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REPLY OF THE SUPREME PEOPLE’S COURT TO THE REQUEST FOR INSTRUCTIONS CONCERNING WHETHER OR NOT TO REVOKE AN ARBITRATION AWARD MADE BY CHENGDE ARBITRATION COMMISSION

Reply of the Supreme People’s Court to the Request for Instructions concerning Whether or not to Revoke an Arbitration Award Made
by Chengde Arbitration Commission

Min Si Ta Yu [2005] No. 51
January 24, 2006

The Higher People’s Court of Hebei Province:

We have received your Request for Instructions on Revoking the Arbitration Award [2000] No. 33and the Supplementary Arbitration Award
[2000] No. 1 of Chengde Arbitration Commission (No. 89 [2005] of the Higher People’s Court of Hebei Province). Upon deliberation,
we give the following reply.

This case involves an application for revoking a foreign-related arbitration award made by an arbitration institution of China. Chengde
Arbitration Commission once made the Arbitration Award No. 33 [2000] on the dispute between Beijing Penghua Economy & Technology
Development Co., Ltd. and British Virgin Islands Haoyun Co., Ltd. on December 26, 2000 in accordance with the status reflected in
your report on request for instructions as well as the attached files, but made a Supplementary Arbitration Award [2000] No. 1 on
December 28 of the same year, which was meant to revoke the Arbitration Award [2000] No. 33. It is stipulated in Article 56 of the
Arbitration Law of the People’s Republic of China that: “An arbitration tribunal should correct the errors concerning context or
computation and matters that have been arbitrated in the arbitral segment but omitted in the arbitration award. Within 30 days after
the receipt of the arbitration award, the related parties may apply for correction with the arbitration tribunal” Paragraph 3, Article
46 of the Arbitration Rules of Chengde Arbitration Commission stipulates: “A modified or supplemented arbitration award as made
by an arbitration tribunal shall be part of the original arbitration award.” Thus, the related laws and arbitration rules just authorize
the Arbitration Commission to make a supplementary arbitration award on any procedural or omitted matters but do not authorize the
arbitration commission to revoke any arbitration award which has been made, served and entered into force. That Chengde Arbitration
Commission made a supplementary arbitration award to revoke its original arbitration award on the same dispute falls short of legal
foundation and does not accord with the provisions of the Arbitration Rules of Chengde Arbitration Commission, which is a situation
as stipulated in item (3), paragraph 1 of Article 260 of the Civil Procedure Law of the People’s Republic of China where “the composing
of the arbitration tribunal or the procedure of arbitration does not accord with rules of arbitration”, so, on the base of the provisions
of Article 70 of the Arbitration Law of the People’s Republic of China, the people’s court may revoke the arbitration awards.

Whereas the main problem in the arbitration awards of this case lies in that the arbitral procedures are in violation of the legal
procedures, this procedural violation (by making a supplementary arbitration award to revoke the original arbitration award) that
may influence the rights of the related parties could be corrected by means of informing the arbitration tribunal of re-arbitration.
On the base of the provisions of Article 61 of the Arbitration Law of the People’s Republic of China, the arbitration tribunal shall
be informed to make a re-arbitration within a certain time limit and rule to cease the procedures for revocation in accordance with
the actual situation regarding the arbitration award in this case,. If the arbitration tribunal refuses to make a re-arbitration,
a rule of resuming the procedures for revocation shall be made and both the two arbitration awards shall be revoked concurrently
under law.

Appendix:
Request for Instructions of the Higher People’s Court of Hebei Province on Revoking the Arbitration Awards Made by Chengde Arbitration
Commission [2000] No. 33 and the Supplementary Arbitration Award [2000] No. 1

Yi Li Min Han Zi [2005] No. 89
November 23, 2005

Tribunal No. 4 of the Supreme People’s Court:

In accordance with the requests of your court in Letter [2004] No. 45, the Intermediate People’s Court of Chengde Municipality accepted
and publicly heard a the case concerning the application of Beijing Penghua Economy & Technology Development Co., Ltd. (hereinafter
referred to as Penghua), the applicant, and the British Virgin Islands Haoyun Co., Ltd. (hereinafter referred to as Haoyun), the
respondent, for revocation of arbitration awards and thereby set forth the following opinions on treatment:

