Investment environment

1. Transportation

Seven trunk railway lines, namely, Beijing-Guangzhou, Hunan-Guizhou, Hunan-Guangxi, Luoyang-Zhanjiang, Shimen-Changsha, Jiaozuo-Liuzhou and Zhejiang-jiangxi, run in all directions linking all parts of China. The Hunan section of the Chongqing-Huaihua Railway line will be completed and put into operation within the year. The length of operating railway line totals 2,799 km, and is listed 9th in China. Seven national highways including No. 106, 107, 319, 320 extend to every part of the province with a total length of 175,415 km. Such high-grade highways have been completed, as part of the Hunan section of Beijing-Zhuhai, HuKun Expressway, and the Changsha-Yiyang-Changde Expressway.

The 18 highways include Yueyang to Xiangtan and Hengyang to Linwu with the Jingzhu double track is still under construction. The Changju Highway has been opened. Changsha, the capital city of Hunan has already implemented the highway links of 13 other cities. The total length of the highway is 2001 km. Six rail project include the added Xianggui double track and the progress of the Changsha and Zhangjiajie airport expansion.

The first phrase project of the Yueyang Chenglinji Port (Songyang Lake), the transport construction project of Changde to Nianyukou is under express construction. In Changsha, there is a direct airline available to South Korea and Hongkong at the Huanghua Airport and Zhangjiajie Airport. The Changde and Yongzhou Airport have been put into operation. The total length of Hunan' fairway is 11,398 km. The province owns two 5,000-tonnage capacity berths at Chenglingji in the Yueyang Waimao terminal.

2. Electric Power

The upgrades to Hunan's power supply trunk network and urban and rural power network have obtained sound results. By the end of 2007, Hunan's installed generating capacity was 22.65 MKW, with a power generating capacity of 814.12 BKW in 2007. Approximately 110,000-volt and over 7,620,000 k VA substation equipment was added.

3. Telecommunications Hunan's communications capacity has doubled and redoubled year by year. Fiber-optical, short wave and microwave communications have formed a telecommunications network linking all parts of the world. By the end of 2008, the total fixed telephone subscriber was 12.57 million. This included 22.61 million mobile phone subscribers and 2.22 million broad band internet users. Every 100 people own 18.37 sets of fixed telephones and 33.03 sets of mobile phones.

Hunan has built seven modern telecommunications networks such as the: Hunan Information Port and Internet, long distance digital transmission network, SPC telephone network, mobile telephone network, conference television & telephone network, numeric data network and speech sound information service network. International and domestic direct dialing telephone service is available in all of Hunan’s cities and counties.

3. Urban Construction

There are 29 cities, 72 county towns and 1,019 other administrative towns in Hunan with the urbanization rate reaching 42 percent. The tap water coverage in urban areas is 94.4 percent, the towages universal rate is 85 percent and bus use rate is 11.7 units per 10,000 persons. The road area per capita was 11.8 square meters and sewage treatment rate was 52 percent.

The rubbish and fecal sewage harmless treatment was 59.5 percent and virescence rate in the constructed area was 32.6 percent. All the technical indexes ranked at the intermediate level in China, leaving room for investment and construction. In Hunan's city plan, construction and administration, handling affairs is open and fair a one-stop procedure for approval and examination as well as whole process tracing service has been implemented.

4. Investment Cost

1) Cultivated Land Expense

a. Category 1 District: Paddy field 800yuan/ha(18yuan/ sq.m.)

Dry field 533yuan/ha (12yuan/sq.m.)

b. Category 2 District: Paddy field 733yuan/ha (16.5yuan/ sq.m.)

Dry field 466yuan/ha (10.5yuan/sq.m.)

c. Category 3 District: Paddy field 667yuan/ha (15yuan/ sq.m.)

Dry field 400yuan/ha (9yuan/sq.m.)

d. Category 4 District: Paddy field 533yuan/ha (12yuan/ sq.m.)

Dry field 333yuan/ha (7.5yuan/sq.m.)

The construction project using basic farming land will be levied with 1.2 times the amount of fees collected as with the paddy field area in the same category of district.

District classification:

Category 1 districts: Changsha city, Zhuzhou city, Hengyang city, Xiangtan city, Changde city and Yueyang city.

