises investing in the projects covering Grade 2 Restrictive Industries as defined in A Guided Catalogue of Sectors for Foreign Investment, import duty and import linkage VAT on equipment imported within their total investment for their own use shall be exempted, except for those which are declared to be not duty free by the state.

For enterprises located within the New Northern Zone of Chongqing, Chongqing Economic & Technical Development Zone, Chongqing High & New Technology Industrial Zone, Chongqing University Science & Technology Park and Chongqing Modern Agricultural Development Zone, the Corporate Income Tax shall be reduced to 10% in case that an annual production value of high & new technology-oriented product plus technical earnings or annual export value reaches over 60% of the total annual output, subject to the approval of taxation authority in charge.

The Risk Compensation of high & new technology enterprises registered within the New Northern Zone whose investment in high & new technology makes up over 60% of total project investment can be drawn before tax at 3-5% against an annual profit for 3 years starting from the profitable year.

For a recognized project with commercialization of high and technical achievement within the New Northern Zone, the full amount of accreted part of Business Tax and the accreted part of VAT (Accreted part of a newly established enterprise is to be calculated according to the average accreted rate of the area) retained by local government paid within 2 years can be arranged by the New Northern Zone Administration in manners of capital contributions starting from 2001, to be followed by another 3 years during which such arrangement shall be made for half of the amount in support of an enterprise's further development.

A Special Industrial Fund shall be set up within the New Northern Zone, which shall be used by ways of share contribution, norm subsidy, discount of bond and loan to support high and new technology-oriented industries within the New Northern Zone, including software, photo-electronics, bio-pharmaceutical, new medicine, agricultural, forestry and husbandry application, as well as export-oriented processing.

In the event of the investment of fixed assets of an enterprise established in the New Northern Zone reaching RMB 50 million Yuan or its registered capital reaching RMB 100 million Yuan, or its annual sales volume reaching RMB 500 Million Yuan, full value of its paid amount of income tax which actually arrived on the account of the New Northern Zone can be arranged by the Financial Authority of the New Northern Zone Administration as a special fund within 2 years starting from the profitable year, to be followed by another 3 years during which such arrangement shall be made for half of its paid amount in support of the tax-paying enterprise's production operation, subject to the approval of the New Northern Zone Administration.

Chapter 2 - Credit & Financing

A Mortgage System based on the Right of Charge or the Right of Proceeds shall be formulated for implementation of infrastructure projects which comply with necessary requirement.

New credit methods shall be explored, including Storage Bill Credit, Tax Drawback Credit, Factoring Credit and Combined Credit Agreement.

Investment fund based on public shares (inclusive of sino-foreign joint ventures) shall be established and standardized, they are encouraged to invest in infrastructure and high & new technology-oriented projects. Encouragement shall be given to establishment of a corporation with strong financial status, who will be a subject of loan and repayment covering infrastructure and high & new technology-oriented projects. Credit guarantee fund for mid and small-sized enterprises shall also be established and standardized.

Qualified enterprises are encouraged to carry out restructuring based on public shares and to raise fund from stock market according to relevant regulations. Support is given to a public limited company to issue Stock A, Stock B, Stock H and overseas bond, as well as to qualified enterprises who may seek financing by Assets Backed Securitization at both home and abroad.

Chapter 3 - Land & Resource Exploration

A principle of " Land-Use on a Payable Basis" shall be carried out and supply of land-use in forms of auction or bid is encouraged, unless otherwise stipulated by law. The Right of Land-Use can be provided to foreign-invested enterprises in forms of shares pricing or shares contribution can be adopted, subject to the approval of a government department at above county level.

The Ownership Variation Registration and associated charges shall apply to an investor investing in high & new technology development and restructuring of state-owned enterprises in forms of land and housing.

A flexible and preferential policy on land let out and lease of house shall be implemented within the New Northern Zone. Land shall be provided at a favored rate to key high & new technology enterprises, foreign-invested enterprises and export-oriented enterprises. An enterprise, a research institute or a university who wishes to lease workshop buildings for technical development may apply to the New Northern Zone administrative departments for subsidy to rents.

Foreign-invested enterprises are encouraged to explore or exploit non-oil/gas minerals in forms of wholly foreign operation, sino-foreign joint venture operation or co-operative operation according to Law on Mineral Resources and A Guided Catalogue of Sectors for Foreign Investment. Foreign-invested enterprises are allowed to make geologic survey in an authorized area, and shall enjoy priorities in acquisition of the Right of Mineral Exploration for the minerals which they discovered or to which they have found a clue, if no Mineral Right is granted yet. Foreign-invested enterprises also enjoy a priority in acquisition of the Right of Mineral Exploitation for minerals which they have invested in exploration and have ascertained.
Foreign-invested enterprises are allowed to purchase the Right of Mineral Exploration (non-oil/gas) and the Right of Mineral Exploitation (non-oil/gas) of the large and mid sized state-owned enterprises, the Right of Mineral Exploration (non-oil/gas) and the Right of Mineral Exploitation (non-oil/gas) obtained by foreign-invested enterprises can be let out legally.

For the foreign-invested enterprises investing in exploiting the non-oil/gas minerals in Chongqing as encouraged under A Guided Catalogue of Sectors for Foreign Investment, the Mineral Resource Compensation Fee shall be exempted for 5 years and the Mineral-Right-Fee for 3 years starting from the date of operation. Ground-Use Fee of land required for mineral exploration and exploitation shall be exempted. Depreciation of fixed assets can be accelerated from exploitation stage of mineral deposit.

