Where a foreign investor carries out an asset merger, it shall stipulate the time limit for contribution of investments in the contract and articles of association of the foreign investment enterprise to be established. Where the foreign investor establishes a foreign investment enterprise, and through which purchases the assets of a domestic enterprise and operates such assets, it shall contribute the investments equivalent to the consideration of the assets within the time limit for payment of consideration as provided for in Paragraph 1 of this Article 16; as for the remaining investments, the time limit for contribution shall be subject to relevant provisions regarding establishment of a foreign investment enterprise.

In case a foreign investor merges a domestic enterprise to establish a foreign-invested enterprise and its/his contribution is less than 25 percent of the registered capital of the enterprise, if it/he makes its/his investment in cash, it/he shall contribute the investment within three (3) months as of the day when the foreign investment enterprise is issued its business license; or contribute all the investments in kind or in industrial properties, etc. within six (6) months as of the day when the foreign investment enterprise is issued its business license.

Article 17 The means of payment as the consideration shall conform to China's relevant laws and administrative regulations. Where a foreign investor uses the Renminbi assets it lawfully owned as the means of payment, it shall be subject to the approval of the foreign exchange administrative authority. Where a foreign investor uses the equity rights it is entitled to dispose of as the means of payment, it shall be subject to the provisions Chapter IV hereof.

Article 18 After a foreign investor purchases by agreement the equity rights of a domestic company, and the domestic company has been altered to be established as a foreign investment enterprise, the foreign investment enterprise's registered capital shall be the registered capital of the original domestic company, and the investment contribution by the foreign investor shall be the proportion of the purchased equity in the original registered capital.

Where a foreign investor purchases the increased capital of a domestic limited liability company, the registered capital of the foreign investment enterprise established after the merger shall be the sum of the original domestic company's registered capital and the increased capital. The foreign investor and other original shareholders of the merged domestic company shall, on the basis of the asset evaluation of the domestic company, determine the proportions of their respectively contributed investments in the foreign investment enterprise's registered capital.

Where a foreign investor purchases the increased capital of a domestic joint stock company, the registered capital of the foreign investment enterprise established after the merger shall be determined in accordance with the relevant provisions in the Company Law of the People's Republic of China.

Article 19 Where a foreign investor merges a domestic enterprise by equity merger, the upper limit of the total investment amount of the foreign-funded enterprise established after the merger shall be determined according to the following proportions, unless it is otherwise provided in relevant state laws and regulations:

(1) if the registered capital is less than $2.1 million, the total investment amount shall not exceed ten sevenths (10/7) of the registered capital;

(2) if the registered capital is more than $2.1 million but less than $5 million, the total investment amount shall not exceed two times of the registered capital;

(3) if the registered capital is more than $5 million but less than $12 million, the total investment amount shall not exceed 2.5 times of the registered capital;

(4) if the registered capital is more than $12 million, the total investment amount shall not exceed three times of the registered capital.

Article 20 Where a foreign investor merges a domestic enterprise by asset merger, it shall determine the total investment amount of the foreign investment enterprise to be established according to the transaction price for purchasing the assets and the actual scale of production and operation. The proportion of the registered capital of the foreign investment enterprise to be established to its total investment shall conform to relevant provisions.

Chapter III Approval and Registration

Article 21 Where a foreign investor merges a domestic enterprise by equity merger, it shall, according to the total investment amount of the foreign investment enterprise to be established, the type of the enterprise and the industry it engages in, submit the following documents to the approval authority with the corresponding approval power in accordance with the laws, administrative regulations and departmental rules on establishment of foreign investment enterprises:

(1) the resolution of the shareholders of the merged domestic limited liability company on unanimous consent of the foreign investor's equity merger, or resolution of the shareholders' meeting of the merged domestic joint stock company on consent of the foreign investor's equity merger;

(2) the application for the merged domestic company to be modified in accordance with the law into and be established as a foreign investment enterprise;

(3) the contract and articles of association of the foreign investment enterprise established after the merger;

(4) the agreement on the foreign investor's purchase of the shareholders' equity of the domestic company or on the subscription of the domestic company to increase capital;

(5) the financial auditing report of the merged domestic company in the previous accounting year;

(6) the identification certificate or incorporation certificate and the credit certificate of the investor notarized and attested according to law;

(7) the statement on the enterprises invested by the merged domestic company;

(8) the business licenses (duplicates) of the merged domestic company and of the enterprises it invests in;

(9) the plan for re-settlement of the merged domestic company's employees;

(10) the documents required in articles 13, 14 and 15 hereof.

Where the business scope, scale and obtainment of land use right of the foreign investment enterprise established after the merger involves permits from other relevant governmental departments, the relevant permit documents shall be submitted along with those provided for in the preceding paragraph.