Category 2 districts: Yiyang city, Yongzhou city, Shaoyang city, Chenzhou city, Loudi city, Changsha county, Liuyang city, Ningxiang county, Wangcheng county, Liling city, Zhuzhou county, Hengdong county, Qidong county, Miluo county, Yueyang county, Huarong county, Xiangtan county, Shaoshan city, Xiangxiang city, Hengshan county, Leiyang city, Changning city, Hengnan county, Hengyang county, Nanyue district, Junshan district, Linxiang city, Xiangyin county, QuYuan district, Jinshi city, Anxiang county Li county, Hanshou county, Linli county, TaoYuan county, Shaodong county, Taojiang county, Yuanjiang city, Qiyang county, Dingchen district.

Category 3 districts: Huaihua city, Zhangjiajie city, You county, Jishou city, Wugang city, Dongkou county, NingYuan county, Daoxian county, Lanshan county, Linwu county, Yizhang county, Guiyang county, Zixing city, Yongxing county, Jiahe county, Shuangfeng county, LianYuan city, Xupu county, Hongjiang city, Chenxi county, Jingzhou county, Dongan county, Lengshuijiang city, Xinshao county, Shaoyang county, Nanxian county, Datonghu district.

Category 4 districts: Chaling county, Yanling county, Pingjiang county, Shimen county, Anhua county, Ruchen county, Guidong county, Anren county, Sangzhi county, Cili county, Xinzhu county, Xinning county, Suining county, Chenbu county, Longhui county, Yuanling county, Mayang county, Zhijiang county, Zhongfang county, Xinhuang county, Huidong county, Tongdao county, Shuangpai county, Xintian county, Jianghua county, Jiangyong county, Luxi county, Fenghuang county, Guzhang county, HuaYuan county, Baojing county, Yongshun county, Longshan county.

2) Newly-added Construction Land Use Fee

Expropriation category:

Category 5:

Changsha city (Furong district, Kaifu district, Tianxin district, Yuhua district, Yuelu district)

Category 6:

Heyang city (Shigu district, Yanfeng district, Zhengxiang district, Zhuhui district) Xiangtan city (Yuetang district, Yuhu district) Zhuzhou city (Hetang district, Mangsong district, Shifeng district, TianYuan district)

Category 7:

Yueyang city, Yueyang Pavilion district

Category 8:

Changde city (Dingcheng district, Wuling district), Chengzhou city (Beihu district, Suxian district)

Category 9:

Loudi city, Louxing district, Shaoyang city (Beita district, Daxiang district, Shuangqing district), Yiyang city (Heshan district, Ziyang district), Yongzhou city (Lengshuitan district, Lingling district), Yueyang city, Yunxi district, Hengyang city, Nanyue district Category 10:

Changsha county, Huahua city Hecheng district, Liuyang city, Zhangjiajie city, Yongding district, Yueyang city, Junshan district

Category 11:

Jishou city, Laiyang city, Liling city, Linxiang city, Miluo city, Xiangxiang city, Yuanjiang city, Zhangjiajie city, WulingYuan district

Category 12:

Anren county, Anxiang county, Changning city, Daoxian county Guiyang county, Hanshou county, Hengdong county, Hengnan county, Hengshan county, Hengyang county, Huarong county Jinshi city, Lengshuijiang city, Lixian county, LianYuan city, Linli county, Linwu county, Nanxian county Ningxiang county, Qidong county, Qiyang county, Shaoshan city, Shaodong county, Shimen county, Shuangfeng county, Tiaojiang county, TiaoYuan county, Wangcheng county, Wugang city, Xiangtan city, Xiangyin county, Xinshao county, Youxian county, Yueyang county, Zhuzhou county, Zixing city

Category 13:

Anhua county, Chaling county, Chenxi county, Cili county, Dong'an county, Dongkou county, Hongjiang city, Huitong county, Jiahe county, Jinzhou Miao and Dong minority autonomy county, Lanshan county, Longhui county, Mayang Miao minority autonomy county, NingYuan county, Pingjiang county, Suining county, Xinhua county, Xinning county, Xintian county, Xupu county, Yanling county, Yizhang county, Yongxing county, Zhijiang Tong minority autonomy county, Zhongfang county, Datonghu region in Yiyang city

Category 14:

Baojing county, Chengbu Miao minority autonomy county, Fenghuang county, Guzhang county, Guidong county, HuaYuan county, Jianghua Yao minority autonomy county, Jiangyong county, Longshan county, Luxi county, Rucheng county, Sangzhi county, Shuangpai county, Tongdao Tong minority autonomy county, Xinhuang Tong minority autonomy county, Yongshun county, Yuanling county

3) Land Price

The unit price of land may be calculated out based on the local price in different towns, referring to such coefficients as the land grade, the land use year and the cultivated percentage. The price of lands for industry and business is determined by means of bid and auction. The price of land used for industrial purposes shall not decrease less than the lowest standard promulgated by the State Ministry of Land and Resources.

