Provisions for the Granting of State-owned Construction Leaseholds by way of an Invitation for Bids, Auction or Listing on a Land Exchange (Amended)

(Promulgated by the Ministry of Land and Resources on September 28 2007 and effective as of November 1 2007.)

Order of the MLR No.39

Article 1: These Provisions have been formulated pursuant to the PRC Property Law, the PRC Land Administration Law, the PRC Law on the Administration of Urban Real Property and the Implementing Regulations for the PRC Land Administration Law in order to regulate the granting of state-owned construction leaseholds, optimize the allocation of land resources and establish a transparent, fair and just land use system.

Article 2: These Provisions shall govern the creation of state-owned construction leaseholds on, above or below the surface of land in the People's Republic of China by way of an invitation for bids, auction or listing on a land exchange.

For the purposes of these Provisions, the phrase "granting of state-owned construction leaseholds by way of an invitation for bids" means the act whereby the competent land and resources administrative department of a city or county people's government (the Grantor) issues a bid invitation announcement inviting specific or unspecified natural persons, or legal persons or other organizations to submit bids for state-owned construction leaseholds, and the state-owned construction leaseholder is determined based on the results of the submitted bids.

For the purposes of these Provisions, the phrase "granting of state-owned construction leaseholds by way of an auction" means the act whereby the Grantor issues an auction announcement, the bidders bid publicly at the specified time and place and the state-owned construction leaseholder is determined based on the results of the bids.

For the purposes of these Provisions, the phrase "granting of state-owned construction leaseholds by way of listing on a land exchange" means the act whereby the Grantor issues a listing announcement, announces the transaction conditions for the lot up for bids on the designated land exchange by the deadline specified in the announcement, accepts the bids of the bidders and updates the listed price, and the state-owned construction leaseholder is determined based on the results of the bid at the time of the close of bidding or on the results of the onsite bid.

Article 3: The granting of state-owned construction leaseholds by way of an invitation for bids, auction or listing on a land exchange shall comply with the principles of transparency, fairness, impartiality and good faith.

Article 4: Business-type land, such as industrial land, commercial land, land for tourism uses, land for entertainment purposes and land for commodity residential premises, as well as lots that have more than one party intending to use them, shall be granted by way of an invitation for bids, auction or listing on a land exchange.

The industrial land specified in the preceding paragraph includes land used for storage purposes but does not include mining land.

Article 5: The activities associated with the granting of state-owned construction leaseholds by way of an invitation for bids, auction or listing on a land exchange shall be carried out in a planned manner.

The competent land and resources administrative department of a city or county people's government shall formulate annual plans for the granting of state-owned construction leaseholds based on socioeconomic development plans, industrial policy, the master plan for the utilization of land, the annual plans for the utilization of land, urban plans and the state of the land market, and publicly announce the same in a timely manner after approval by the people's government at the same level.

Article 6: The competent land and resources administrative department of a city or county people's government shall, together with relevant departments such as the urban planning department, formulate grant plans for the lots that are to be granted by way of an invitation for bids, auction or listing on a land exchange and once such plan has been approved by the people's government of the city or county, the competent land and resources administrative department of the city or county people's government shall organize the implementation thereof.

A grant plan as specified in the preceding paragraph shall include the spatial extent, purpose, term, grant method, time and other conditions of the granted lot.

Article 7: The Grantor shall prepare the documents for the grant of a lot by way of an invitation for bids, auction or listing on a land exchange based on the circumstances of the grant by way of an invitation for bids, auction or listing on a land exchange.

The documents for the grant by way of an invitation for bids, auction or listing on a land exchange shall include the grant announcement, the bidding instructions, the land use conditions, the bids, the winning bid notice or confirmation of the conclusion of the transaction and the text of the contract for the grant of state-owned construction leasehold.

Article 8: At least 20 days prior to the date of commencement of the invitation for bids, auction or listing on the land exchange, the Grantor shall make the announcement of the invitation for bids, auction or listing on the land exchange at a tangible land market or in the designated place or media so as to make known to the public the basic particulars of the lot to be granted by way of the invitation for bids, auction or listing on the land exchange and the time and place of the invitation for bids, auction or listing on the land exchange.

Article 9: An announcement of an invitation for bids, auction or listing on a land exchange shall include the following information:

(1) the name and address of the Grantor;

(2) the area, boundaries, spatial extent, current state, term, purpose and zoning indicator requirements of the lot up for bids;

(3) the requirements in respect of the qualifications of the bidders and the method of applying for the bidding qualifications;

(4) the time, place and method of obtaining the documents for the grant by way of an invitation for bids, auction or listing on a land exchange;

(5) the time and location of the invitation for bids, auction or listing on a land exchange, the bidding deadline, the bidding method, etc.;

(6) the criteria and method for determining the winning bidder;

(7) the bid deposit; and

(8) other matters that need to be announced.

