PROVISIONAL MEASURES FOR THE ADMINISTRATION OF BOND INVESTMENTS OF INSURANCE INSTITUTIONAL INVESTORS

the China Insurance Regulatory Commission

Circular of the China Insurance Regulatory Commission on Printing and Distributing the Notice on the Provisional Measures for the
Administration of Bond Investments of Insurance Institutional Investors

Bao Jian Fa [2005] No. 72

All insurance companies and insurance asset management companies:

With a view to strengthening the administration of bond investments, diversifying investment products, optimizing the asset structure,
effectively spreading risks and enhancing the asset quality, this Commission has formulated the Provisional Measures for the Administration
of Bond Investments of Insurance Institutional Investors (hereinafter referred to as the Measures) according to the requirements
of insurance fund investments and the bond market. These Measures are hereby printed and distributed to you, and the relevant matters
are notified as follows:

the China Insurance Regulatory Commission

August 17, 2005

Provisional Measures for the Administration of Bond Investments of Insurance Institutional Investors

Chapter I General Provisions

Article 1

With a view to strengthening the administration of bond investments, diversifying investment products, optimizing the asset structure,
effectively spreading risks and enhancing the asset quality, these Measures are formulated in accordance with the Insurance Law of
the People’s Republic of China and other relevant laws and regulations.

Article 2

The term “insurance institutional investors” (hereinafter referred to as insurance institutions) as mentioned in these Measures refers
to those insurance companies and insurance asset management companies that are established and registered upon approval of the China
Insurance Regulatory Commission (hereinafter referred to as the CIRC) and are engaged in bond investments. These Measures shall be
applicable to insurance group companies and insurance holding companies that undertake the bond investments.

Article 3

The term “bonds” as mentioned in these Measures refers to the Renminbi bonds and foreign currency bonds which are issued within the
territory of China by all kinds of issuers.

Article 4

An insurance institution can invest in bonds, which include the government bonds, financial bonds, enterprise (corporate) bonds and
other bonds issued upon approval of the department concerned.

Article 5

An insurance institution shall, in accordance with the requirements of matching assets with liabilities and the supervisory standards
of the CIRC, formulate the strategic plan of asset allocation and investment strategies, allocate bond assets on its own initiative,
and assume risks and the responsibility for its profits and losses by itself.

Article 6

An insurance institution shall, in accordance with the relevant provisions of the CIRC, entrust a third party for the independent
custody of bond assets.

Article 7

The CIRC shall be responsible for formulating policies and regulations on the administration of bond investments of insurance institutions,
adjusting the varieties and proportion of bond investment and carrying out the administration of and supervision over investment
activities.

Chapter II Government Bond Investments

Article 8

When investing in government bonds, an insurance institution may, according to the requirements of asset allocation and investment
strategies, freely determine the proportions of total investment each investment and keep a certain proportion of government bonds.

Chapter III Financial Bond Investments

Article 9

The financial bonds as invested in by an insurance institution include the central bank bills, financial bonds of policy banks, subordinated
bonds of policy banks, financial bonds of commercial banks, subordinated bonds of commercial banks, subordinated term debts of commercial
banks, subordinated term debts of insurance companies and Renminbi bonds of international development institutions, etc..Section
I Central Bank Bills

Article 10

When investing in the central bank bills, an insurance institution may, according to the needs of asset allocation as well as investment
strategies, freely determine the proportions of total investment and each investment.Section II Financial Bonds and Subordinated
Bonds of Policy Banks

Article 11

The financial bonds of policy banks invested in by an insurance institution shall be the financial bonds which, upon approval of the
People’s Bank of China, are issued by policy banks in the national inter-bank bond market in accordance with the Measures for the
Administration of the Issuance of Financial Bonds in the National Inter-bank Bond Market (hereinafter referred to as the Measures
for the Administration).The subordinated bonds of policy banks as invested in by an insurance institution shall be the subordinated
bonds which, upon the qualification examination by the China Banking Regulatory Commission (hereinafter referred to as the CBRC)
and the approval of the People’s Bank of China, are issued by policy banks in the national inter-bank bond market in accordance with
the Measures for the Administration of the Issuance of Subordinated Bonds of Commercial Banks (hereinafter referred to as the Measures
for Subordinated Bonds),.

