LETTERS BETWEEN THE GOVERNMENT OF JANPAN AND THE GOVERNMENT OF THEPEOPLE'S REPUBLIC OF CHINA

LETTERS BETWEEN THE GOVERNMENT OF JANPAN AND THE GOVERNMENT OF THEPEOPLE'S REPUBLIC OF CHINA (Beijing, September 4, 1997) Whole document Excellency, I have the honour to acknowledge the receipt of Your Excellency's Note of today's date, which reads as follows: "I have the honour to confirm the following understanding recently reached between the representatives of the Government of Japan and of the Government of the People's Republic of China concerning Japanese loans to be extended with a view to contributing to the economic stabilization and promoting the economic modernization efforts of the People's Republic of China: I 1. (1)A loan in Japanese yen up to the amount of two hundred billion one hundred and fourteen million yen (200,114,000,000)(hereinafter referred to as "the Loan I") will be extended, in accordance with the relevant laws and regulations of Japan, to the Government of the People's Republic of China by the Overseas Economic Co-operation Fund (hereinafter referred to as "the Fund") to implement the projects listed in the List attached hereto (hereinafter referred to as "the List"), according to the amount for each project as specified in the List. The Ministry of Foreign Trade and Economic Co-operation of the People's Republic of China (hereinafter referred to as "the Ministry") is authorized by the Government of the People's Republic of China to accept the Loan I and sign the loan agreements with the Fund on behalf of the Government of the People's Republic of China.

His Excellency Mr. Yoshiyasu Sato Ambassador Extraordinary and Plenipotentiary of Japan to the People's Republic of China (2) The Loan I will be extended in line with sub-paragraph (2) of paragraph 2 of the "Funds for Development" Initiative announced by the Government of Japan on June 25, 1993.

2. (1) The Loan I will be made available by loan agreements to be concluded for each of the projects mentioned in sub-paragraph (1) of paragraph 1 between the Ministry and the Fund. The terms and conditions of the Loan I as well as the procedures for its utilization will be governed by the said loan agreements which will contain, inter alia, the following principles: (a) The repayment period will be twenty (20) years after the grace period of ten (10) years.

(b) The rate of interest will be two point three per cent (2.3%) per annum with regard to the projects mentioned in 1 to 3 and 6 to 9 of the List and two point one per cent (2.1%) per annum with regard to the environmental projects mentioned in 4, 5 and 10 to 13 of the List.

(c) The disbursement period will be seven (7) years with regard to the projects mentioned in 7 to 9 of the List, and five (5) years with regard to the projects mentioned in 1 to 6 and 10 to 13 of the List from the dates of coming into force of the relevant loan agreements.

(2) Each of the loan agreements mentioned in sub-paragraph (1) above will be concluded after the Fund is satisfied of the feasibility, including environmental consideration, of the project to which such loan agreement relates.

3. (1) The Loan I will be made available to cover payments already made and/or to be made by Chinese executing agencies to suppliers, contractors and/or consultants of eligible source countries under such contracts as have been and/or may be entered into between them for purchases of products and/or services to be required for the implementation of the projects mentioned in sub-paragraph (1) of paragraph 1, provided that such purchases are made in such eligible source countries for products produced in and/or services supplied from those countries.

(2) The scope of eligible source countries mentioned in sub-paragraph (1) above will be agreed upon between the authorities concerned of the two Governments.

4. The Government of the People's Republic of China will take necessary measures for products and/or services mentioned in sub-paragraph (1) of paragraph 3 to be procured in accordance with the guidelines for procurement of the Fund, which set forth, inter alia, the procedures of international tendering to be followed except where such procedures are inapplicable or inappropriate.

II 1. (1) A loan in Japanese yen up to the amount of two billion seven hundred and ninety-two million yen (гд2,792,000,000) (hereinafter referred to as "the Loan II") will be extended, in accordance with the relevant laws and regulations of Japan, to the Government of the People's Republic of China by the Fund to implement the Sanjiang Plain Agricultural Development Program (II) (hereinafter referred to as "the Program"). The Ministry is authorized by the Government of the People's Republic of China to accept the Loan II and sign the loan agreement with the Fund on behalf of the Government of the People's Republic of China.