Article 10: The competent land and resources administrative department of the people's government of the relevant city or county shall determine the reserve price by comprehensively taking into consideration the results of land valuation and the government's industrial policy.

The reserve price may not be lower than the minimum price rate specified by the state.

Collective decision making shall be carried out when determining the reserve price for invitation for bids, or the starting bid price or reserve price for an auction or listing on the land exchange and the bid deposit.

The reserve price shall be kept confidential until the bids have been opened or the activities associated with a grant by way of an auction or listing on a land exchange have concluded.

Article 11: All natural persons, and legal persons and other organizations inside or outside the People's Republic of China may, unless otherwise specified in laws or regulations, apply to participate in activities associated with the grant of state-owned construction leaseholds by way of an invitation for bids, auction or listing on a land exchange.

The Grantor may not set restrictive conditions in the announcement for the grant by way of an invitation for bids, auction or listing on a land exchange that would affect fair and impartial competition. Where a grant is to made by way of a listing on a land exchange, the application deadline specified in the grant announcement shall be two days prior to the conclusion of the grant by way of listing on the land exchange. The Grantor shall notify applicants that fulfil the conditions specified in the announcement for the invitation for bids, auction or listing on a land exchange that they can participate in the invitation for bids, auction or listing on the land exchange.

Article 12: The competent land and resources administrative department of a city or county people's government shall provide the facilities to enable bidders to obtain relevant information on the land to be granted.

Article 13: Bidding and the opening of bids shall be carried out in accordance with the following procedure:

(1) the bidders place their bids in the bid box before the bid deadline; if the bid announcement permits bids to be conveyed by mail, bidders may mail their bids, however only those bids received by the Grantor before the bid deadline shall be valid;

once a bid has been placed in the bid box, it cannot be withdrawn; bidders shall be liable for their bids and their relevant written undertakings;

(2) the Grantor opens the bids at the time and place specified in the bid invitation announcement and invites all the bidders to participate; the bidders or their selected representatives inspect the seal on the bid box, the bid box is opened in everyone's presence and the bids are counted; if there are fewer than three bidders, the Grantor shall terminate the bid invitation activities; if the bidders are not less than three in number, each of the bidders' names, bid quotes and the principal contents of their bid documents shall be read out in succession;

(3) the bid evaluation committee proceeds with the bid evaluation; the evaluation committee shall be composed of the representatives of the Grantor and relevant experts in an odd number comprising at least five persons;

the bid evaluation committee may require bidders to provide necessary clarification and explanation of their bid documents, but such clarification or explanation may not exceed the scope of the bid documents or modify the substantive contents of the bid documents;

the bid evaluation committee shall evaluate the bid documents based on the bid evaluation standards and by the method determined in the bid invitation documents;

(4) the bid inviting party determines the winning bidder based on the bid evaluation results; and

if the winning bidder is determined based on the principle of the highest bidder winning, the establishment of an evaluation committee may be eschewed and the winning bidder shall be determined by the person presiding over the bid based on the bid opening results.

Article 14: The bidder that is best able to satisfy the comprehensive evaluation criteria specified in the bid invitation documents or that is able to satisfy the substantive requirements in the bid invitation documents and submits the highest bid shall be determined as the winning bidder.

Article 15: An auction shall be carried out in accordance with the following procedure:

(1) the auctioneer counts the number of bidders;

(2) the auctioneer describes the area, boundaries, spatial extent, current state, purpose, term, zoning indicator requirements, dates for commencement and completion of construction of, and other matters relevant to, the lot up for auction;

(3) the auctioneer announces the starting bid price, bid increase rules and bid increase increment; if there is no reserve price, the same shall be expressly stated;

(4) the auctioneer calls the starting bid price;

(5) the bidders raise their signs to respond to a bid or to bid;

(6) the bidding continues after the auctioneer confirms the bid response or bid;

(7) if the auctioneer announces the same bid response or bid three times in succession without any further bid responses or bids being made, he/she brings down his/her gavel indicating that the bid is closed and the transaction concluded; and

(8) the auctioneer announces the highest bidder as the winner.

Article 16: If the bidders' bid responses or bids fail to reach the reserve price, the auctioneer shall terminate the auction.

The auctioneer may revise the bid increase increment during the auction based on the bidding by the bidders.

