Correct. Loans between affiliated enterprises shall be calculated at the lowest interest rate of bank loans (not lower than the lowest interest rate stipulated by the local tax authorities).

Article 39 of the Detailed Rules for the Implementation of the Law on the Administration of Tax Collection in People's Republic of China (PRC) stipulates that if the interest paid or collected between taxpayers and affiliated enterprises exceeds or is lower than the amount that can be agreed between unrelated enterprises, or its interest rate exceeds or is lower than the normal interest rate of similar businesses, the competent tax authorities may make adjustments with reference to the normal interest rate.

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