Article 22 The equity purchase agreement and the capital increase agreement for a domestic company shall be governed by Chinese laws, and shall include the following contents:

(1) information regarding each party to the agreements, including its name, domicile, and the name, position and nationality, etc. of its legal representative;

(2) the proportions and price of the purchased equity or the capital increased from subscription;

(3) the term and method for performance of the agreements;

(4) the rights and obligations of each party to the agreements;

(5) the liabilities for breach of the agreement and settlement of disputes;

(6) the date and place for conclusion of the agreements.

Article 23 Where a foreign investor merges a domestic enterprise by asset merger, it shall, according to the total investment amount of the foreign investment enterprise to be established, the type of the enterprise and the industry it engages in, submit the following documents to the approval authority with the corresponding approval power in accordance with the laws, administrative regulations and departmental rules on establishment of foreign investment enterprises:

(1) the resolution of the property holders or authority of the domestic enterprise on agreeing to sell the assets;

(2) the application for the establishment of the foreign investment enterprise;

(3) the contract and articles of association of the foreign investment enterprise to be established;

(4) the agreement concluded between the foreign investment enterprise to be established and the domestic enterprise on purchase of assets, or, the agreement concluded between the foreign investor and the domestic enterprise on asset purchase;

(5) the articles of association and business license (duplicates) of the domestic enterprise subject to the merger and acquisition;

(6) the evidence of notice and public announcement issued to creditors by the domestic enterprise subject to the merger and acquisition and statement on whether or not any objection is made by creditors;

(7) the identification certificate or incorporation certificate and the credit certificate of the investor notarized and attested according to law;

(8) the plan for employees re-settlement of the domestic enterprise subject to the merger and acquisition;

(9) the documents required to in articles 13, 14 and 15 hereof.

Where the assets of the domestic enterprise purchased and operated in accordance with the preceding paragraph involves permits from other relevant governmental departments, the relevant permit documents shall be submitted along with those provided for in the preceding paragraph.

Where a foreign investor purchases the assets of a domestic enterprise by agreement and invests such assets in establishing a foreign investment enterprise, it shall not, prior to the establishment of the foreign investment enterprise, operate any business with such assets.

Article 24 The asset purchase agreement shall be governed by the laws of China, and shall include the following contents:

(1) information of each party to the agreements, including its name and domicile, and the name, position and nationality, etc. of its legal representative;

(2) the list and price of the assets under planned purchase;

(3) the term and method for performance of the agreements;

(4) the rights and obligations of each party to the agreements;

(5) the liabilities for breach of the agreement and settlement of disputes;

(6) the date and place for conclusion of the agreements.

Article 25 Where a foreign investor merges a domestic enterprise to establish a foreign investment enterprise, the approval authority shall, unless otherwise provided for in the present provisions, decide on, in accordance with the law, whether or not to grant the approval within thirty (30) days as of the receipt of all the documents submitted. If the approval authority decides to grant the approval, it shall issue a certificate of approval.

Where the approval authority decides to approve a foreign investor to purchase by agreement the shareholders' equity of a domestic company, it shall simultaneously make copies of the relevant approval documents separately to the foreign exchange administrative authority at the equity transferor's locality. The foreign exchange administrative authority at the equity transferor's locality shall issue the relevant certificate on registration of share transference of foreign exchange earnings and foreign exchange from foreign investment, which is the valid document to prove that the foreign investor has paid the consideration for equity subscription.

Article 26 Where a foreign investor merges a domestic enterprise by asset merger, it shall, within thirty (30) days as of the receipt of the approval certificate of foreign investment enterprise, apply to the administrative authority of registration for making registration of establishment, and obtaining the foreign investment enterprise's business license.

Where a foreign investor merges a domestic enterprise by equity merger, the merged domestic company shall, in accordance with the present provisions, apply to the original registration administrative authority for registration of modification, to obtain the foreign investment enterprise's business license. If the original registration administrative authority has no jurisdiction of registration, it shall, within ten (10) days as of the receipt of the application documents, transfer them to an administrative authority of registration with the jurisdiction for handling the registration, and meanwhile attach the domestic company's registration files. The merged domestic company shall, when applying for registration of modification, submit the following documents, and be responsible for their genuineness and validity:

(1) the application for registration of modification;

(2) the agreement on the foreign investor's purchase of the shareholders' equity of the domestic company or on the subscription to the domestic company's increased capital;

(3) the amended articles of association of the company or the amendment to the original articles of association, and the contract of the foreign investment enterprise that needs to be submitted in accordance with the law;

(4) the foreign investment enterprise's approval certificate;

(5) the qualification certificate or the natural person's identification certificate of the foreign investor;