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CONFORMED COPY
LOAN NUMBER
3075-0-CHA
 
(Fifth Industrial Credit Project)
 
between
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
and
CHINA INVESTMENT BANK
Dated July
21, 1989
 
LOAN NUMBER
3075-0-CHA
 
PROJECT AGREEMENT
AGREEMENT, dated July
21, 1989, between INTERNATIONAL BANK FOR RECONSTRUCTION 
AND DEVELOPMENT
(the Bank) and CHINA INVESTMENT BANK (CIB).
 
WHEREAS: (A) by the Loan Agreement of even date herewith between People's 
Republic of China
(the Borrower) and the Bank, the Bank has agreed to lend to the 
Borrower an amount in various currencies equivalent to three  hundred million dollars
($300,000,000), on the terms and conditions set forth in the Loan Agreement, but only 
on condition that CIB agree to undertake such obligations toward the Bank as are set
forth in this Agreement;
(B)
by a subsidiary loan agreement to be entered into between the Borrower 
and CIB, the proceeds of the Loan provided for under the Loan Agreement will be made
available to CIB on terms and conditions set forth in said Subsidiary Loan Agreement;
and
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WHEREAS CIB, in consideration of the Bank's entering into the Loan Agreement
with the Borrower, has agreed to undertake the obligations set forth in this
Agreement;
NOW THEREFORE the parties hereto hereby agree as follows:
 
ARTICLE I
Definitions
Section
1.01. Unless the context otherwise requires, the several terms defined 
in the Loan Agreement and in the General Conditions
(as so defined) have the 
respective meanings therein set forth.
 
Section
1.02. The Project Agreements, dated December 28, 1982, June 25, 1984, 
April
16,
1986
and March
16,
1987, among the Association, the Bank and CIB for the 
Industrial Credit Project, Second Industrial Credit Project, Third Industrial Credit
Project and Fourth Industrial Credit Project, respectively, are hereby amended:
 
(a)
by replacing the term "Statement of Policy" wherever it appears in such 
agreements with the term
"Statement of Operating and Financial Policies"; and
 
(b)
by deleting Section 2.10 (b) of the Agreement dated December 28, 1982 and 
Section
2.09 (b) of all other such Agreements.
 
ARTICLE II
Execution of the Project;
Management and Operations of CIB
Section
2.01. (a) CIB declares its commitment to the objectives of the Project 
as set forth in Schedule
2
to the Loan Agreement, and, to this end, shall carry out
the Project and conduct its operations and affairs, in accordance with sound financial
standards and practices, under the supervision of qualified and experienced management
assisted by competent staff in adequate
numbers and in accordance with its Charter, Supplementary Regulations, Statement of
Operating and Financial Policies, Statement of Development Strategy and Lending
Procedures.
 
(b)
In order to carry out the Project, CIB shall: 
 
(i)
carry out the training under Part B of the Project in accordance 
with a program
agreed with the Bank;
(ii)
apply operational guidelines for equity investments, leasing 
operations and working
capital loans, acceptable to the Bank, and
adopt such guidelines prior to making
any such Sub-loans or 
Investments; and
(iii)
implement an electronic data processing system in accordance with 
a plan agreed
with the Bank. 
 
Section
2.02. CIB undertakes that, unless the Bank shall otherwise agree, 
Sub-loans and Investments will be made in accordance with the procedures and on the 
terms and conditions set forth or referred to in Schedule
1
to this Agreement.
 
(b)
CIB shall exercise its rights in relation to each Investment Project in 
such manner as to: (i) protect the interests of the Bank and of CIB; (ii) comply with 
its obligations under this Agreement and the Subsidiary Loan Agreement; and
(iii) 
achieve the purposes of the Project.
 
Section
2.03. Except as the Bank shall otherwise agree, procurement of the goods 
and services required for the Project and to be financed out of the proceeds of the
Loan shall be governed by the provisions of Schedule
2
to this Agreement.
 
