Administration of Foreign-invested Advertising Enterprises Provisions

(Promulgated by the State Administration for Industry and Commerce and the Ministry of Commerce on, and effective as of, March 2 2004.)

Article 1: These Provisions have been formulated pursuant to laws and administrative regulations related to the administration of foreign investment and advertising in order to strengthen the administration of foreign-invested advertising enterprises and promote the healthy development of the advertising industry.

Article 2: For the purposes of these Provisions, the term "foreign-invested advertising enterprises" means Sino-foreign equity joint ventures, Sino-foreign cooperative joint ventures (here and hereinafter Sino-foreign equity joint ventures and Sino-foreign cooperative joint ventures in these Provisions shall be jointly called "Sino-foreign Advertising Joint Ventures") and wholly foreign-owned advertising enterprises.

Article 3: In addition to complying with these Provisions, establishment of foreign-invested advertising enterprises must also comply with relevant laws, regulations and rules such as the PRC Sino-foreign Equity Joint Venture Law, PRC Sino-foreign Cooperative Joint Venture Law, PRC Wholly Foreign-owned Enterprise Law, PRC Advertising Law, Administration of Advertising Regulations and Qualification Standards for Advertising Operators and Advertisement Publishers and Specified Terminology Standards for an Advertising Business Scope.

Article 4: The project proposals and feasibility study reports of foreign-invested advertising enterprises shall be examined by the State Administration for Industry and Commerce and its authorized provincial level administrations for industry and commerce. The contracts and articles of association of foreign-invested advertising enterprises shall be subject to the examination and approval of the Ministry of Commerce and its authorized provincial level departments in charge of commerce.

Article 5: Subject to approval, foreign-invested advertising enterprises that comply with stipulated conditions may engage in the design, production and publication of, as well as agency services for, domestic and foreign advertisements. Their specific business scopes shall be verified by the State Administration for Industry and Commerce and its authorized provincial level administrations for industry and commerce in accordance with the Qualification Standards for Advertising Operators and Advertisement Publishers and Specified Terminology Standards for an Advertising Business Scope.

Article 6: Sino-foreign Advertising Joint Ventures shall be established in accordance with the following procedures:

(1) The principal Chinese party shall submit the documents specified in Article 12 to the administration for industry and commerce in the locality with foreign-invested enterprise registration approval right. Such administration authority shall provide a preliminary examination opinion that will be submitted for examination to the provincial level administration for industry and commerce authorized by the State Administration for Industry and Commerce or that will be verified by an administration for industry and commerce at the level of province, autonomous region, municipality directly under the central government or city with independent development plans and then submitted for examination to the State Administration for Industry and Commerce.

The State Administration for Industry and Commerce and its authorized provincial level administration for industry and commerce shall make a decision on whether or not to grant approval within 20 days of receipt of all the submitted documents.

(2) After the State Administration for Industry and Commerce or its authorized provincial level administration for industry and commerce has issued a Foreign-invested Advertising Enterprise Project Examination Opinion, the principal Chinese party shall submit the documents specified in Article 13 to the provincial level department in charge of commerce in the locality of the proposed enterprise and, following examination and approval by the provincial level department in charge of commerce, be issued with a Foreign-invested Enterprise Approval Certificate; if it is not granted approval, the reasons therefor shall be explained in writing.

(3) The principal Chinese party shall, in accordance with relevant provisions on enterprise registration, complete enterprise registration formalities with the State Administration for Industry and Commerce or the local administration for industry and commerce with foreign-invested enterprise registration approval right on the strength of the Foreign-invested Advertising Enterprise Project Examination Opinion issued by the State Administration for Industry and Commerce or its authorized provincial level administration for industry and commerce, the Foreign-invested Enterprise Approval Certificate issued by the provincial level department in charge of commerce and other documents specified in laws and regulations.

Article 7: Wholly foreign-owned advertising enterprises shall be established in accordance with the following procedures:

(1) The foreign investor(s) shall submit the documents specified in Article 14 to the State Administration for Industry and Commerce.

The State Administration for Industry and Commerce shall make a decision on whether or not to grant approval within 20 days of receipt of all the submitted documents.

(2) After the State Administration for Industry and Commerce has issued a Foreign-invested Advertising Enterprise Project Examination Opinion, the foreign investor(s) shall submit the documents specified in Article 15 to the provincial level department in charge of commerce in the locality of the proposed enterprise. Within 20 days, the provincial level department in charge of commerce shall provide a preliminary examination opinion to be submitted to the Ministry of Commerce for examination and approval.