Haoyun did not submit any certification of its legal existence when applying with Chengde Arbitration Commission for arbitration.
The identity certification of its legal representative was not verified by the Chinese foreign representative office located in Hong
Kong either. During the hearing, it did not submit the aforesaid certification documents to this court within the time limit as provided
for by our court. Therefore, Haoyun is disqualified as a subject in an arbitration or action in accordance with the Civil Procedure
Law of the People’s Republic of China as well as the replies of the Supreme People’s Court regarding any foreign-related or Hong
Kong-related litigation documents as well as the service thereof. Moreover, Chengde Arbitration Commission made a Supplementary Arbitration
Award No. 1 [2000] in order to revoke the Arbitration Award [2000] No. 33 after Chengde Arbitration Commission made an Arbitration
Award [2000] No. 33 on the dispute between Penghua and Haoyuan, which has gone against the related provisions of the Arbitration
Law as well as the arbitration rules of Chengde Arbitration Commission, thus, the aforesaid supplementary arbitration award shall
be regarded as illegal. So, it is determined to revoke the Arbitration Award [2000] No. 33and the Supplementary Arbitration Award
[2000] No. 1.

As far as the opinions as reported by the Intermediate People’s Court of Chengde Municipality are concerned, this court holds that
the facts as confirmed are clear and the application of law is accurate and therefore consents to revoke the Arbitration Award [2000]
No. 33and the Supplementary Arbitration Award [2000] No. 1 after an earnest examination. All the aforesaid matters are hereby reported
to you for verification in light of the Circular of the Supreme People’s Court on Revoking the Foreign-related Arbitration Awards.

Please make a reply to us whether the aforesaid opinions are right or not.



 
The Supreme People’s Court
2006-01-24

 






GUIDANCE TO CORPORATE GOVERNANCE OF STATE-OWNED COMMERCIAL BANKS AND THE RELEVANT SUPERVISION THEREOF

Circular of China Banking Regulatory Commission on Printing and Distributing the Guidance to Corporate Governance of State-owned Commercial
Banks and the Relevant Supervision thereof

Yin Jian Fa [2006] No.22

Industrial and Commercial Bank of China, Agricultural Bank of China, Bank of China, China Construction Bank, and Bank of Communication,

in order to strengthen the reform of corporate governance of state-owned commercial banks and ensure the stock reform to get substantial
results, this Commission has revised the Guidance to Corporate Governance of State-owned Commercial Banks and the Relevant Supervision
thereof, which is hereby printed and distributed to you, please implement it accordingly.

China Banking Regulatory Commission

April 18, 2006

Guidance to Corporate Governance of State-owned Commercial Banks and the Relevant Supervision Thereof
Chapter I General Provisions

Article 1

In order to ensure corporate governance of state-owned commercial banks to get substantial results, the present Guidance is formulated
according to the Company Law of the People’s Republic of China, Banking Regulatory Law of the People’s Republic of China, the Law
of Commercial bankof the People’s Republic of China, and other laws and regulations.

Article 2

The overall objective of the reform of corporate governance shall be to put emphasis on reforming management systems, perfecting
governance structures, transferring management mechanisms, and improving management performances so as to built the state-owned commercial
banks into modern joint stock commercial banks with adequate capital, close internal control system , safe operation, good service
and benefit, and international competitiveness step by step.

Article 3

Through the stock reform, the state-owned commercial banks shall improve the level of their operation management, strengthen their
financial power, and reach and retain the level , which is above middle of the big banks ranking top 100internationally concerning
the financial indexes widely accepted internationally.

Article 4

The core and crux of the reform is to improve corporate governance. The state-owned commercial banks shall enhance core competitiveness
through setting up and perfecting corporate governance mechanism to stimulate the sustainable and healthy development.

Chapter II Corporate Governance

Article 5

In accordance with the requirements for the modern financial enterprise system, state-owned commercial banks shall set up standard
shareholders’meeting, board of directors, and board of supervisors, and senior management level system, and set up a scientific mechanism
with balance of power, accountability system and interest incentives system.

1.