Section
2.04. CIB shall carry out the obligations set forth in Sections 9.04, 
9.05, 9.06, 9.07, 9.08 and 9.09 of the General Conditions (relating to insurance, use 
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of goods and services, plans and schedules, records and reports, maintenance and land
acquisition, respectively) in respect of the Project Agreement. 
 
Section
2.05. CIB shall duly perform all its obligations under the Subsidiary 
Loan Agreement.
Except as the Bank shall otherwise agree, CIB shall not take or concur
in any action which would have the effect of assigning, amending, abrogating or
waiving the Subsidiary Loan Agreement to affect the provisions of Section
3.01 (b) of 
the Loan Agreement.
 
Section
2.06. (a) CIB shall, at the request of the Bank, exchange views with the 
Bank with regard to the progress of the Project, the performance of its obligations
under this Agreement and under the Subsidiary Loan Agreement, and other matters
relating to the purposes of the Loan.
 
(b)
CIB shall promptly inform the Bank of any condition which interferes or 
threatens to interfere with the progress of the Project, the accomplishment of the
purposes of the Loan, or the performance by CIB of its obligations under this
Agreement and under the Subsidiary Loan Agreement.
 
Section
2.07. If CIB establishes or acquires any Subsidiary, CIB shall cause 
such Subsidiary to observe and perform the obligations of CIB under this Agreement to
the extent to which such obligations shall or may be made applicable thereto, as
though such obligations were binding upon such Subsidiary. 
 
Section
2.08. CIB shall exchange views with the Bank on any proposal to modify 
its Charter, Supplementary Regulations, Statement of Operating and Financial Policies,
Statement of Development Strategy or Lending Procedures.
 
Section
2.09. (a) From time to time, at the request of any one of them, the 
Bank, the Borrower and CIB shall exchange views on the interest rates to be charged by
CIB in its lending operations in light of CIB's cost of funds and profitability and
interest and inflation rates in China and internationally.
 
(b)
From time to time, at the request of either party, the Bank and CIB shall 
exchange views on the adequacy of the exchange risk fee to be charged by CIB pursuant
to paragraph
1
(a) of Schedule 1 to this Agreement.
 
Article III
Financial and Other Covenants
Section
3.01. (a) CIB  shall  maintain procedures and records adequate to monitor 
and record the progress of the Project and of each Investment Project
(including its
cost and the benefits to be derived from it) and to reflect in accordance with 
consistently maintained sound accounting practices the operations and financial
condition of CIB.
 
(b) CIB shall:
 
(i)
have its records, accounts and financial statements (balance 
sheets, statements of
income and expenses and related statements) 
for each fiscal year audited, in
accordance with appropriate
auditing principles consistently applied, by
independent
auditors acceptable to the Bank;
(ii)
furnish to the Bank, as soon as available but in any case not 
later than six months
after the end of each such year,
(A)
certified
copies of its financial statements
for such year as so
audited, and
(B)
the report of such audit by said auditors, of
such
scope and in such detail as the Bank shall have reasonably requested; and
(iii)
furnish to the Bank such other information concerning said 
records, accounts and
financial statements as well as the
audit thereof as the Bank shall from time to
time reasonably
request.
Section
3.02. Except as the Bank shall otherwise agree, CIB shall not incur or 
Page  4
permit any Subsidiary to incur any debt if, after the incurrence of such debt, the
aggregate principal amount of the consolidated debt of CIB and all its Subsidiaries
then incurred and outstanding would be greater than five times the consolidated
capital and surplus of CIB and all its Subsidiaries. For the purpose of this Section:
 
(a)
The term "debt" 
means any indebtedness of CIB or any Subsidiary maturing
by its terms more than one year after the date on which it is originally incurred. 
 
(b)
Debt shall be deemed to be incurred: (i) under a loan contract or 
agreement or other instrument providing for such debt or for the modification of its
terms of payment, on the date, and to the extent, the amount of such debt has become
outstanding pursuant to such contract or agreement or instrument; and
(ii) under a 
guarantee agreement, on the date the agreement providing for such guarantee has been
entered into but only to the extent the guaranteed debt is outstanding.
 