4) State Land Source Administration Fee

(1) Administrative Fee for Land Use and Requisition:

The administrative fee levied shall be 3 percent of the total compensation paid for land requisition if it involves full contract (work, fee and time) with requisition for lump-sum cultivated land over 66.67 hectares (1,000 Chinese mu) and non-cultivated land over 133,34 hectares (2,000 Chinese mu). If the cultivated land in lump-sum requisition is less than 66.67 hectares and non-cultivated land is less than 133.34 hectares, the administrative fee levied shall be 4 percent of the total land compensation paid for the land requisition.

If the land requisition is in semi-contract with a lump sum requisition for cultivated land over 66.67 hectares (1,000 Chinese mu) and non-cultivated land over 133.34 hectares (2,000 Chinese mu), the administrative fee levied shall be two percent of the total land compensation payment. For the cultivated land requisition of less than 66.67 hectares and the non-cultivated land of less than 133.34 hectares, the administrative fee shall be 2.5 percent of the total royalty.

In case of a cultivated land requisition in a single contract over 66.67 hectares and non-cultivated land over 133.34 hectares, the fee levied shall be 1.5 percent of the total royalty. For the cultivated land requisition of less than 66.67 hectares and non-cultivated land of less than 133.34 hectares, the fee levied shall be 2 percent of the total land compensation payment.

The use of land for project construction with the land requisition whereby the formalities are supplemented and are necessary to be re-surveyed and registered, the fee levied shall be 100 yuan per Chinese mu. This includes the project land by utilizing state-owned wasteland and waste mountain allocated free of charge.

(2) Prospecting and mining license:

Geological survey project license: 50 yuan for one

Survey license change and replace: 50 yuan for one

(3) Registration cost for mining:

Large scaled mine: 500 yuan/ one mine;

Medium sized mine: 300 yuan/ one mine;

Small sized mine: 200 yuan/ one mine;

5) Labor Costs and other Charges

Ordinary management personnel: 2,000 dollars for one person per year

Ordinary workers: 1,000 dollars for one person per year

Other cost of ordinary workers: 50 dollars for one person per year

6) Electricity Charges

(1) Domestic lighting 0.573 yuan/kWh (one-ten kv standard electricity price)

(2) Lighting for non-domestic 0.85 yuan/kWh (one-ten kv standard electricity price)

(3) Commercial Electricity Charges 1.01 yuan/kWh(one-ten kv standard electricity price)

Electricity charges of non-industry and normal industry are 0.666 yuan/kWh (one-ten kv standard electricity price)

(5)Electricity charges of bulk industrial use are 0.561 Yuan/kWh for one-tenkv standard electricity price; 0.49 Yuan/kwh for 220kv standard electricity price.

The basic power charge is 20 yuan/KVA/month (calculated based on transformation capacity) and 30 yuan/Kw/month (calculated based on max. transformation capacity). In addition, the actual price for power consumption during the wet season or valley period may be lower than above mentioned power price.

(6)The bulk industrial users may sign power purchase contracts with generating enterprises with the price negotiated.

7) Charges for Water

Water for industrial use is 2.20 yuan/ton (about 0.286 dollar/t) including 0.8 yuan (expense for sewage discharging)

Water for domestic use is 1.88 yuan/ton (about 0.244 dollar/t) including 0.65 yuan for sewage discharging

8) Charges of Transportation

(1) Railway

Shanghai-Changsha 1193km;

Full carload for No.6 cargo a wagon (60t) 8,277 yuan, 138 yuan/ ton;

Less than carload No.21, 11.05 yuan/100kg

(2) Highway

Changsha-Shanghai 1,350 km

Full carload 600-800 yuan/ton;

Less than carload 880 yuan/ton

(3) Waterway

Changsha-Shanghai 900 yuan per container; 30-40 yuan per ton for bulk cargo.

9). Quarantine & Inspection Fee

The fee collection standard shall be in accordance with the "Circular Concerning Measures and Standards of Fee Collection for Inspection & Quarantine of Import & Export Commodities promulgated by the State Development and Reform Commission and the Ministry of Finance".