In accordance with the provisions of the Company Law of the People’s Republic of China and other laws and regulations, a state-owned
commercial bank shall set up shareholders’meeting, board of directors, board of supervisors, and senior management level, constitute
articles of association of the banks reflecting the requirements of modern financial enterprise system, and specify the obligations
and powers of shareholders’meeting, board of directors, board of supervisors and directors, supervisors, and senior administrative
personnel, in order to give shape to the organic combination of powers, responsibilities and benefits, and set up a reasonable and
high efficient mechanism of decision-making, implementation and supervision, and make sure that each party runs independently and
balances effectively.

2.

The shareholders’meeting is the organ of power of the state-owned commercial bank. The shareholders of a state-owned commercial bank
shall lawfully exercise their rights through shareholders’meeting, be in compliance with laws and regulations and the provisions
of the banks’articles of associations, and shall not interfere in the performance of duties of the board of directors and senior
management level. If the shareholders cause losses to the banks or any other shareholder by misusing their rights, they shall be
liable for the damage in accordance with law.

3.

The board of directors of a state-owned commercial bank shall take charge of the shareholders’meeting. The board of directors shall
set up a special committee to formulate the rules of procedures and working instruction for each special committee. With the authorization
of the board of directors, each special committee shall perform duties and provide professional opinions to the board of directors.
Each special committee shall be enpost_titled to have direct communication with the senior management personnel and other staff members
to get adequate information on the operation and management of the bank.

In principle, the board of directors of a state-owned commercial bank shall set up a strategic planning committee, a compensation
and nomination committee, an auditing committee, a risk management committee, a connected transaction control committee and other
special committees. There shall be no less than 3 members in each special committee. The posts of the chairmen of the compensation
and nomination committee, auditing committee, and connected transaction control committee shall be taken up by independent directors
in principle. The number of the independent directors in the compensation and nomination committee, auditing committee, and connected
transaction control committee shall exceed half of the total members of the committees they work in.

4.

The senior management level of a state-owned commercial bank shall bear responsibility for the board of directors, and be supervised
by the board of supervisors. The senior management level shall exercise duties independently under their jurisdiction in accordance
with law.

5.

The board of supervisors is the supervision organ of a state-owned commercial bank, and shall bear responsibility for the shareholders’meeting.
The board of supervisors shall be in charge of supervising the acts of directors and senior management personnel for their performance
of duties, and make suggestions on recalling the directors and senior management personnel who violate laws and regulations, articles
of associations of the bank or the resolutions of the shareholders’meeting; and ask directors or senior management personnel to make
a correction when any act of the director or the senior management personnel damages the interests of the bank; and supervise operation
and management acts including decision of operation ,risk control internal control and so on.

6.

A commercial bank shall make detailed rules decision-making for shareholders’meeting, board of directors, and supervision board,
and the detailed rules and procedures for the work of senior management level, and make clear the jurisdiction of the ogans, and
set up a clear mechanism of report procedure and information communication .

7.

A state-owned commercial bank shall set up a due diligence system for directors, supervisors, and senior management personnel. The
directors shall bear the relevant legal liabilities in their individual capacities, and discharge their functions as a trustee and
custody . The supervisors shall strictly discharging their functions of supervision and supervise the operation of the bank and the
performance of duties by directors, senior management personnel, and other staff members. The senior management personnel shall have
good professional quality and moral fortitude to manage and run the bank professionally.

8.

A state-owned commercial bank shall set up a perfect system for nomination, appointment, resign and dismissal of directors, supervisors,
and senior management personnel, and go through the relevant formalities according to the related provisions. A state-owned commercial
bank shall set up and improve market-oriented performance evaluation methods and incentive and binding mechanism for directors, supervisors,
and senior management personnel as well as a routine and multi-level system of accountability.

9.

A state-owned commercial bank shall fully respect the opinions and suggestions of directors and supervisors to make sure that the
directors and supervisors be able to work in an independent way, and bring full play into corporate governance. The directors with
stock rights shall play their role positively in corporate governance, to promote the state-owned commercial bank to perfect corporate
governance, and reinforce risk control and internal management.

10.

State-owned commercial banks shall regulate the connected transactions. Connected transactions shall be implemented in accordance
with the principle of honesty and good faith and fairness, and shall be governed by law and regulations, and make revealment of
them in a comprehensive, objective and truthful way.

Article 6

State-owned commercial banks shall set up multiple equity structure, and bring in strategic investors on the basis of the enhancement
of corporate governance of themselves and the operation management level.