(c)
Whenever in connection with this Section it shall be necessary to value, 
in terms of Renminbi, debt payable in foreign currency, such valuation shall be made
at the prevailing lawful rate of exchange at which such foreign currency is, at the
time of such valuation, obtainable for the purposes of servicing such debt, or, in the
absence of such rate, on the basis of a rate of
exchange accept able to the Bank.
 
(d)
The term "consolidated debt of CIB and all its Subsidiaries" 
means the
total amount of debt of CIB and all its Subsidiaries excluding: (i) debt owed by CIB 
to any Subsidiary or by any Subsidiary to CIB or to any other Subsidiary; and
(ii) 
debt referred to in paragraph
(e) (ii) of this Section.
 
(e)
The term "consolidated capital and surplus of CIB and all its 
Subsidiaries"
means the aggregate of
: (i) the total unimpaired paid-in capital, 
surplus and free reserves of CIB and of all its Subsidiaries after excluding therefrom
such amounts as shall represent equity interests of CIB in any Subsidiary, or of any
such Subsidiary in CIB or in any other Subsidiary; and
(ii) such amount of any other 
loan which the Bank may determine to be included in the consolidated capital and
surplus of CIB.
Section
3.03. Except as the Bank shall otherwise agree, CIB shall not make any 
repayment in advance of maturity in respect of any outstanding debt of CIB which, in
the judgment of the Bank, would materially affect CIB's ability to meet its financial
obligations.
 
Section
3.04. CIB shall take such steps satisfactory to the Bank as shall be 
necessary to protect itself against risk of loss resulting from changes in the rates
of exchange between the various currencies
(including Renminbi) used in its 
operations.
 
Section
3.05. Until at least December 31, 1992, CIB shall mobilize the financial 
resources required for its operations in the proportions of funding from different
sources agreed among the Borrower, the Bank and CIB.
 
Section
3.06. Except as the Bank shall otherwise agree, CIB shall: (a) 
make
provision for bad debts of
0.4% or more of its total portfolio for each year until its 
total provisions for bad debts are at least equal to
2%
of its total portfolio; and
(b) reach such 2% 
minimum level by December
31, 1992 and thereafter maintain such 
level.
 
Section
3.07. CIB shall ensure that the funds received by CIB in repayment of 
Sub-loans for working capital and realized from disinvestment of Investments are 
relent or reinvested only for similar purposes.
 
ARTICLE IV
Effective Date; Termination
Cancellation and Suspension
Section
4.01. This Agreement shall come into force and effect on the date upon 
which the Loan Agreement becomes effective. 
 
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Section
4.02. This Agreement and all obligations of the Bank and CIB thereunder 
shall terminate on the date on which the Loan Agreement shall terminate in accordance
with its terms, and the Bank shall promptly notify CIB thereof.
Section
4.03. All the provisions of this Agreement shall continue in full force 
and effect notwithstanding any cancellation or suspension under the General
Conditions.
 
ARTICLE V
Miscellaneous Provisions
Section
5.01. Any notice or request required or permitted to be given or made 
under this Agreement and any agreement between the parties contemplated by this
Agreement shall be in writing. Such notice or request shall be deemed to have been 
duly given or made when it shall be delivered by hand or by mail, telegram, cable,
telex or radiogram to the party to which it is required or permitted to be given or
made at such party's address hereinafter specified or at such other addresses as such
party shall have designated by notice to the party giving such notice or making such
request.
The addresses so specified are:
 
For the Bank:
International Bank for Reconstruction
and Development
1818
H Street, N.W.
Washington, D.C. 20433
United States of America
Cable address:
Telex:
 
INTBAFRAD
440098 (ITT)
Washington, D.C.
248423 (RCA) or
 64145 (WUI)
 
For CIB:
 
China Investment Bank
Jingtong Hotel
No. 27-B
Wan Shou Road
(South)
Beijing
People's Republic of China
Cable address:
Telex:
 
2122
22537 CIB CN
Beijing
Section
5.02. Any action required or permitted to be taken, and any documents 
required or permitted to be executed, under this Agreement on behalf of CIB or by CIB
on behalf of the Borrower under the Loan Agreement may be taken or executed by its
President, or by such other person or persons as the President shall designate in
writing, and CIB shall furnish to the Bank sufficient evidence of the  authority and
the authenticated specimen signature of each such person.
 