(2) The Loan II will be extended in line with sub-paragraph (2) of paragraph 2 of the "Fund for Development" Initiative announced by the Government of Japan on June 25, 1993.

2. (1) The Loan II will be made available by a loan agreement to be concluded for the Program between the Ministry and the Fund. The terms and conditions of the Loan II as well as the procedures for its utilization will be governed by the said loan agreement which will contain, inter alia, the following principles: (a) The repayment period will be twenty (20) years after the grace period of ten (10) years.

(b) The rate of interest will be two point three percent (2.3%) per annum.

(c) The disbursement period will be five (5) years from the date of coming into force of the relevant loan agreement.

(2) The loan agreement mentioned in sub-paragraph (1) above will be concluded after the Fund is satisfied of the feasibility, including environmental consideration, of the Program.

(3) The loan for the Program will be made available to cover credits to be extended by the Export-Import Bank of China to sub-borrowers for the implementation of the Program.

III 1. The respective disbursement periods mentioned in sub-paragraph (1) (c) of paragraph 2 of Part I and sub-paragraph (1) (c) of paragraph 2 of Part II may be extended with the consent of the authorities concerned of the two Governments.

2. The Government of the People's Republic of China will exempt: (1) the Fund from Chinese fiscal levies and taxes on and/or in connection with the Loan I and the Loan II as well as interest accruing therefrom; and (2) Japanese companies operating as contractors and/or consultants from Chinese duties and related fiscal charges with respect to the bringing-in and bringing-out of their own construction equipment needed for the implementation of the projects mentioned in sub-paragraph (1) of paragraph 1 of Part I and the Program mentioned in sub-paragraph (1) of paragraph 1 of Part II.

3. Japanese nationals whose services may be required in the People's Republic of China in connection with the supply of products and/or services to be provided under the Loan I and under the credits covered by the Loan II will be accorded such facilities as may be necessary for their entry into the People's Republic of China and stay therein for the performance of their work.

4. With regard to the shipping and marine insurance of products purchased under the Loan I and under the credits covered by the Loan II, the two Governments will refrain, within the scope of the relevant laws and regulations of their respective countries, from imposing any restrictions that may hinder fair and free competition of the shipping and marine insurance companies.

5. The Government of the People's Republic of China will take necessary measures to ensure that: (1) the Loan I and the Loan II be used properly and exclusively for the projects mentioned in sub-paragraph (1) of paragraph 1 of Part I and the Program mentioned in sub-paragraph (1) of paragraph 1 of part II; and (2) the facilities constructed under the Loan I be maintained and used properly and effectively for the purposes prescribed in this understanding.

6. The Government of the People's Republic of China will, upon request, furnish the Government of Japan with information on the progress of the projects mentioned in sub-paragraph (1) of paragraph 1 of Part I and the Program mentioned in sub-paragraph (1) of paragraph 1 of Part II.

7. The two Governments will jointly review from time to time the progress of the implementation of the Loan I and the Loan II and take measures necessary to secure smooth and effective utilization of the Loan I and the Loan II and otherwise consult with each other in respect of any matter that may arise from or in connection with the foregoing understanding.

I should be grateful if Your Excellency would confirm the foregoing understanding on behalf of the Government of the People's Republic of China.

List (Maximum Amount in Million Yen) |------------------ | 1. Shuoxian-Huanghua Railway Construction Project (III) 20,460 | 2. Xi'an-Ankang Railway Construction Project (III) 12,685 | 3. Guiyang-Loudi Railway Construction Project (II) 17,028 | 4. Hohhot and Baotou Environment Improvement Project (II) 5,629 | 5. Liuzhou Environment Improvement Project (II) 3,679 | 6. Shanghai Pudong International Airport Construction Project 40,000 | 7. Huanghua Port Construction Project 15,400 | 8. Shaanxi Hancheng No.2 Thermal Power Plant | Construction Project 35,000 | 9. Shanxi Wangqu Thermal Power Plant Construction Project 30,000 | 10. Benxi Environment Improvement Project 4,110 | 11. Huai River Henan Water Pollution Control Project 4,945 | 12. Xiang River Basin Hunan Environment Improvement Project 5,678 | 13. Dalian Water Supply System Rehabilitation Project 5,500 | Total 200,114 |------------------ I have further the honour to confirm on behalf of the Government of the People's Republic of China the understanding set forth in Your Excellency's Note.