That the principle of holding shares for long terms, optimizing governance, business cooperation, and evasion of competition shall
be complied with by a state-owned commercial bank when introducing any strategic investor, and the following five standards shall
be kept to:

1.

In principle, the strategic investors shall hold no less than 5% percentages of shares .

2.

The term for holding the stock right by the strategic investors shall be more than 3 years as of the settlement day,.

3.

In principle, the strategic investors shall send directors to the bank, and simultaneously encourage the experienced to send senior
management talents to give about management experiences in a direct way.

4.

The strategic investors shall have abundant backgrounds of management in financial industry, and simultaneously, they shall have
mature management experiences and technology in financial industry, and good will of cooperation.

5.

A strategic investor of a commercial bank shall not make investment in more than two state-owned commercial banks.

Article 7

Practically, a state-owned commercial bank shall work out clear medium and long-term development strategy according to its actual
conditions to maximize the value of the bank.

1.

A state-owned commercial bank shall have accurate market orientation, work out and carry out famous brand strategy, and give play
to the comparative competition advantages, and enhance the market to recognize bank brand through differentiation competitive strategy.

2.

A state-owned commercial bank shall have medium and long term development plans and propel their implementation gradually.

3.

After its listing, a state-owned commercial bank shall pay close attention to any factor that may affect the change of the market
value, and set up the management ideas of maximizing the market value.

Article 8

For state-owned commercial banks, risk control and construction of compliance with regulations shall be reinforced, and scientific
decision-making system, as well as internal control mechanism and risk control system shall be set up.

1.

State-owned commercial banks shall set up and improve the risk management system, such as credit risk, market risk, and operation
risk, and identify, measure, monitor, and control all kinds of risks in an effective way.

2.

State-owned commercial banks shall set up a standard internal control and supervision system, which specifically includes: supervision
carried out by the board of directors or the board of supervisors, supervision carried out by the personnel not participating in
the specific operation of each kind of business fields, supervision carried out within the business flow, and supervision carried
out by independent risk control department, compliance department, and audit department.

3.

State-owned commercial banks shall employ advanced international risk control technology to enhance the internal control management
level and fulfill the effective combination of quantitative and qualitative risk control.

4.

In order to make clear the specific functions of the board of directors and senior management level in the compliance risk management,
state-owned commercial banks shall set up and perfect the framework of the compliance risk management..

Article 9

For state-owned commercial banks, the business process flow and management process shall be integrated, organizational structure
shall be optimized, resource allocation shall be perfected, and business operation efficiency shall be enhanced in accordance with
the principle of intensive management.

1.

In accordance with their own conditions and the demand of the clients, state-owned commercial banks shall gradually set up a vertical
management system of risk control, auditing, and etc., in order to give effect to enterprise department management system with the
product units and business line as the process flow.

2.

State-owned commercial banks shall gradually simplify their organizations and make centralized management on their operation, in
order to reduce the levels in management, adjust overall arrangement for the organization, and enhance operation efficiency.

3.

State-owned commercial banks shall set up a scientific and overall evaluation system and build up a good coordination and communication
mechanism among internal departments, reinforce cooperation relationship inbusiness doing, and form a complete process flow in management
and control.

Article 10

For state-owned commercial banks, its deliberate financial accounting system and market-oriented information revealment system shall
be carried out in accordance with the standards and requirements for modern financial enterprises and large listed banks.

1.

State-owned commercial banks shall carry out deliberate accounting system and make business accounting system perfect. Based on strict
implementation of domestic accounting system of financial enterprises, the state-owned commercial banks shall positively try to be
in line with international accounting rules.

2.

State-owned commercial banks shall attach importance to management of the construction of accounting, reinforce financial management,
and build up a financial operation mechanism with the comprehensive budgetary management as means, the comprehensive cost management
as the main contents, and the financial information to be reported in a timely, accurate and smooth way.

3.

State-owned commercial banks shall reinforce information revealment work, set up a perfect information revealment system, and play
the full role of the market in the supervision and check, and reveal the financial information and other information in a truthful,
overall, and accurate way, in order to enhance the transparency of the operation and management of the banks.

Article 11

State-owned commercial banks shall reinforce the construction on information science and technology, so as to enhance comprehensive
management and service functions in an overall way.

1.