Section
5.03. This Agreement may be executed in several counterparts, each of 
which shall be an original, and all collectively but one instrument.
 
IN WITNESS WHEREOF, the parties hereto, acting through their duly authorized
representatives, have caused this Agreement to be signed in their respective names in
the District of Columbia, United States of America, as of the day and year first above
written.
INTERNATIONAL BANK FOR RECONSTRUCTION
AND DEVELOPMENT
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By
/s/ A. Karaosmanoglu
Regional Vice President
Asia
CHINA INVESTMENT BANK
By
/s/ Han Xu
Authorized Representative
SCHEDULE
1
Terms and Conditions of Sub-loans
and Processing Procedures
1.
Principal Terms and Conditions of CIB Sub-loans:
 
(a)
Sub-loans shall bear interest on the principal amount withdrawn and 
outstanding from time to time, at a rate not less than the variable rate payable under
Section
2.05 of the Loan Agreement, plus a spread of at least 1.5%.
 
(b)
Except as provided below, CIB shall require Investment Enterprises to 
bear the full foreign exchange risk between the Renminbi and the Bank's currency pool
or make other arrangements satisfactory to the Bank for the bearing of such foreign
exchange risk.
However, for Sub-loans in amounts below $1,000,000, the Investment 
Enterprise may decide to bear the foreign exchange risk between the dollar and
Remninbi only, and pay to CIB an annual exchange risk fee of at least
0.5% per annum, 
and not to exceed
2% per annum.
 
(c)
The aggregate amount of all Sub-loans and Prior Sub-loans and Investments 
for an Investment Project shall not exceed the equivalent of $20,000,000.
 
(d)
Repayment periods for Sub-loans shall normally not extend beyond seven 
years and shall not exceed twelve years including up to three years of grace.
 
(e)
Sub-loans for capital investment may be used to finance goods and 
services required for the Investment Project, including foreign currency working
capital, and interest during construction payable in foreign currency on such
Sub-loan. Except as the Bank shall otherwise agree, the aggregate amount of Sub-loans 
for working capital shall not exceed $50,000,000 and the aggregate amount of 
Investments shall not exceed $5,000,000.
 
(f)
All Investment Projects shall have minimum financial and economic rates 
of return of
12%, except for those financed under Sub-loans for working capital only. 
For such Sub-loans, Investment Enterprises shall be required to furnish CIB with
evidence demonstrating that the Investment Project will generate value added for
export or for the domestic market.
 
(g)
All Investment Enterprises shall have a satisfactory projected financial 
position as determined by generally accepted financial standards.
 
(h)
All Investment Projects  shall  be consistent with environmental 
standards satisfactory to the Bank and shall include appropriate environmental
protection equipment, except for those financed under Sub-loans for working capital 
only.
 
2.
No expenditures for goods or services required for an Investment Project shall 
be eligible for financing out of the proceeds of the Loan unless:
 
(a)
the Sub-loan or Investment for such Investment Project shall have been 
approved by the Bank and such expenditures shall have been made not earlier than
Page  7
ninety
(
90
)
days prior to the date on which the Bank shall have received the
application and information required under paragraph
3
(a) of this Schedule in respect 
of such Sub-loan; or
 
(b)
the Sub-loan or Investment for such Investment Project shall have been a 
free-limit Sub-loan or Investment for which the Bank has authorized withdrawals from 
the Loan Account and such expenditures shall have been made not earlier than ninety
(90) days prior to the date on which the Bank shall have received the request and 
information required under paragraph
3
(b)
of this Schedule in respect of such
free-limit Sub-loan or Investment.
 