Article 17: A listing on a land exchange shall be carried out in accordance with the following procedure:

(1) on the listing commencement date specified in the listing announcement, the Grantor lists and announces on the land exchange specified in the listing announcement the area, boundaries, spatial extent, current state, purpose, term, zoning indicator requirements, dates for commencement and completion of construction, starting bid price of and the bid increase rules and bid increase increment for, the lot up for bids;

(2) qualified bidders submit their bids by completing a bid note;

(3) after confirming a bid, the person presiding over the listing updates the displayed listed price; and

(4) the person presiding over the listing determines the winning bidder on the listing deadline specified in the listing announcement.

Article 18: The listing period may not be shorter than 10 days. The bid increase increment may be revised during the listing period based on the bids of the bidders.

Article 19: The conclusion of the listing shall be presided over and determined by the person presiding over the listing. At the expiration of the listing period, the person presiding over the listing shall announce onsite the highest bid and bidder and ask the bidders if they wish to continue the bidding. If bidders indicate that they wish to continue the bidding, the grant by way of listing on the land exchange shall proceed to an onsite bidding with the winning bidder determined through such onsite bidding. Once the person presiding over the listing announces the highest bid three times in succession without any bidder indicating a wish to continue the bidding, the transaction shall be determined to be concluded or not in accordance with the following provisions:

(1) if only one bidder bids during the listing period and his/her bid is not lower than the reserve price and fulfils the other conditions, the transaction is concluded;

(2) if two or more bidders bid during the listing period, the highest bidder will be the winner; if two bids are identical, the winner will be the bidder that submitted his/her bid note first, unless the bid is lower than the reserve price; and

(3) if, during the listing period, there are no bidders, or if the bids of all the bidders are lower than the reserve price or fail to comply with other conditions, the transaction is not concluded.

Article 20: Once the winning bidder has been determined by an invitation for bids, auction or listing on a land exchange, the bid deposit paid by the winning bidder shall become the deposit for the acquisition of the lot. The Grantor shall issue the winning bidder a winning bid notice or execute a confirmation of conclusion of a transaction with him/her.

The winning bid notice or confirmation of conclusion of a transaction shall contain the names of the Grantor and winning bidder, the subject matter of the grant, the time and place of conclusion of the transaction, the price, the time when and the place where the contract for the grant of state-owned construction leasehold is to be executed, etc.

The winning bid notice or confirmation of conclusion of a transaction shall be legally binding on the Grantor and winning bidder. If the Grantor changes the bid results or the winning bidder relinquishes the lot won with his/her bid, it/he/she shall be liable in accordance with the law.

Article 21: The winning bidder shall execute a contract for the grant of state-owned construction leasehold with the Grantor at the time specified in the winning bid notice or confirmation of conclusion of a transaction. The bid deposit paid by the winning bidder shall be set off against the land grant premium. The Grantor must refund the bid deposits paid by the other bidders without interest within five working days after the conclusion of the activities associated with the invitation for bids, auction or listing on the land exchange.

Article 22: The Grantor shall announce the results of the invitation for bids, auction or listing on the land exchange at the tangible land market or in the designated place or media within 10 working days after the conclusion of the activities associated with the invitation for bids, auction or listing on the land exchange.

The Grantor may not charge the grantee a fee for the announcement of the grant results.

Article 23: The grantee may apply for land registration and collect his/her state-owned construction leasehold certificate only after he/she has paid in full the entire land grant premium in accordance with the contract for the grant of the state-owned construction leasehold.

A state-owned construction leasehold certificate may not be issued if the land grant premium is not paid in full in accordance with the grant contract, nor may a state-owned construction leasehold certificate be issued for a portion of the leasehold proportional to the grant premium paid.

Article 24: If an invitation for bids, auction or listing on a land exchange is required for the grant of a state-owned construction leasehold but such leasehold is instead granted in an unauthorized manner by way of an agreement, the officer directly in charge and the other directly responsible persons shall be disciplined in accordance with the law. If a criminal offence is constituted, criminal liability shall be pursued in accordance with the law.

Article 25: If a bidder commits either of the acts set forth below, the results of his/her bid shall be invalid; if a loss is incurred as a result thereof, he/she shall be liable for compensation in accordance with the law:

(1) he/she submits false documentation that conceals facts; or

(2) he/she uses illegal methods such as bribery and malicious collusion to win the bid.

Article 26: If a member of the working personnel of the competent land and resources administrative department is derelict in his/her duties, abuses his/her authority, practises favouritism or commits irregularities in the course of the activities associated with the invitation for bids, auction or listing on a land exchange, he/she shall be disciplined in accordance with the law. If a criminal offence is constituted, his/her criminal liability shall be pursued in accordance with the law.

Article 27: If state-owned construction leaseholds are to be leased by way of an invitation for bids, auction or listing on a land exchange, matters shall, mutatis mutandis, be handled in accordance with these Provisions.

Article 28: These Provisions shall be effective as of November 1 2007.