State-owned commercial banks shall institutea clear medium and long-termed plan of information science and technology development
, and make clear the overall objects and specific measures for building the information science and technology, and trace the development
of financial science and technology attentively in order to enhance the information science and technology level gradually.

2.

State-owned commercial banks shall improve information science and technology system to fulfill the gathering of the data, and set
up an advanced platform for information science and technology, in order to enhance functions of comprehensive management and service
in an overall way.

Article 12

In accordance with the requirements for human resources management of modern financial enterprises, a market-oriented human resources
management system and incentive and binding mechanism shall be set up by state-owned commercial banks.

1.

State-owned commercial banks shall consider comprehensively the capacity for acceptance and other factors, give consideration to
the principle of both fairness and efficiency, so as to impel the human resources system reformed in a positive and steady way.

2.

State-owned commercial banks shall bring into competitive mechanism, so as to set up a market-oriented personnel system .of surviving
of the fittest and competent to work ., assuming the posts according to their abilities,and enabling to come and leave, and call
off the administrative levels , and implement the appointment and discharge system focusing on engagement. and

3.

State-owned commercial banks shall suit the market demand, reform the pattern of the salary payment, set up and improve the system
of performance index and make the evaluation procedures in a strict way.

Article 13

State-owned commercial banks shall carry out financial talents strategy, and increase pertinent on training talents and do well in
introducing talents to key positions, and simultaneously, attach importance to the effective usage and reasonable allocation of human
resources, and make use of the activity and creativity of the existing human resources.

1.

State-owned commercial banks shall pay much attention to constructing the training system, set up and improve all employees’on-the-job
training system with such main contents as on-the-job qualification training, performance capability training, and employee professional
career development training.

2.

State-owned commercial banks shall pay much attention to cultivating medium and senior management talent teams, enhance the source
structure of human resources, and do well in the examination of the relevant qualifications and the report and approval of them as
introducing scarce talents to key job positions in market-oriented way.

Article 14

State-owned commercial banks shall display professional advantages of intermediate institutions to impel the reformation in the shareholding
system steadily.

1.

For popurse of using the up-to-date experiences of corporate governance of international banking industry, state-owned commercial
banks shall make full use of the professional technical advantages of intermediate institutions, such as financial consultants, certified
public accountants firms, lawyers firms, and management consultants, and etc., so as to impel the reform on shareholding system to
deeper development. and

2.

State-owned commercial banks shall set up the afterwards evaluation mechanism for the work of intermediate institutions, and submit
to the regulatory departments in time

Chapter III Evaluation and MonitoringIndexes

Article 15

China Banking Regulatory Commission (hereinafter referred to as the CBRC) shall evaluate the stock reform of state-owned commercial
banks according to the seven in three large categories, including such categories as operation performance, assets quality and prudent
operation. The indicators in the category of operation performance shall consist of ratio of assets (ROA), ratio of equity (ROE),
and cost-revenue ratio. The indicator in the category of assets quality shall be the percentage of bad loans. The indicators in the
category of prudent operation shall consist of capital adequacy ratio, intensiveness of large amount risks, and non-performing loans
(NPL) provisioning coverage ratio. State-owned commercial banks shall be monitored on the stock reform by CBRC.

Article 16

The ROA of state-owned commercial banks shall be up to 0.6% in the next year of the year when the financial reorganization is finished,
and shall be up to internationally good level in the following three years.

The formula for computation of the ROA shall be: (Omitted)

Article 17

The ROE of the state-owned commercial banks shall be up to 11% in the next year of the year when the financial reorganization is
finished, and shall be up to not less than 13% afterwards year by year.

The formula for computation of the ROE shall be: (Omitted)

Article 18

The cost-revenue ratio of a state-owned commercial bank shall be controlled in the scope of 35% to 45% from the next year after financial
reorganization.

The formula for computation of cost/income ratio shall be: (Omitted)

Article 19

Strictly based on the five-leveled standard of classification, the state-owned commercial banks shall sort the credit assets and
evaluate the quality of the credit assets based on the five- leveled classification standards, and the non-performing loans shall
be controlled less than 5% continuously after financial reorganization.

The percentage of non-performing loans shall be measured based on the five- leveled classification standards for the loans, and the
formula for computation shall be: (Omitted)

Article 20

The state-owned commercial banks shall make management on their capital strictly according to the related provisions of the Measures
for the Administration of Capital Adequacy Ratio of Commercial Banks, and the capital adequacy ratio after financial reorganization
shall be kept more than 8%.

