After the “Administration of Foreign-invested leasing industry procedures” (refer to “Procedures” hereinafter) became effective on 5th March, 2005, “Administration of the Examination and Approval of Foreign-invested Leasing Companies Tentative Procedures”(refer to “Tentative Procedures” hereinafter) the No 3 decree previously, issued by the Ministry of Foreign Trade and Economic Cooperation was abolished simultaneously.

Compared with “Tentative Procedures”, the author would like to introduce the modifications in the “Procedures” briefly as the following:

1. The form of organization of foreign-invested enterprise engaged in leasing business and lease financing business become less restrictive.

Article 2 of the “Procedures” provides that the foreign-invested enterprises engaged in leasing business, lease financing business can be established as Sino-foreign equity joint ventures, Sino-foreign cooperative joint ventures and solely foreign-owned enterprise by foreign investors. While the “Tentative Procedures” only allows the foreign-invested enterprises engaged in leasing business and lease financing business to be established as Sino-foreign equity joint ventures or Sino-foreign cooperative joint ventures by foreign investors. This modification is in accordance with Chinese government's promise when entering WTO, that is, for leasing industry, the admission of the subsidiary company of solely foreign-owned companies shall be allowed within 3 years. That will be of great significances.

2. The broadening of the form of foreign-invested leasing company

Article 3 of the “Procedures” provides that foreign-invested leasing enterprises can be established as limited liability companies or companies limited by shares, while the “Tentative Procedures” provides that the foreign-invested leasing companies shall be established as limited liability companies. This modification encourages the foreign investors to raise more funds to engage in leasing industry and promote the participation of foreign fund in Chinese market. That demonstrates Chinese government's attitudes and decision to encourage foreign businessman to engage in the leasing industry.

3. The reduction of the threshold of admission

Article 7 of the “Procedures” provides that the requirements for minimal contributions made for the establishment of foreign-invested leasing company and foreign-invested lease financing company by foreign investors are all reduced to US$5 million uniformly, which is in accordance with Chinese government's commitments when entering WTO. Meanwhile, the minimal registered capital of foreign-invested lease financing company is reduced from US$20 million to US$10 million; the minimal registered capital of foreign-invested leasing company is changed from US$5 million to no special limits. The above modification lowers the requirements of establishment for foreign-invested leasing company and thus further encourages the entrance of foreign funds.

4 delegation of administrative authority

In light of the “Procedures”, the competency of examination and approval of the leasing companies established as limited liability companies is delegated to regional administrative authorities, that is, provincial-level commerce administration authority where the enterprise is located.

The modification would better facilitate the establishment of foreign-invested leasing companies and foreign-invested lease financing companies and makes the supervision and administration for them more effective and convenient.

5 the modifications of the procedures of examination and approval and documents submitted

Compared with the “Tentative Procedures”, the “Procedures” adds the documents, to be submitted: the latest year's audit report of each investment party, subject to be audited by accounting firm; the list of the members of board of directors and each party's director appointment letter etc. All those would do much for governing authorities to master the operationof situations of leasing company; to implement the effective supervision and administration and to further enhance the leasing industry's development.

The above is my brief analysis and opinions on the modification of the “Procedures”, for your reference.

---- Michael Hu