Chapter 4 - Opening up to the Outside

All sectors of business, except for those in which investment is prohibited by the state stipulations, are open to foreign investment and Chinese non-state-owned investment, who will enjoy a same treatment as offered to state-owned enterprises.

Foreign-invested enterprises and non-state-owned enterprises are encouraged to make investment in forms of independent operation, joint venture operation, co-operative operation, BOT (Build - Operate - Transfer), TOT (Transfer - Operate - Transfer), take-over, merge, lease or rest of international practiced investment forms. All preferential policies applied to areas where foreign investment is encouraged shall be also available to foreign invested BOT and TOT projects. Qualified foreign-invested enterprises are allowed, on the basis of independent operation or joint venture operation to set up industrial fund, risk investment fund or guarantee companies, among which full amount of registered capital is required to be transferred by the investor at one time in the case of setting up a guarantee company.

Foreign-invested enterprises are encouraged to invest in Chongqing's infrastructure, pillar industries and high & new technology projects, without restriction on proportion of investment and term of running, unless otherwise stipulated by the state. In the event of foreign invested enterprises investing in commercial business, term of running is relaxed to 40 years and registered capital to RMB 30 million Yuan. Preferential policies applied to foreign-invested enterprises shall also apply to enterprises set up in Chongqing by existing foreign-invested enterprises in China, provided that foreign investment in such enterprises set up in Chongqing exceeding 25% of registered capital. Qualified Chinese Natural Person can be a Chinese partner to sino-foreign joint venture enterprises or co-operative enterprises.

If a foreign-invested enterprise investing in Chongqing's infrastructure or encouraged projects is evaluated by banks as qualified for receiving loans, Chinese banks can provide loans in RMB against its fixed assets, the foreign-invested enterprise shall be also allowed to seek financing inclusive of RMB for its projects. Good-famed and qualified foreign-invested enterprises and non-state-owned enterprises, who do not need a government guarantee may apply for loan of foreign government and international financial institutions.

An infrastructure investment management system shall be formulated and implemented to encourage foreign and domestic investment in water supply, drainage, road and bridge. Tariff of operations of projects relying on income of charges shall be calculated on the principle of "Reasonable Cost + Tax + Reasonable Profit = Tariff". For public projects such as water supply, drainage and waste disposal, to which a tariff standard is not covering operations yet, responsible government in charge can take appropriate measures to subsidize the operations until tariff standard comes into effect.

A visa can be issued upon arrival to foreigners who fly direct to Chongqing for tourism according to the state stipulations.

Restrictions on registered capital shall be relaxed to encourage more investment. The registered capital of production and whole-sale based companies is reduced to RMB300,000 Yuan; Trade marks, brands, technology and technical achievement can be used as registered capital after assessed; The proportion of technical achievement which is used as registered capital can reach as high as 80% of total registered capital.

In case that an investment firm invests in Chongqing's industrialization projects of high & new technology and its earnings from the investment have made up over 50% of its total earnings, the preferential treatment to municipal high & new technology-oriented enterprises shall apply, if confirmed by Chongqing High & New Technology Industrialization Workgroup.

A " Record Registration System" shall apply to a project which is fully financed by the owner should the owner wish, this should exclude projects which utilize government financing, bank financing or projects which are under the control of the state government. The owner of a project shall, according to the category of project such as capital construction, real estate or technical renovation, send the Project Proposal to a district/county's Planning Commission (For capital construction and real estate) and Economic Commission (For technical renovation) for record. The Planning Commission and the Economic Commission in charge shall, if the project complies with industrial policies, within 2 days issue a Certification of Record, which has a same legal effect as the Approval of Project Proposal.

In case that a foreign-invested enterprise invests in a project which has a volume of below US$ 20 million and does not involve government financing, resources and environmental protection co-ordination, departments concerned at district/county level are authorized to examine and approve its Project Proposal, Feasibility Study, Contract Document and Memorandum of Association.

For a project which is subjected to an approval by municipal departments, the Project Proposal and the Feasibility Study shall be approved together. The approval of kickoff of the project shall be superseded by the Annual Investment Program, instead of being approved separately.
For a project which must undergo an approval by the state authorities, the municipal departments concerned shall forward a submission to the state authorities in charge within 15 days after receipt of the acceptable documents handed over by the owner of the project.

Based on principle of "Be Open, Be Fair and Be Impartial", Foreign-invested enterprises and domestic enterprises in Chongqing shall enjoy the same right and opportunity as local enterprises in the aspects of accreditation, qualification appraisal, scope of business, public bidding and business undertaking.

Chapter 5 - Treatment to Talents & Technical Achievement

A Policy of "Fixed Household Residence, Steady Employment, Free Come and Free Go" shall apply to personnel with college qualification or above, personnel with Intermediate Technical Specialty Qualification or above and personnel back from overseas study who come to work in Chongqing's state-owned and non-state-owned enterprises or undertake technical and business project in Chongqing.

Employers shall arrange satisfactory laboratories, offices and living conditions as required by their work for personnel with doctor's degree and personnel with master's degree back from overseas study. The above personnel who work in Chongqing and have a legal domicile in Chongqing are allowed to register their household residence, including their wives and children.