Capital adequacy ratio shall be measured according to the related provisions of the Measures for the Administration of Capital Adequacy
Ratio of Commercial Banks, and the formula for computation shall be: (Omitted).

Article 21

A state-owned commercial bank shall strictly control its collective risk for the credit granted to the same borrower, and the percentage
of loan balance for the same borrower to capital balance by this bank shall not more than 10%.

The formula for computation of the intensiveness of large amount risk shall be: (Omitted)

Article 22

The NPL provisioning coverage ratio of a state-owned commercial bank shall be no less than 60% in the current year when the financial
reorganization is finished, and the bank shall increase the percentage year by year on the precondition of ensuring the steadiness
of finance, and shall try its best to have it up to 100% in 5 years.

The formula for computation of the NPL provisioning coverage ratio shall be: (Omitted).

Article 23

In order to set up a monitoring indicator system, CBRC shall monitor the business operations of state-owned commercial banks during
their stock reform. A state-owned commercial bank shall set up a relevant risk monitoring mechanism to positively operate in coordination
with the implement of risk monitoring.

The monitoring indicators and monitoring requirements of a state-owned commercial bank shall be as follows:

1.

Tier 1 Capital. The monitoring requirements consist of closing balance and increase rate.

2.

Capital scale. The monitoring requirements consist ofclosing balance, world ranking, and increase rate.

3.

Percentage of capital to assets. The monitoring requirements consist of closing balance of the current term, closing balance of the
last term, ranking at the end of the current term, and ranking at the end of last term.

4.

Pre-tax profits. The monitoring requirements consist of closing balance and increase rate. and

5.

Actual profit increase. The monitoring requirements consists ofincrease at the end of the current term, increase rate in the balance
of last term at the end, and the world ranking of the current term.

Chapter IV Examination and Report

Article 24

In accordance with the targets of reform and the requirements for the tasks, state-owned commercial banks shall work out specific
corporate governance scheme, and carry out the responsibility on different levels. State-owned commercial banks shall carry out a
rigorous target management, and evaluate the work of each stage through rigorous examination and checking and acceptance, and then
submit to CBRC in time.

Article 25

CBRC shall evaluate and monitor the stock reform of the state-owned commercial banks and work out an evaluation and monitoring report
and then submit it to the State Council.

Article 26

In accordance with the evaluation and monitoring, CBRC shall supervise and direct the work of stock reform of state-owned commercial
banks in time, and reveal the corporate governance and all kinds of evaluation and monitoring indexes in proper ways.

Chapter V Supplementary Provisions

Article 27

CBRC shall be responsible for interpretation of the present Guidance .

Article 28

The present Guidance shall go into effect as of April 24, 2006. The Guidance to Corporate Governance of the Bank of China and China
Construction Bank and the Supervision thereof promulgated on March 11, 2004 shall be abolished at the same time.



 
China Banking Regulatory Commission
2006-04-18

 






NOTICE OF THE STATE ADMINISTRATION OF TAXATION ON FURTHER STRENGTHENING TAX IMPOSITION ADMINISTRATION OF CARGO TRANSPORTATION

The State Administration of Taxation

Notice of the State Administration of Taxation on further Strengthening Tax Imposition Administration of Cargo Transportation

Guo Shui Han [2006] No.102

January 25, 2006

To states tax bureaus, local tax bureaus of all provinces, autonomous region, municipalities directly under the central government,
cities specifically designated in the state plan:

Since the distribution of Notice of the State Administration of Taxation on further Strengthening Tax Imposition Administration of
Cargo Transportation ( Guo Shui Fa [2003] No.121) by the State Administration of Taxation in October 2003, all levels of states tax
bureaus and local tax bureaus have made certain achievement on strengthening tax imposition of cargo transportation through coordinated
efforts. However, judging by the situations reflected by the media and the investigation conducted by the State Administration of
Taxation, problems still exists in cargo transportation, such as loose invoice administration, inferior information acquisition,
unfulfilled auditing and examination, unsmooth operation of the joint examination. For the purpose of further strengthening tax
imposition taxation, the related issues is hereby notified as follows

I.

local tax authorities shall abide by the provisions of in Guo Shui Fa [2003] No.121 to undertake the confirmation of invoice issuing
taxpayer of cargo transportation. For those taxpayers ineligible for the confirmation hereof, local tax authorities shall not give
the confirmation hereof to them, for those having been given the conformation hereof, local tax authorities all revoke the qualification
hereof.