6. Measures of Hunan Province to Optimize Soft Climate for Economic Development

In recent years, Hunan focused on the work target of "Improving efficiency of governmental institutions, optimizing economic climate, promoting people well-being and building a strong province economy". By the end of 2008, the degree of satisfaction from enterprises and investors about Hunan's economic development climate went up 6 percentage points. This was measured through a questionnaire evaluation of enterprises and supervisors with the main procedures:

1.) To build a complete leadership system. In 2008, the Hunan Governmental Institution Efficacy Construction Leading Group was established, with Governor Zhou Qiang as the group head. The vice group heads include Xu Yunzhao, member of standing committee of Hunan Provincial Party Committee and secretary of Discipline Inspection Committee of Hunan Provincial Party Committee, and Yu Laishan, member of standing committee of Hunan Provincial Party Committee and executive vice governor. The leading group is located in the Discipline Inspection Committee of Hunan Provincial Party Committee and Hunan Provincial Department of Supervision, combined with Provincial Office of Economic Climate Optimization for administrative work. All local governments and provincial departments established the Institution Efficiency Construction Leading Group to perfect the economic climate optimization system of the local governments and provincial departments.

2.) Deregulation of administrative examination and approval. In 2008, a new round of sorting-out of the provincial departments' administrative examination and approval work was implemented. There were 179 items of administrative examination and approval that we cut with an overall reduction of 23 percent. Hunan's administrative examination and approval procedures were reduced to 729 items. In 2009, Hunan arranged further sorting-out of administrative examinations and approval and annual inspection work to standardize administrative procedures. In April 2008, Governor Zhou Qiang officially signed Regulations of Hunan's Administrative Procedures. It is the first administrative procedure rule of local government in China, providing a legal safeguard for optimizing the economic climate in Hunan. Since the rule was implemented on Oct 1, 2008, it has effectively promoted the standardization of administration.

2.) To urge the opening of administration affairs. Hunan has fully implemented the transparency of information for administration affairs. The administrative service centers or administration affair agency centers are established in 14 municipalities and 112 counties. They provide a one-stop streamlined examination and approval service for enterprises and investors. The E-administration construction is widely adopted. Partial cities, counties and provincial departments have built electronic supervision systems to timely monitor the administrative examination and approval issues. The time for handling examination and approval procedures is half of the regulated norm.

3.) To optimize administrative services. The streamlining agency system is implemented for examination and approval of invested projects as "one project invested in Hunan, one department responsible for, one official for handling and one organized group to trace". The administrative service centers at all levels are carrying out a Green-passage System for key industrial projects.

4.) To implement enterprise monitoring and evaluation systems. Since 2004, the Hunan Provincial Office of Optimizing Economic Development Climate had initially built Enterprise Evaluating Administration Departments Systems in China. The legal persons or directors of the enterprises are employed as supervisors. The optimizing offices at provincial, municipal and county level may collect enterprise opinions every year and regularly monitor and evaluate the enterprises and supervisors. The monitoring and evaluating results are used as the basis to examine the departments' achievements and efficiency. At present, the provincial and municipal optimizing offices established 1,000 enterprise monitoring and evaluating points and employed 1,000 supervisors. In 2009, Hunan will establish monitoring and evaluating points and employ them in MSEs.

5.) To establish a contact point system for key project construction environments. This system has been established for the timely coordination and dealings with environment issues that impact the project construction. The discipline inspection and supervision institutions are at provincial, municipal and county levels. The Discipline Inspection Committee of the Hunan Provincial Party Committee and Hunan Provincial Department of Supervision have established contact points of optimizing construction environments for more than100 key projects.

6.) To establish a complaint handling mechanism. In October 2007, the Administrative Efficacy Complaint Center of Hunan Provincial People's Government was established. The Administrative Efficacy Complaint Centers of local governments have been established. The complaint hotline, "12342" for administrative efficacy is in 24-hour running, thus establishing the system for fast handling of complaints. Since January, 2009, there have been 8,245 complaint cases for administrative efficacy in the province, including 6,859 cases with handle results.

7.) To establish a lawyer aid center. The Layer Aid Center of Optimizing Economic Development Climate of Hunan provides legal consulting service free of charge for the investors and enterprises.

8.) To hold a regional cooperation forum. The Regional Cooperation Forum is held once in Liuyang city every two years. The forum of regional cooperation for optimizing economic development climate and the system of regional cooperation for optimizing economic development climate coordinates to solve soft environment issues. This is for Hunan's investors to invest and develop in other provinces, regions and municipalities. In October 2007, the First Liuyang Forum was held.