Article 12

The financial bonds and subordinated bonds of policy banks as invested in by an insurance institution may not be subject to credit
rating.

Article 13

When investing in the financial bonds and subordinated bonds of policy banks, an insurance institution may, according to the requirements
of asset allocation as well as investment strategies, freely determine the proportions of total investment and each investment.

Article 14

If an insurance institution invests in the financial bonds of policy banks issued towards particular investors or in the subordinated
bonds issued privately, the conditions for issuers and the bond credit rating shall be fulfilled in accordance with Articles 11 and
12 of these Measures. The balance of investment in the above-mentioned bonds shall be reckoned in the balance of financial bonds
and subordinated bonds of policy banks, and the proportions of total investment and each investment shall be governed by Article
13 of these Measures.Section III Financial Bonds and Subordinated Bonds of Commercial Banks

Article 15

In the case of the financial bonds and subordinated bonds of commercial banks invested in by an insurance institution, their issuer
shall, in addition to complying with the Measures for the Administration, the Measures for Subordinated Bonds and other relevant
provisions as set down by the People’s Bank of China and the CBRC, satisfy the following conditions:

(1)

Its total assets are no less than RMB 200 billion Yuan;

(2)

Its core capital adequacy ratio is no less than 4 %;

(3)

It has been continuously profitable for last three years;

(4)

It is assessed by a domestic credit rating institution as the long-term credit rating of Class A or a level higher than Class A;

(5)

It is listed overseas and not subject to domestic credit rating, and is assessed as the long-term credit rating of Class BB or a level
higher than Class BB by an international credit rating institution;

(6)

It has timely, sufficiently, accurately and completely disclosed relevant information, which at least includes the total assets, total
liabilities, owners’ equities, operating income, net profits, rate of return on average equity, ratio of non-performing loans, ratio
of bad and doubtful debts, capital adequacy ratio and other indicators and data; and

(7)

Other conditions as prescribed by the CIRC.Where an issuer simultaneously has the domestic credit rating and international credit
rating as mentioned in Items (4) and (5) of the preceding paragraph, the domestic credit rating shall prevail.

Article 16

If an insurance institution invests in the financial bonds and subordinated bonds of commercial banks, the issuer of the aforesaid
bonds shall be assessed as the long-term credit rating of Class A or a level higher than Class A by a domestic credit rating institution.

Article 17

If an insurance institution invests in the financial bonds and subordinated bonds with guarantee, the credit standing of the guarantor
may not be lower than the credit rating of the issuer.

Article 18

The financial bonds and subordinated bonds of commercial banks invested in by an insurance institution shall comply with the following
provisions for the proportion:

(1)

The total balance of investments in the financial bonds and subordinated bonds of commercial banks may not exceed 30% of the total
assets of the aforesaid insurance institution at the end of last quarter as calculated at the cost price;

(2)

The balances of investments in the financial bonds and subordinated bonds of a same commercial bank may not add up to over 10% of
the total assets of the aforesaid insurance institution at the end of last quarter;

(3)

The portion of investments in a single type of financial bonds or subordinated bonds of commercial banks with the long-term credit
rating of Class AA or a level higher than Class AA at a period may not exceed 20% of the amount of issuance of the aforesaid single
type at the same period, and the balance thereof may not exceed 5% of the total assets of the aforesaid insurance institution at
the end of last quarter; and

(4)

The portion of investments in a single type of financial bonds or subordinated bonds of commercial banks with the long-term credit
rating of Class A or a level higher than Class A at a period may not exceed 10% of the amount of issuance of the aforesaid single
type at the same period, and the balance thereof may not exceed 3% of the total assets of the aforesaid insurance institution at
the end of last quarter.