(i)
For the purposes of the Loan Agreement and this Agreement, a 
free-limit Sub-loan or 
Investment shall be a Sub-loan or Investment 
for an Investment Project in an amount
to be financed out of the
proceeds of the Loan which: (A) when added to any other 
outstanding amounts financed or proposed to be financed out of Sub-loans and Prior 
Sub-loans and Investments, the proceeds of which have been or are being 
used for
financing goods and services directly and materially
related to such Investment
Project, shall not exceed in the
aggregate the equivalent of: (1) $1,000,000 or (2) 
in the case of 
Sub-loans or Investments proposed to be made by such CIB branches as 
the Bank and CIB may agree, up to
$4,000,000; and (B) when added to all other free 
limit Sub-loans or Investments financed or proposed to be financed out of
the
proceeds of the Loan, shall not exceed in the aggregate the
equivalent of
$150,000,000, the foregoing amounts 
being subject to change from time to time as
determined by the
Bank.
 
(ii)
Notwithstanding sub-paragraph (i) above, until any CIB branch has 
made a total of
three Sub-loans and Prior Sub-loans and 
Investments, no Sub-loan or Investment made 
or proposed to be made by 
said CIB branch shall be deemed to a free-limit Sub-loan 
or 
Investment, irrespective of the amount of such Sub-loan or Investment.
 
3.
(a)
When presenting a Sub-loan or an Investment (other than a free-limit 
Sub-loan or Investment) to the Bank for approval, CIB shall furnish to the Bank an 
application, in form satisfactory to the Bank, together with: (i) a description of the 
Investment Enterprise and an appraisal of the Investment Project, including a
description of the expenditures proposed to be financed out of the proceeds of the
Loan and a description of the procurement procedures;
(ii) the proposed terms and 
conditions of the Sub-loan or Investment including the schedule of amortization of the 
Sub-loan or of return to CIB of the amount of the proceeds of the Loan to be used for 
the Investment; and
(iii) such other information as the Bank shall reasonably request.
 
(b)
Each request by CIB for authorization to make withdrawals from the Loan 
Account in respect of a free-limit Sub-loan or Investment shall contain: (i) a summary 
description of the Investment Enterprise and the Investment Project, including a
description of the expenditures proposed to be financed out of the proceeds of the
Loan and a description of the procurement procedures; and
(ii) the terms and 
conditions of the Sub-loan or Investment including the schedule of amortization of the 
Sub-loan or of return to CIB of the amount of the proceeds of the Loan to be used for 
the Investment.
(c)
Applications and requests made pursuant to the provisions of 
sub-paragraphs (a) and (b) of this paragraph shall be presented to the Bank on or 
before December
31,
1991. 
 
4.
Sub-loans and Investments shall be made on terms whereby CIB shall obtain, by 
written contract with the Investment Enterprise or by other appropriate legal means,
rights adequate to protect the interests of the Bank and CIB, including, in the case
of any Sub-loan and, to the extent that it shall be appropriate, in any case of any 
Investment, the right to:
 
(a)
require the Investment Enterprise to carry out and operate the Investment 
Project with due diligence and efficiency and in accordance with sound technical,
financial and managerial standards and to maintain adequate records;
Page  8
(b)
require that the goods and services to be financed out of the proceeds of 
the Loan: (i) be procured in accordance with the provisions of Schedule 2 to this 
Agreement; and
(ii) be used exclusively in the carrying out of the Investment Project;
 
(c)
inspect, by itself or jointly with representatives of the Bank if the 
Bank shall so request, such goods, works, plants and construction included in the
Investment Project, the operation thereof, and any relevant records and documents;
(d)
require that: (i) the Investment Enterprise shall take out and maintain 
with responsible insurers such insurance, against such risks and in such amounts, as
shall be consistent with sound business practice; and
(ii) without any limitation upon 
the foregoing, such insurance shall cover hazards incident to the acquisition,
transportation and delivery of goods financed out of the proceeds of the Loan to the
place of use or installation, any indemnity thereunder to be made payable in a
currency freely usable by the Investment Enterprise to replace or repair such goods;
(e)
obtain all such information as the Bank or CIB shall reasonably request 
relating to the foregoing and to the administration, operations and financial
condition of the Investment Enterprise and to the benefits to be derived from the
Investment Project; and
(f)
suspend or terminate the right of the Investment Enterprise to the use of 
the proceeds of the Loan upon failure by such Investment Enterprise to perform its
obligations under its contract with CIB. 
 