I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration.

(Signed) Tang Jiaxun Vice-Minister of Foreign Affairs of the People's Republic of China Beijing, September 4, 1997 Excellency, I have the honour to acknowledge the receipt of Your Excellency's Note of today's date, which reads as follows: "With reference to the Exchange of Notes dated today concerning Japanese loans to be extended with a view to contributing to the economic stabilization and promoting the economic modernization efforts of the People's Republic of China, I have the honour to propose, on behalf of the Government of Japan, that in case there is any divergence of interpretation of the said Exchange of Notes which is done in the Japanese, Chinese and English languages, the English text shall prevail." I have further the honour to express agreement, on behalf of the Government of the People's Republic of China, to the proposal put forward in Your Excellency's Note.

I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration.

(Signed) Tang Jiaxun Vice-Minister of Foreign Affairs of the People's Republic of China His Excellency Mr. Yoshiyasu Sato Ambassador Extraordinary and Plenipotentiary of Japan to the People's Republic of China Record of Discussions In connection with the Exchange of Notes dated today concerning Japanese loans to be extended with a view to contributing to the economic stabilization and promoting the economic modernization efforts of the People's Republic of China, the representatives of the Chinese Delegation and of the Japanese Delegation wish to record the following: 1. With reference to the financing formula for procurement in the People's Republic of China under the Loan I mentioned in Part I of the said Exchange of Notes, the following principles will be applied: (1) Tender will be called on that part of the project classified as "foreign currency portion". The tender will be open to nationals of eligible source countries including the People's Republic of China.

(2)With regard to the contract which is to be awarded to Chinese nationals through the tendering, financing will be made to the whole amount of such contract within the scope of the said "foreign currency portion".

2. (1) With reference to the Program mentioned in sub-paragraph (1) of Paragraph 1 of Part II of the said Exchange of Notes, the Loan II will be used to cover credits extended by the Export-Import Bank of China to the sub-borrower for the purpose of agricultural development in Heilongjiang Province.

(2) The "sub-borrower" mentioned in (1) above is the General Bureau of State Farms of Heilongjiang Province.

3. With reference to sub-paragraph (1) of paragraph 3 of Part I of the Exchange of Notes, the representative of the Japanese Delegation stated that the Loan for the project mentioned in 6 of the List attached to the said Exchange of Notes may be made available to cover payments already made and/or to be made between August 8, 1997 and the previous day of coming into force of the loan agreement mentioned in sub-paragraph (1) of paragraph 2 of Part I of the Exchange of Notes, as well as payments to be made on and after the day of coming into force of the said loan agreement, for purchases of the products and/or services referred to in the said sub-paragraph.

4. (1) With regard to the environmental protection measures relating to the Shanxi Wangqu Thermal Power Plant (hereinafter referred to as "the Wangqu Plant"), the representative of the Japanese Delegation requested the Chinese side to confirm the following points: (a) to secure long-term stable supply of low-sulphur coal to the Wangqu Plant, (b) to secure sufficient space for the possible future installation of desulphurization equipment in the Wangqu Plant, and to immediately take necessary measures for the introduction and operation of such equipment, (c) to consider introduction of measures to reduce NOx emission and establishing a standard of the emission of NOx, and (d)to carry out monitoring of the environment and to submit the monitoring results to the Japanese side.

(2) The representative of the Chinese Delegation confirmed the following with regard to the points stipulated in sub-paragraph (1) above: (a) The Wangqu Plant is designed to burn low sulphur coal. For the purpose of insuring the long-term stable supply of low-sulphur coal, the coal supply agreement between the Plant side and the coal supplier side concerning the Wangqu Plant has been signed. If there would be any problem with the supply of coal, the Japanese side would be promptly informed and effective measures would be taken by the Chinese side.