Article 19

If an insurance institution invests in the financial bonds of commercial banks issued towards particular investors or in subordinated
bonds issued privately, the conditions for issuers and the bond credit rating shall be governed by Articles 15, 16 and 17 of these
Measures. The balance of investments in the above-mentioned bonds shall be reckoned in the balance of financial bonds and subordinated
bonds of commercial banks, and the proportions of total investment each investment shall be governed by Article 18 of these Measures.Section
IV Subordinated Term Debts of Commercial Banks

Article 20

The subordinated term debts of commercial banks as invested in by an insurance institution shall be the subordinated term debts which,
upon approval of the CBRC, are issued by state-owned commercial banks or national joint stock commercial banks in accordance with
the Circular on Including Subordinated Term Debts into the Attached Capital and the Measures for Subordinated Bonds.As for the subordinated
term debts of commercial banks invested in by an insurance institution, their issuer and the subordinated term debts shall comply
with Articles 15 and 16 of these Measures.

Article 21

The subordinated term debts of commercial banks as invested in by an insurance institution shall comply with the following provisions
for the proportion:

(1)

The balance of investments in the subordinated term bonds of commercial banks may not exceed 8% of the total assets of the aforesaid
insurance institution at the end of last quarter as calculated at the cost price;

(2)

The balance of investments in the subordinated term bonds of a same bank may not add up to over 5% of the total assets of the aforesaid
insurance institution at the end of last quarter; and

(3)

The portion of investments in a single type of subordinated term bonds of commercial banks at a period may not exceed 10% of the amount
of issuance of the aforesaid single type at the same period, and the balance may not exceed 3% of the total assets of the aforesaid
insurance institution at the end of last quarter.

Article 22

The term of subordinated term debts of commercial banks as invested in by an insurance institution may not exceed six years.Section
V Subordinated Term Debts of Insurance Companies

Article 23

The subordinated term debts of insurance companies as invested in by an insurance institution shall be the subordinated term debts
which, upon approval of the CIRC, are raised from targeted sources by insurance companies in accordance with the Interim Measures
for the Administration of Subordinated Term Debts of Insurance Companies.

Article 24

The subordinated term debts of insurance companies as invested in by an insurance institution shall comply with the following provisions
for the proportion:

(1)

The balance of investments in the subordinated term bonds of insurance companies may not exceed 20% of the total assets of the aforesaid
insurance institution at the end of last quarter as calculated at the cost price;

(2)

The balance of investments in the subordinated term bonds of a same insurance company may not add up to over 4% of the total assets
of the aforesaid insurance institution at the end of last quarter; and

(3)

The portion of investment in the subordinated term bonds of insurance companies at a period may not exceed 20% of the issuance amount
of subordinated term bonds of insurance companies at the same period, and the balance may not exceed 1% of the total assets of the
aforesaid insurance institution at the end of last quarter.

Article 25

Where an insurance institution has any of the following relations with an insurance company that raises subordinated term debts from
targeted sources, the insurance institution is not allowed to invest in the subordinated term debts raised by the insurance company
from targeted sources:

(1)

The insurance institution is in the control of the insurance company;

(2)

The insurance institution controls the insurance company; or

(3)

Both the insurance institution and the insurance company are in the control of a same third party.Section VI Renminbi Bonds of International
Development Institutions

Article 26

The Renminbi bonds of international development institutions invested in by an insurance institution shall be the Renminbi bonds which,
upon the examination by the department concerned and the approval of the State Council, are issued by international development institutions
in accordance with the Interim Measures for the Administration of the Issuance of Renminbi Bonds by International Development Institutions.

Article 27

When investing in Renminbi bonds of international development institutions, an insurance institution may, according to the requirements
of asset allocation as well as investment strategies, freely determine the proportions of total investment and each investment.