The Ministry of Commerce shall make a decision on whether or not to grant approval within 20 days of receipt of all the submitted documents and, if it approves after examination, issue a Foreign-invested Enterprise Approval Certificate.

(3) The foreign investor(s) shall, in accordance with relevant provisions on enterprise registration, apply to complete enterprise registration formalities with the State Administration for Industry and Commerce on the strength of the Foreign-invested Advertising Enterprise Project Examination Opinion issued by the State Administration for Industry and Commerce, the Foreign-invested Enterprise Approval Certificate issued by the Ministry of Commerce and other documents specified in laws and regulations.

Article 8: Application for establishment of a branch or sub-branch of a foreign-invested advertising enterprise shall be handled in accordance with the following procedures:

(1) the foreign-invested advertising enterprise shall submit the documents specified in Article 16 respectively to the provincial level department in charge of commerce and provincial level administration for industry and commerce in the locality;

(2) after the provincial level department in charge of commerce in the locality has sought the opinion of the administration for industry and commerce at the same level, it shall decide whether or not to grant approval. If it decides to grant approval, the approval documents shall simultaneously be copied to the provincial level department in charge of commerce and provincial level administration for industry and commerce at the place of establishment; if it does not grant approval, it shall explain the reasons therefor in writing; and

(3) the foreign-invested advertising enterprise shall complete the formalities for registration of the branch or sub-branch with the administration for industry and commerce with foreign-invested enterprise registration approval right at the place where the branch or sub-branch is being established on the strength of the approval documents for establishing a branch or sub-branch and other documents specified in laws and regulations.

Article 9: In addition to complying with the conditions of relevant laws and regulations, establishment of Sino-foreign Advertising Joint Ventures shall also meet the following conditions:

(1) each of the parties to the joint venture is an enterprise that engages in an advertising business;

(2) each of the parties to the joint venture must have been established and have operated for at least two years; and

(3) it has achieved results in advertising.

Article 10: In addition to complying with the conditions of relevant laws and regulations, establishment of wholly foreign-owned advertising enterprises shall also meet the following conditions:

(1) the investor(s) is/are enterprise(s) whose main business is advertising; and

(2) the investor(s) should have been established and have operated for at least three years.

Article 11: Foreign-invested advertising enterprises that apply to establish a branch or sub-branch shall meet the following basic conditions:

(1) Its registered capital has been paid up in full; and

(2) Its annual advertising turnover is not lower than Rmb20 million.

Article 12: To apply to establish a Sino-foreign Advertising Joint Venture, the principal Chinese party shall submit the following documents to the State Administration for Industry and Commerce or its authorized provincial level administration for industry and commerce pursuant to the procedures specified in Article 6.

(1) an application for establishing a Sino-foreign Advertising Joint Venture;

(2) an enterprise name pre-approval notice;

(3) a resolution of a shareholders' meeting (board meeting) of the parties;

(4) a project proposal for establishing a Sino-foreign Advertising Joint Venture and a feasibility study report jointly prepared by each party to the joint venture;

(5) the registration certificates for each party to the joint venture;

(6) proof of creditworthiness of each party to the joint venture;

(7) an advertising management system; and

(8) the preliminary examination opinion of the local administration for industry and commerce.

Article 13: To apply to establish a Sino-foreign Advertising Joint Venture, the following documents shall be submitted to the provincial level department in charge of commerce pursuant to the procedures stipulated in Article 6:

(1) the Foreign-invested Advertising Enterprise Project Examination Opinion issued by the State Administration for Industry and Commerce or its authorized provincial level administration for industry and commerce;

(2) the contract and articles of association for establishing a foreign-invested advertising enterprise;

(3) a project feasibility study report;

(4) the registration certificates of each party to the joint venture;

(5) proof of creditworthiness of each party to the joint venture;

(6) an enterprise name pre-approval notice;

(7) the list of names of the board of directors of the joint venture and the director appointment letters from each party; and

(8) the preliminary examination opinion of the local department in charge of commerce.