(b) The general layout plan for the Wangqu Plant, has been modified and sufficient space is left around chimney in the end of boilers of the Wangqu Plant for the future installation of Flue Gas Desulphurization equipments, and the Ministry of Electric Power shall carry out, as the executing agency concerning the Wangqu Plant, preliminary feasibility studies to estimate the approximate cost of the said equipments of the type and technical specifications appropriate to the Wangqu Plants before the installation of Flue Gas Desulphurization equipments.

(c) Concerning whole facilities in the Wangqu Plant, the Chinese side will ensure that they will make further environmental research, in accordance with Chinese laws and regulations on environment, make a plan in order to reduce total emission amount of dust, SOx and NOx, and report the said plan to the Overseas Economic Co-operation Fund.

Beijing, September 4, 1997 For the Chinese Delegation: For the Japanese Delegation: (Signed) Wang Shijia (Signed) Yoshiyuki Sadaoka f paragraph 1 of Part II.

3. Japanese nationals whose services may be required in the People's Republic of China in connection with the supply of products and/or services to be provided under the Loan I and under the credits covered by the Loan II will be accorded such facilities as may be necessary for their entry into the People's Republic of China and stay therein for the performance of their work.

4. With regard to the shipping and marine insurance of products purchased under the Loan I and under the credits covered by the Loan II, the two Governments will refrain, within the scope of the relevant laws and regulations of their respective countries, from imposing any restrictions that may hinder fair and free competition of the shipping and marine insurance companies.

5. The Government of the People's Republic of China will take necessary measures to ensure that: (1) the Loan I and the Loan II be used properly and exclusively for the projects mentioned in sub-paragraph (1) of paragraph 1 of Part I and the Program mentioned in sub-paragraph (1) of paragraph 1 of part II; and (2) the facilities constructed under the Loan I be maintained and used properly and effectively for the purposes prescribed in this understanding.

6. The Government of the People's Republic of China will, upon request, furnish the Government of Japan with information on the progress of the projects mentioned in sub-paragraph (1) of paragraph 1 of Part I and the Program mentioned in sub-paragraph (1) of paragraph 1 of Part II.

7. The two Governments will jointly review from time to time the progress of the implementation of the Loan I and the Loan II and take measures necessary to secure smooth and effective utilization of the Loan I and the Loan II and otherwise consult with each other in respect of any matter that may arise from or in connection with the foregoing understanding.

I should be grateful if Your Excellency would confirm the foregoing understanding on behalf of the Government of the People's Republic of China.

List (Maximum Amount in Million Yen) |------------------ | 1. Shuoxian-Huanghua Railway Construction Project (III) 20,460 | 2. Xi'an-Ankang Railway Construction Project (III) 12,685 | 3. Guiyang-Loudi Railway Construction Project (II) 17,028 | 4. Hohhot and Baotou Environment Improvement Project (II) 5,629 | 5. Liuzhou Environment Improvement Project (II) 3,679 | 6. Shanghai Pudong International Airport Construction Project 40,000 | 7. Huanghua Port Construction Project 15,400 | 8. Shaanxi Hancheng No.2 Thermal Power Plant | Construction Project 35,000 | 9. Shanxi Wangqu Thermal Power Plant Construction Project 30,000 | 10. Benxi Environment Improvement Project 4,110 | 11. Huai River Henan Water Pollution Control Project 4,945 | 12. Xiang River Basin Hunan Environment Improvement Project 5,678 | 13. Dalian Water Supply System Rehabilitation Project 5,500 | Total 200,114 |------------------ I have further the honour to confirm on behalf of the Government of the People's Republic of China the understanding set forth in Your Excellency's Note.

I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration.

(Signed) Tang Jiaxun Vice-Minister of Foreign Affairs of the People's Republic of China Beijing, September 4, 1997 Excellency, I have the honour to acknowledge the receipt of Your Excellency's Note of today's date, which reads as follows: "With reference to the Exchange of Notes dated today concerning Japanese loans to be extended with a view to contributing to the economic stabilization and promoting the economic modernization efforts of the People's Republic of China, I have the honour to propose, on behalf of the Government of Japan, that in case there is any divergence of interpretation of the said Exchange of Notes which is done in the Japanese, Chinese and English languages, the English text shall prevail." I have further the honour to express agreement, on behalf of the Government of the People's Republic of China, to the proposal put forward in Your Excellency's Note.