Chapter IV Enterprise (Corporate) Bond Investments

Article 28

In case an insurance institution invests in short-term financing bonds or convertible corporate bonds, it shall be governed by the
provisions on the enterprise (corporate) bond investments.Section I Enterprise (Corporate) Bonds

Article 29

In the case of the enterprise (corporate) bonds invested in by an insurance institution, their issuer shall, in addition to complying
with the relevant provisions of the state, satisfy the following conditions:

(1)

Its net assets are not lower than RMB 2 billion Yuan at the end of last year;

(2)

It has been continuously profitable for the last three fiscal years;

(3)

It has provided the audited financial statements for last three fiscal years in a timely manner;

(4)

The balance of enterprise (corporate) bonds to be repaid may not exceed 40% of its net assets of the latest fiscal year;

(5)

The credit standing of the guarantor may not be lower than the credit rating of the issuer;

(6)

It provides the legal opinions on information disclosure issued by practicing lawyers in a timely manner;

(7)

The financial information, which includes the total assets, total liabilities, revenues of main businesses, assets-liabilities ratio,
EBITDA/interests, quick ratio, rate of return on shareholders’ equities, other indicators and data, is disclosed in a timely manner
; and

(8)

Other conditions as prescribed by the CIRC.

Article 30

The enterprise (corporate) bonds as invested in by an insurance institution shall be assessed as the long-term credit rating of Class
AA or a level higher than Class AA by an international credit rating institution.

Article 31

The enterprise (corporate) bonds as invested in by an insurance institution shall comply with the following provisions for the proportion:

(1)

The balance of investments in the enterprise (corporate) bonds may not exceed 30% of the total assets of the insurance institution
at the end of last quarter as calculated at the cost price;

(2)

The balance of investments in the enterprise (corporate) bonds of a same enterprise (corporate) may not add up to over 10% of the
total assets of the insurance institution at the end of last quarter;

(3)

Where the guarantor meets any of the following conditions and provides the irrevocable guarantee, for which the guarantor shall bear
joint and several liabilities, the portion of investments in a single type of enterprise (corporate) bonds made by the insurance
institution at a period may not exceed 20% of the amount of issuance at the same period, and the balance thereof may not exceed 5%
of the total assets of the insurance institution at the end of last quarter:

a.

A financial institution that is assessed as the credit rating of Class AA or a level higher than Class AA for the last year by a domestic
credit rating institution;

b.

Special funds of the state such as the Railway Construction Fund or the Three-Gorges Dam Construction Fund, etc.; or

c.

A non-financial enterprise whose net assets are RMB20 billion Yuan or more at the end of last year.

(4)

Where the guarantor or the guarantee method does not comply with the conditions or provisions as listed in Item (3) of this Article,
the portion of investments in a single type of enterprise (corporate) bonds made by the insurance institution at a period may not
exceed 10% of the amount of issuance at the same period, and the balance thereof may not exceed 3% of the total assets of the aforesaid
insurance institution at the end of last quarter.

Article 32

The provisions for insurance institutions to invest in the unsecured enterprise (corporate) bonds shall be separately formulated by
the CIRC. Section II Convertible Corporate Bonds

Article 33

The convertible corporate bonds as invested in by an insurance institution shall, in addition to complying with the relevant provisions
of the state, satisfy the following conditions:

(1)

The credit standing of the guarantor may not be lower than the credit rating of the issuer of bonds; and

(2)

The specific debt redemption plans and the contract of guarantee shall be provided.

Article 34

The convertible corporate bonds as invested in by an insurance institution shall comply with the following provisions for the proportion:

(1)

The total balance of the enterprise (corporate) bonds, which shall include the balance of investment in the convertible corporate
bonds, may not exceed 30% of the total assets of the aforesaid insurance institution at the end of last quarter as calculated at
the cost price;

(2)

The sum of the balance of investment in the convertible corporate bonds of a same enterprise (corporation), which shall be reckoned
in the balance of the enterprise (corporate) bonds of the same enterprise (corporation), may not exceed 10% of the total assets of
the aforesaid insurance institution at the end of last quarter. In particular, the balance of convertible corporate bonds may not
exceed 5% of the total assets of the aforesaid insurance institution at the end of last quarter as calculated at the cost price;

(3)

Where the guarantor satisfies any of the following conditions, the portion of investment in a single type of convertible corporate
bonds made by an insurance institution at a period may not exceed 20% of the amount of issuance at the same period, and the balance
may not exceed 3% of the total assets of the aforesaid insurance institution at the end of last quarter;

a.