Article 14: To apply to establish a wholly foreign-owned advertising enterprise, the investor(s) shall submit the following documents to the State Administration for Industry and Commerce pursuant to the procedures stipulated in Article 7:

(1) an application for establishing a wholly foreign-owned advertising enterprise;

(2) a resolution of a shareholders' meeting (board meeting) of the investor(s);

(3) a project proposal and feasibility study report prepared by the investor(s);

(4) the registration certificate(s) of the investor(s);

(5) proof of creditworthiness of the investor(s); and

(6) an enterprise name pre-approval notice.

Article 15: To apply to establish a wholly foreign-owned advertising enterprise, the foreign investor(s) shall submit the following documents to the Ministry of Commerce pursuant to the procedures stipulated in Article 7:

(1) an application for establishing a foreign-invested advertising enterprise;

(2) a Foreign-invested Advertising Enterprise Project Examination Opinion issued by the State Administration for Industry and Commerce;

(3) a project proposal and feasibility study report prepared by investor(s);

(4) the registration certificate(s) of the investor(s);

(5) proof of creditworthiness of the investor(s); and

(6) articles of association for the establishment of a wholly foreign-owned advertising enterprise.

Article 16: To apply to establish a branch or sub-branch, a foreign-invested advertising enterprise shall submit the following documents to the provincial level department in charge of commerce and the administration for industry and commerce at the same level:

(1) an application for establishing a branch or sub-branch of a foreign-invested advertising enterprise;

(2) a resolution of the board of directors;

(3) an annual audit report for advertising business;

(4) the enterprise business licence;

(5) proof of the place of business; and

(6) an enterprise capital verification report.

Article 17: After a foreign-invested advertising enterprise has been established, where one of the following circumstances arises, it shall report for separate approval in line with the procedures stipulated in Articles 6 and 7 hereof, and shall carry out changes in its enterprise registration:

(1) a change in a party to the joint venture or an assignment of equity interest;

(2) a change in the scope of advertising business; or

(3) a change in the registered capital.

Article 18: Foreign investors investing in and establishing an advertising enterprise may entrust an intermediary service organization with appropriate qualifications to carry out the application and submission procedures on their behalf.

Article 19: All documents submitted pursuant to these Provisions shall be written in Chinese.

Article 20: Investment in the advertising business through the merger or acquisition of a domestic advertising enterprise shall be handled in accordance with the provisions related to mergers and acquisitions of domestic enterprises by foreign investors and these Provisions.

Article 21: Investing in and establishment of advertising enterprises in the Mainland by investors from Hong Kong, Macao and Taiwan regions shall, mutatis mutandis, be handled in accordance with these Provisions.

Article 22: Application for including advertising business in the scope of business of foreign-invested enterprises shall, mutatis mutandis, be handled in accordance with these Provisions.

Article 23: From the date of implementation of these Provisions, foreign investors are permitted to hold a majority interest in a Sino-foreign Advertising Joint Venture, provided that the equity ratio is not higher than 70%; the establishment of wholly foreign-owned advertising enterprises will be permitted from December 10 2005.

Article 24: The State Administration for Industry and Commerce and the Ministry of Commerce shall be responsible for the interpretation of these Provisions.

Article 25: These Provisions shall be implemented as of the date of promulgation. The Establishment of Foreign-invested Advertising Enterprises Several Provisions (Gong Shang Guang Zi [1994] No.304) shall be repealed at the same time and documents that conflict with these Provisions shall simultaneously become void.

Appendix:

In order to promote closer economic and trade ties between Hong Kong or Macao and the Mainland and encourage Hong Kong service suppliers and Macao service suppliers to invest in and establish advertising enterprises in the Mainland, we hereby set forth the following supplementary provisions in respect of Hong Kong and Macao investors investing in the advertising business pursuant to the Mainland and Hong Kong Closer Economic Partnership Arrangement and the Mainland and Macao Closer Economic Partnership Arrangement approved by the State Council.

1. From January 1 2004, Hong Kong service suppliers and Macao service suppliers are permitted to establish wholly owned advertising companies in the Mainland.

2. Hong Kong service suppliers and Macao service suppliers shall comply with the definitions of Service Suppliers and relevant stipulated requirements in the Mainland and Hong Kong Closer Economic Partnership Arrangement and the Mainland and Macao Closer Economic Partnership Arrangement respectively.

3. Hong Kong service suppliers and Macao service suppliers shall be enterprise legal persons engaging in the advertising business (including where it is not the main business).

4. Other provisions on investment in the advertising business in the Mainland by Hong Kong service suppliers and Macao service suppliers shall still be handled in accordance with these Provisions.