I avail myself of this opportunity to renew to Your Excellency the assurances of my highest consideration.

(Signed) Tang Jiaxun Vice-Minister of Foreign Affairs of the People's Republic of China His Excellency Mr. Yoshiyasu Sato Ambassador Extraordinary and Plenipotentiary of Japan to the People's Republic of China Record of Discussions In connection with the Exchange of Notes dated today concerning Japanese loans to be extended with a view to contributing to the economic stabilization and promoting the economic modernization efforts of the People's Republic of China, the representatives of the Chinese Delegation and of the Japanese Delegation wish to record the following: 1. With reference to the financing formula for procurement in the People's Republic of China under the Loan I mentioned in Part I of the said Exchange of Notes, the following principles will be applied: (1) Tender will be called on that part of the project classified as "foreign currency portion". The tender will be open to nationals of eligible source countries including the People's Republic of China.

(2)With regard to the contract which is to be awarded to Chinese nationals through the tendering, financing will be made to the whole amount of such contract within the scope of the said "foreign currency portion".

2. (1) With reference to the Program mentioned in sub-paragraph (1) of Paragraph 1 of Part II of the said Exchange of Notes, the Loan II will be used to cover credits extended by the Export-Import Bank of China to the sub-borrower for the purpose of agricultural development in Heilongjiang Province.

(2) The "sub-borrower" mentioned in (1) above is the General Bureau of State Farms of Heilongjiang Province.

3. With reference to sub-paragraph (1) of paragraph 3 of Part I of the Exchange of Notes, the representative of the Japanese Delegation stated that the Loan for the project mentioned in 6 of the List attached to the said Exchange of Notes may be made available to cover payments already made and/or to be made between August 8, 1997 and the previous day of coming into force of the loan agreement mentioned in sub-paragraph (1) of paragraph 2 of Part I of the Exchange of Notes, as well as payments to be made on and after the day of coming into force of the said loan agreement, for purchases of the products and/or services referred to in the said sub-paragraph.

4. (1) With regard to the environmental protection measures relating to the Shanxi Wangqu Thermal Power Plant (hereinafter referred to as "the Wangqu Plant"), the representative of the Japanese Delegation requested the Chinese side to confirm the following points: (a) to secure long-term stable supply of low-sulphur coal to the Wangqu Plant, (b) to secure sufficient space for the possible future installation of desulphurization equipment in the Wangqu Plant, and to immediately take necessary measures for the introduction and operation of such equipment, (c) to consider introduction of measures to reduce NOx emission and establishing a standard of the emission of NOx, and (d)to carry out monitoring of the environment and to submit the monitoring results to the Japanese side.

(2) The representative of the Chinese Delegation confirmed the following with regard to the points stipulated in sub-paragraph (1) above: (a) The Wangqu Plant is designed to burn low sulphur coal. For the purpose of insuring the long-term stable supply of low-sulphur coal, the coal supply agreement between the Plant side and the coal supplier side concerning the Wangqu Plant has been signed. If there would be any problem with the supply of coal, the Japanese side would be promptly informed and effective measures would be taken by the Chinese side.

(b) The general layout plan for the Wangqu Plant, has been modified and sufficient space is left around chimney in the end of boilers of the Wangqu Plant for the future installation of Flue Gas Desulphurization equipments, and the Ministry of Electric Power shall carry out, as the executing agency concerning the Wangqu Plant, preliminary feasibility studies to estimate the approximate cost of the said equipments of the type and technical specifications appropriate to the Wangqu Plants before the installation of Flue Gas Desulphurization equipments.

(c) Concerning whole facilities in the Wangqu Plant, the Chinese side will ensure that they will make further environmental research, in accordance with Chinese laws and regulations on environment, make a plan in order to reduce total emission amount of dust, SOx and NOx, and report the said plan to the Overseas Economic Co-operation Fund.

Beijing, September 4, 1997 For the Chinese Delegation: For the Japanese Delegation: (Signed) Wang Shijia (Signed) Yoshiyuki Sadaoka