Interpretation of the General Administration of Civil Aviation ofChina of Certain Issues of the Notice Concerning Relevant Policieslicences on Foreign Investment in Civil Aviation

Interpretation of the General Administration of Civil Aviation ofChina of Certain Issues of the Notice Concerning Relevant Policieslicences on Foreign Investment in Civil Aviation (Promulgated on October 25, 1994) Whole document Interpretation of the General Administration of Civil Aviation of China of Certain Issues of the Notice Concerning Relevant Policies licences on Foreign Investment in Civil Aviation (Promulgated on October 25, 1994) The promulgation of the Notice Concerning Relevant Policies on Foreign Investment in Civil Aviation (hereinafter referred to as the Notice) is another fundamental move of our country to further open to the outside world. In order to ensure the correct comprehension and implementation of the Notice, an interpretation on certain issues with regard to the Notice is hereby made as follows: 1. On the issue of the scope in which foreign investors may invest in the construction of airports, the investment in the flying areas shall include that for flight assisting light in addition to the runway, taxiway and parking apron as stipulated in Item 1, Section 1 of the Notice.

2. On the issue of investment, "capital contribution from the Chinese side shall constitute more than fifty-one per cent" in Item 2, Section 1 means the same as "with the Chinese capital investment constituting more than fifty-one per cent of the enterprise's registered capital" in the second half of Item 1, referring to the rate of the Chinese capital contribution to the enterprise's registered capital.

3. On the issue of investment ratio In establishing Chinese-foreign equity joint ventures or cooperative joint ventures for single construction of airport flying areas as provided for in Item 1, Section 1 of the Notice or for joint construction of any one or more of the auxiliary projects as listed in Item 2 of the same section, or for a comprehensive construction of an airport, the Chinese capital contribution shall, in any case, constitute more than fifty-one per cent of the enterprise's registered capital, and the offices of chairman of the board of directors and of general manager shall be assumed by personnel from the Chinese side.

In Chinese-foreign equity joint ventures or cooperative joint ventures for single construction of the terminal building as provided for in Item 2, Section 1 of the Notice or for joint construction of any one or more of the auxiliary projects listed in the section, the Chinese capital contribution shall, in any case, constitute more than fifty-one per cent of the enterprise's registered capital, and the offices of chairman of the board of directors and of general manager shall be assumed by personnel from the Chinese side.

Where Chinese-foreign equity joint ventures or cooperative joint ventures established for foreign investment in civil airport flying areas as provided for in Item 2, Section 1 of the Notice need to increase the investment amount to enlarge the business scope and engage in the operation of the auxiliary projects as listed in the item, the Chinese capital contribution shall also constitute more than fifty-one per cent of the enterprise's registered capital, and an application shall be submitted for approval in light of the regulated procedure.

4. "Foreign investment in establishment of air transport enterprises" stated in Section 2 of the Notice refers to the investment made by foreign investor (s) in the air transport enterprises already established, which shall be examined and approved in the same way as the establishment of an enterprise with foreign investment and the conditions for such an enterprise shall be fulfilled, but does not mean the establishment of a new air transport enterprise. According to the State Council decision on temporarily ceasing to examine and approve establishment of new airline companies, foreign investors may only make investments in the air transport enterprises already legally established.

5. The issue of "jointly holding shares" stated in Item 2, Section 2 of the Notice means that Chinese air transport enterprises and foreign air transport enterprises may, on the condition of reciprocity, jointly hold each other's shares and effectively cooperate in market operation, with no personnel from one side to the other side's managing circle for participation in management control.

6. On the issue of "choosing one or two air transport enterprises as experimental units" as stated in Item 3, Section 2 of the Notice, the China East Airlines and the China South Airlines that are carrying out the experimental reform of stock system and getting ready for listing outside China are, after approval, among the experimental units put forward in the Notice. An increasing of the experimental units shall be subject to otherwise decision and announcement of the General Administration of Civil Aviation of China.

7. On the issue of the foreign investment in an air transport enterprise, if a foreign investor invests in an air transport enterprise in any of the forms stipulated in these Regulations, the proportion of his investment or the capital actually paid in the registered capital of an air transport enterprise shall not exceed thirty-five per cent, his deputy's right to vote shall not exceed twenty-five per cent of that of the board of directors, and his right to vote in the shareholders' conference or shareholders' meeting shall not exceed twenty-five per cent either.

8. "Home enterprises of the same kind" as stated in Item 6, Section 2 of the Notice refers to the existing local air transport enterprises with no foreign investment. And "all items of tax" mainly refers to the import duties of aircrafts, air material, enterprise income tax, etc. in which two kinds of enterprises with and without foreign investment shall enjoy equal treatment so as to ensure them an equal competition environment.

9. In terms of the general-purpose agriculture and forestry aviation, Section 3 of the Notice states that foreign investors may invest in general-purpose agricultural and forestrial airline enterprises only.

General-purpose airline enterprises other than agricultural and forestial airline enterprises are outside the scope of foreign investment.

10. "According to law" as stated in Section 5 of the Notice means "according to" the State laws administrative regulations, rules of the General Administration of Civil Aviation of China and other relevant stipulations.

11. If a company, enterprise or other economic organization or individual from Taiwan, Hong Kong or Macao invests in or participates in holding shares of a civil aviation enterprise on the mainland, matters shall be handled under this Interpretation.

shares and effectively cooperate in market operation, with no personnel from one side to the other side's managing circle for participation in management control.

6. On the issue of "choosing one or two air transport enterprises as experimental units" as stated in Item 3, Section 2 of the Notice, the China East Airlines and the China South Airlines that are carrying out the experimental reform of stock system and getting ready for listing outside China are, after approval, among the experimental units put forward in the Notice. An increasing of the experimental units shall be subject to otherwise decision and announcement of the General Administration of Civil Aviation of China.

7. On the issue of the foreign investment in an air transport enterprise, if a foreign investor invests in an air transport enterprise in any of the forms stipulated in these Regulations, the proportion of his investment or the capital actually paid in the registered capital of an air transport enterprise shall not exceed thirty-five per cent, his deputy's right to vote shall not exceed twenty-five per cent of that of the board of directors, and his right to vote in the shareholders' conference or shareholders' meeting shall not exceed twenty-five per cent either.

8. "Home enterprises of the same kind" as stated in Item 6, Section 2 of the Notice refers to the existing local air transport enterprises with no foreign investment. And "all items of tax" mainly refers to the import duties of aircrafts, air material, enterprise income tax, etc. in which two kinds of enterprises with and without foreign investment shall enjoy equal treatment so as to ensure them an equal competition environment.

9. In terms of the general-purpose agriculture and forestry aviation, Section 3 of the Notice states that foreign investors may invest in general-purpose agricultural and forestrial airline enterprises only.

General-purpose airline enterprises other than agricultural and forestial airline enterprises are outside the scope of foreign investment.

10. "According to law" as stated in Section 5 of the Notice means "according to" the State laws administrative regulations, rules of the General Administration of Civil Aviation of China and other relevant stipulations.

11. If a company, enterprise or other economic organization or individual from Taiwan, Hong Kong or Macao invests in or participates in holding shares of a civil aviation enterprise on the mainland, matters shall be handled under this Interpretation.