SCHEDULE
2
Procurement
Part A:
Part A of the Project
 
Except as the Bank may otherwise agree, CIB shall cause Investment Enterprises
to procure goods and services to be financed in whole or in part under Sub-loans and 
Investments in accordance with paragraphs
1,
2
and
3
below.
 
1.
Goods and services estimated to cost the equivalent of $5,000,000 or more each 
shall be procured under contracts awarded in accordance with procedures consistent
with those set forth in Sections I and II of the
"Guidelines for Procurement under
World Bank Loans and IDA Credits" published by the Bank in May 1985 (the Guidelines).
 
In the procurement of goods in accordance with the procedures described in this
paragraph, goods manufactured in China may be granted a margin of preference in
accordance with, and subject to, the provisions of paragraphs
2.55 and 2.56 of the 
Guidelines and paragraphs
1
through
4
of Appendix
2
thereto. 
 
2.
Goods and services estimated to cost less than the equivalent of $5,000,000 per 
contract shall be procured under contracts awarded on the basis of evaluation and
comparison of price quotations obtained from at least three qualified suppliers
eligible under the Guidelines, in accordance with procedures acceptable to the Bank.
 
3.
Review of procurement decisions by the Bank: 
 
(a)
Review of invitations to bid and of proposed awards and final contracts:
 
(i)
With respect to all contracts estimated to cost the equivalent of 
$5,000,000
or
more, the procedures set forth in paragraphs
2
and
4
of Appendix
1
to the
Guidelines shall apply. 
Where payments for such contract are to be made out of the
Special
Account, such procedures shall be modified to ensure that the two conformed
copies of the contract required to be furnished to the Association pursuant to
said
paragraph
2
(d) shall be furnished to the Bank prior to the making 
of the first
payment out of the Special Account in respect of such
contract.
(ii)
With respect to each contract not governed by the preceding 
paragraph and to
contracts under Part B.1 of this Schedule, the 
procedures set forth in paragraphs
3
and
4
of Appendix
1
to the
Page  9
Guidelines shall apply
.
Where payments for such contract
are to be
made out of the Special Account, such procedures shall be modified to
ensure that the two conformed copies of the contract together with the other
information required to be furnished to the Bank pursuant to said
paragraph
3
shall
be furnished to the Bank as part of the evidence to
be furnished pursuant to
paragraph
4
of Schedule
4
to the Loan
Agreement.
(iii)
The provisions of the preceding sub-paragraphs (a) (i) and (ii) 
shall not apply to
contracts on account of which the Bank has authorized
withdrawals from the Loan
Account on the basis of statements of
expenditure. Such contracts shall be retained 
in accordance with Section 
4.01 (a) (ii) of the Loan Agreement.
 
(b)
The figure of 15% is hereby specified for purposes of paragraph 4 of 
Appendix
1
to the Guidelines. 
 
Part B:
Part B of the Project
 
1.
Goods for Part B of the Project shall be procured under contracts awarded on the 
basis of evaluation and comparison of price quotations obtained from at least three
qualified suppliers eligible under the Guidelines, in accordance with procedures
acceptable to the Bank.
 
2.
In order to assist CIB in carrying out Part B of the Project, CIB shall employ 
consultants whose qualifications, experience and terms and conditions of employment
shall be satisfactory to the Bank. Such consultants shall be selected in accordance 
with principles and procedures satisfactory to the Bank on the basis of the
"Guidelines for the Use of Consultants by World Bank Borrowers and by the World Bank 
as Executing Agency" published by the Bank in August 1981.