THE CIRCULAR OF THE SUPERVISION DEPARTMENT OF CHINA SECURITIES REGULATORY COMMISSION ON RELATED MATTERS ABOUT ISSUANCE OF SHORT-TERM FINANCING BONDS FOR SECURITIES COMPANIES

The Supervision Department of the China Securities Regulatory Commission

The Circular of the Supervision Department of China Securities Regulatory Commission on Related Matters about Issuance of Short-term
Financing Bonds for Securities Companies

Ji Gou Bu Bu Han [2005] No. 18

All securities companies:

Pursuant to the provisions of the Measures for Administration of Short-term Financing Bond of Securities Companies, the Memorandum
of Understanding on the Measures for Administration of Short-term Financing Bond of Securities Companies of the People’s Bank of
China, the China Securities Regulatory Commission and the China Banking Regulatory Commission, the related issues about qualification
approval of the issuance of short-term financing bonds for securities companies are hereby notified as follows:

1.

The securities company which proposes to issue short-term financing bond shall submit to the Supervision Department the materials
that prove it consistent with the fundamental conditions of issuing short-term financing bond prescribed in the Measures for Administration
of Short-term Financing Bond of Securities Companies, including:

(1)

The basic information of proposed issuance of the short-term financing bond, including the aims, repayment arrangement, funds usage,
the company’s net assets in recent three months and etc..;

(2)

The preservation of trading settlement funds of the clients of the company, the enforcement of the Circular of Further Strengthening
the Supervision of Clients Trading Settlements funds of Securities Companies, and the commitment that senior managers doesn’t misappropriate
the clients trading settlements funds and bear the relevant responsibilities;

(3)

The account of the company internal control mechanism and its execution, including the separate management of the application of equity
capital from the assets management business for clients as an agent, the construction of medium and back platform and control of
the operation risks of the front platform, and commitment of rules-compliance operation of the company;

(4)

The evaluation of the assets and liabilities in accordance with relevant rules adopted by the company;

(5)

The appraisal and control of stock risks of the company;

(6)

The copy of approval document of national inter-bank borrowing (lending) market membership;

(7)

The copy of announcement on information disclosure publicized by the inter-bank borrowing center.

2.

The Supervision department shall exanimate the materials submitted by securities companies in accordance with Article 9 of the Measures
for Administration of Short-term Financing Bond of Securities Companies, and issue an approval letter to the qualified securities
company.

3.

In the first year of the implementation of the Measures for Administration of Short-term Financing Bond of Securities Companies, securities
companies of innovational tryout or normalized development type that passed the review of the Securities Association of China may
not retain credit rating agencies to make credit rating at the time of issuance of short-term financing bond.

4.

All securities companies shall abide by the provisions of the Measures for Administration of Short-term Financing Bond of Securities
Companies, and carry out earnestly the issuance, trading and information disclosure of short-term financing bonds, and report timely
to the China Securities Regulatory Commission and the People’s Bank of China if they encounter material problems.

The Supervision department of the China Securities Regulatory Commission

January 11, 2005