II.

local tax authorities shall conduct strict administration upon invoice administration of cargo transportation, establish and perfect
cargo invoice administrative measures of cargo transportation. As for the newly-established cargo transportation enterprises, local
tax authorities shall come to the place of business of taxpayers to conduct interview investigation, for those cargo transportation
units and individuals having failed to pay business tax, local authorities shall not offer them cargo transportation invoice to prevent
them from abusing transport invoice to attract tax from other regions.

III.

should the invoice issuing taxpayer in cargo transportation have been registered in a document demonstrating the abnormality hereof,
local tax authorities shall cease the sale of transportation tax hereto to prevent them from drawing and utilizing cargo transportation
invoice without declaration of taxpaying.

IV.

the tax declaration and examination shall be put into effect. All levels of local tax authorities, when accepting taxpaying declaration,
shall undertake auditing on the integrity of various taxpaying declaration documents and logic of basic data hereof. Local tax authorities
shall, when accepting business tax declaration from cargo transportation enterprises, identify the declared sum with the total sum
in the invoice list to ensure the declared list is the carrying trade- invoice -counterfoil one after taxpaying. Given problems emerge
in the declaration, local tax authorities shall cope with them promptly to improve sustained authenticity and accuracy hereof.

V.

local tax authorities shall utilize communication means to conduct regular contrast between the sum of business volume and income
of business income tax declared by the taxpayer to prevent from falsified declaration of income, tax evasion and etc.

VI.

the taxpaying assessment of cargo transportation shall be carried out actively. For the enterprises with abnormal utilization of cargo
transportation invoice and declaration, local tax authorities shall deal with them differentially: carry out arranged dialogue or
on-the-spot investigation. Should the tax-collecting is suspected of violation of law and needed to be placed on file, local tax
authorities shall transfer them to tax inspection department for investigation and prosecution.

VII.

all state tax bureaus and local tax bureaus shall, in accordance with the prescribed time limit, integrally collect invoice bills
of carrying trade. The provincial state tax bureaus and local tax bureaus shall submit the summarized invoice bill hereof to the
State Administration of Taxation.

VIII.

state tax bureaus and local tax bureaus shall intensify their coordination to convene regular joint meeting to inform the tax collection
and administration on cargo transportation. Data switching channels of carry trade shall be established to exchange the status quo
of the administered client and data of declared business tax. For those utilizing carrying trade to evade tax, state tax bureaus
and local tax bureaus shall undertake joint investigation to promote their cash-handling performance and the efficiency of tax examination.

IX.

state tax bureaus and local tax bureaus shall strictly abide by the requirements of the State Administration of Taxation to conduct
examination and auditing upon the abnormal invoice of carrying trade and exchange the information about their examination and auditing.
Should the state tax authorities, after their examination and auditing, deem that it is of necessity for the local tax authorities
in responsible to carry out further examination and auditing, state tax bureaus shall transfer it to local tax authorities for further
examination and auditing, subsequently the local tax bureaus from the invoice-drawing party shall feedback the result to state tax
bureaus.

X.

state tax bureaus and local tax bureaus shall bring the tax imposition administration of carrying trade under the preferred areas
of law enforcement and examination and investigate the responsibilities of related units and personnel having failed to abide by
the prescribed provisions to perform tax imposition, administration, examination and information transfer.



 
The State Administration of Taxation
2006-01-25

 






INTERIM ADMINISTRATIVE MEASURES FOR COMMERCIAL BANKS TO PROVIDE OVERSEAS FINANCING MANAGEMENT SERVICES

Circular of the People’s Bank of China, China Banking Regulatory Commission and the State Administration of Foreign Exchange on the
Promulgation of the Interim Administrative Measures for Commercial Banks to Provide Overseas Financing Management Services