A financial institution that is assessed as the credit rating of Class AA or a level higher than Clas AA for the last year by a domestic
credit rating institution; or

b.

An enterprise whose net assets are RMB20 million Yuan or more at the end of last year.

(4)

If the guarantor does not satisfies the conditions as listed in Item (3) of this Article, the portion of investment in a single type
of convertible corporate bonds made by an insurance institution at a period may not exceed 10% of the amount of issuance at the same
period, and the balance may not exceed 1% of the total assets of the aforesaid insurance institution at the end of last quarter.

Article 35

Where an insurance institution converts the convertible corporate bonds that it invests in into stocks, the Provisional Measures for
the Administration of Stock Investments of Insurance Institutional Investors (hereinafter referred to as the Measures for Stock Investments)
shall be applied to the conversion .Section III Short-term Financing Bonds

Article 36

The short-term financing bonds as invested in by an insurance institution shall be the short-term financing bonds which, after filing
with the People’s Bank of China for record, are issued in the national inter-bank bond market by non-financial enterprises according
to the Measures for the Administration of Short-term Financing Bonds.

Article 37

In the case of the short-term financing bonds as invested in by an insurance institution, their issuer shall meet the following conditions
as well as the conditions as prescribed in the Measures for the Administration of Short-term Financing Bond,:

(1)

Its net assets may not be lower than RMB 2 billion Yuan at the end of last year;

(2)

It has been continuously profitable for last two fiscal years;

(3)

The balance of short-term financing bonds to be redeemed may not exceed 40% of its net assets of the latest fiscal year;

(4)

It has timely disclosed the financial information, which at least includes the total assets, total liabilities, main business income,
assets-liabilities ratio, EBITDA/interests, quick ratio, rate of return on shareholders’ equities, other indicators and data; and

(5)

Other conditions as prescribed by the CIRC.

Article 38

The credit rating of short-term financing bonds as invested in by an insurance institution shall satisfy the following conditions:

(1)

Being assessed as the short-term credit rating of Class A-1 or a level higher than Class A-1 by a domestic credit rating institution;
and

(2)

As for a listed company that is not subject to the credit rating under the Measures for the Administration of Short-term Financing
Bonds, its credit rating and follow-up rating for recent three years shall satisfy either of the following conditions:

a.

Being assessed as the long-term credit rating of Class AA or a level higher than Class AA by a domestic credit rating institution;

b.

Being assessed as the long-term credit rating of Class BBB or a level higher than Class BBB by an international credit rating institution.

Where an issuer simultaneously has the domestic credit rating and international credit rating, the domestic credit rating shall prevail.

Article 39

The short-term financing bonds as invested in by an insurance institution shall comply with the following provisions for the proportion:

(1)

The total of the balance of enterprise (corporate) bonds, which shall include the balance of investment in the short-term financing
bonds, may not exceed 30% of the total assets of the aforesaid insurance institution at the end of last quarter as calculated at
the cost price. In particular, the balance of short-term financing bonds may not exceed 10% of the total assets of the aforesaid
insurance institution at the end of last quarter as calculated at the cost price;

(2)

The sum of the balance of investment in the short-term financing bonds of a same enterprise (corporation), which shall be reckoned
in the balance of the bonds of the same enterprise (corporate), may not exceed 10% of the total assets of the aforesaid insurance
institution at the end of last quarter as calculated at the cost price. In particular, the balance of short-term financing bonds
may not exceed 3% of the total assets of the aforesaid insurance institution at the end of last quarter; and

(3)

The portion of investment in a single type of short-term financing bonds at a period may not exceed 10% of the amount of issuance
at the same period, and the balance thereof may not exceed 3% of the total assets of the aforesaid insurance institution at the end
of last quarter.

Chapter V Risk Control

Article 40

An insurance institution shall, in accordance with the requirements as stated in the Guidelines for Risk Control in the Utilization
of Insurance Funds, establish a sound risk control system of bond investment, formulate scientific, rigorous and high-efficiency
business operational procedures and report them to the CIRC for record.

Article 41

The custodian of bond assets as selected by an insurance institution shall be a commercial bank or any other professional financial
institution that satisfies the conditions as prescribed in the Measures for Stock Investments.

Article 42

The relevant provisions as stated in the Guidelines for the Custody of Stock Assets of Insurance Companies (for Trial Implementation)
shall be applied to the contents of the bond custody agreement entered into between an insurance institution and a custodian, the
duties and obligations of the custodian as well as the supervision and administration of the custodian.

Article 43

An insurance institution should intensify the risk management of bond investment, properly arrange the term structure, allocation
of bond types, credit distribution and liquidity requirements of bond portfolio, carry out follow-up administration of the capital
quality, rate of return, risk nature, harms and occurrence of risks of bond investments. It shall regularly analyze and evaluate
the policy risk, credit risk, market risk, liquidity risk and operational risk, and control the overall risks of bond investments
within the endurable range.

Article 44

An insurance institution should establish an assessment system of credit risks of bond issuers and bonds, carry out continuous follow-up
assessment of the credit standing of the bond issuer and bonds, on which decisions with regard to bond investments should be based.

Article 45

An insurance institution shall, according to the credit standing of the bond issuer, the risk degree of bonds and the supervisory
standards of the CIRC, set the investment restrictions, and adjust the investment quota regularly or do so when the credit standing
of the bond issuer is changed.

Article 46

If an insurance institution invests in various bonds (excluding government bonds, central bank bills, financial bonds of policy banks
or subordinated bonds of policy banks) issued or guaranteed by a same issuer, the total of the balance of aforesaid various bonds
may not exceed 20% of the total assets of the aforesaid insurance institution at the end of the previous quarter as calculated at
the cost price.

Article 47

If an insurance institution establishes an investment account for investment-linked insurance products, the proportion of investment
in the financial bonds and subordinated bonds of commercial banks and the enterprise (corporate) bonds may not exceed 100% of the
total assets of the aforesaid account at the end of the last quarter.If an insurance institution establishes an investment account
for universal life insurance products, the proportion of investment in the financial bonds and subordinated bonds of commercial banks
and the enterprise (corporate) bonds may not exceed 80% of the total assets of the aforesaid account at the end of the last quarter.If
an insurance institution establishes an independent account for other insurance products, the proportion of investment in the financial
bonds and subordinated bonds of commercial banks and the enterprise (corporate) bonds may not exceed the proportion as stipulated
in the insurance clause or go against the relevant provisions as prescribed by the CIRC.

Article 48

As for the bonds as invested in by an insurance institution, when the latest follow-up credit rating is downgraded, the insurance
institution shall, in accordance with the relevant provisions as prescribed by the CIRC, work out the adjustment measures and adjust
the above-mentioned bond investments to the prescribed proportion within the time limit.

Article 49

Where the issuer of the bonds as invested in by an insurance institution is under any of the following circumstances, the insurance
institution shall stop investing in the bonds that are newly or already issued by the aforesaid issuer, and shall properly dispose
of the bonds it holds:

(1)

The latest information shows that the issuer fails to satisfy the conditions as prescribed in these Measures;

(2)

The issuer cannot pay the principal or interest on schedule;

(3)

The issuer fails to comply with the relevant provisions to timely, sufficiently, accurately or completely disclose the relevant information;

(4)

The follow-up credit rating cannot be carried out for the issuer according to the provisions; or

(5)

The issuer fails to satisfy any other condition as prescribed by the CIRC.

Article 50

If an insurance institution carries out bond repurchase transactions, it shall effectively control the size of repurchase program
and evade the liquidity risk.In case an insurance institution carries out the bond transactions or repurchase transactions at the
seat of a securities institution, it shall check the balance of standard bonds and the conditions on the repurchase of undue bonds
every day, and avoid the occupation and embezzlement of bonds and capital.When carrying out bond repurchase transactions in the inter-bank
bond market, the insurance institution shall, according to the relevant provisions of the CIRC, determine the standards for selecting
counterparty, and the financing amount of repurchase may not be higher than the fair market price of the aforesaid bonds un

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