Yin Fa [2006] No. 121

Shanghai Head Office of the People’s Bank of China, each branch and business management department of the People’s Bank of China and
its central sub-branch of all provincial (or autonomous regional) capital cities, each central sub-branch of Dalian, Qingdao, Ningbo,
Xiamen and Shenzhen, each banking regulatory bureau of all provinces, autonomous regions, municipalities directly under the Central
Government and cities specifically designated in the state plan, each branch and foreign exchange department of the State Administration
of Foreign Exchange of all provinces, autonomous regions and municipalities directly under the Central Government, each branch of
the State Administration of Foreign Exchange of Shenzhen, Dalian, Qingdao, Xiamen and Ningbo, each wholly state-owned commercial
bank and joint-stock commercial bank:

For the purpose of propelling the convertibility of Renminbi capital accounts in an orderly and controllable way, satisfying the reasonable
demands of domestic institutions and individuals for financing investment and asset management abroad, and promoting the balance
of international payments, the People’s Bank of China, China Banking Regulatory Commission and the State Administration of Foreign
Exchange have formulated the Interim Administrative Measures for Commercial Banks to Provide Overseas Financing Management Services,
which are hereby promulgated. Please abide hereby.

Each branch and business management department of the People’s Bank of China shall immediately, after receiving this Circular, transmit
it to the city commercial banks and foreign capital banks within their respective jurisdictions.

The People’s Bank of China

China Banking Regulatory Commission

The State Administration of Foreign Exchange

April 18, 2006

Interim Administrative Measures for Commercial Banks to Provide Overseas Financing Management Services
Chapter I General Provisions

Article 1

For the purpose of regulating commercial banks to provide overseas financing management services, these Measures are formulated in
accordance with the related laws and administrative regulations.

Article 2

The term “providing overseas financing management services” as mentioned in these Measures shall refer to the business activities
carried out in light of the related requirements of these Measures by commercial banks that are qualified for overseas financing
management services and are entrusted by domestic institutions and individual residents (except domestic non-residents, hereinafter
referred to as “investors”) to make stipulated financing product investments with the investors’ funds.

Article 3

China Banking Regulatory Commission (hereinafter referred to as “CBRC”) shall take charge of the admittance administration and business
administration of commercial banks to provide overseas financing management services.

Article 4

The State Administration of Foreign Exchange (hereinafter referred to as “SAFE”) shall take charge of the foreign exchange quota
administration on overseas financing management services of commercial banks.

Article 5

A commercial bank shall, when making overseas financing management investments for customers, follow the laws and regulations of
the state, the provisions of the state on foreign exchange administration and industry administration, as well as the laws and regulations
at the locality of the investments.

Article 6

Where a commercial bank is entrusted by a domestic individual resident to provide overseas financing management services, it shall
follow the related provisions on the administration of commercial banks’ provision of personal financing management services; where
a commercial bank is entrusted by a domestic institution to provide overseas financing management services, it shall conduct it by
referring to the related requirements on building up internal control rules and risk management systems as well as other prudence
requirements pertaining to the administration of commercial banks’ provision of personal financing management services.

Article 7

A commercial bank shall, when providing overseas financing management services, take practical and effective measures to intensify
the management of related risks.

Chapter II Business Admittance Management

Article 8

A commercial bank shall, when intending to provide overseas financing management services, apply with CBRC for approval.

Article 9

A commercial bank providing overseas financing management services shall be a designated foreign exchange bank, and shall satisfy
the following requirements:

(1)

it has established and improved an effective market risk management system;

(2)

it has sound internal control rules;

(3)

it is of the ability for and experience in overseas investment management;

(4)

it has not been penalized by CBRC within one year before applying for the financing management service activities; and

(5)

other conditions on prudence as required by CBRC.

Article 10

A commercial bank shall, when applying with CBRC for the qualification for providing overseas financing management services, provide
the following materials (in triplicate):

(1)

an application letter;

(2)

the related internal control and risk management systems;

(3)

the draft of the custody agreement; and

(4)

other documents as required by CBRC.

Article 11

CBRC shall abide by the related procedures and provisions on administrative license when examining and approving commercial banks’
qualifications for overseas financing management services.

Article 12

Where a commercial bank sells personal financing management products within the territory of China after obtaining the qualification
for overseas financing management services, the activities shall be subject to the related provisions in the Interim Measures for
the Administration of Commercial Banks’ Personal Financing Management Services.

Where a commercial bank sells financing management products or provides comprehensive financing management services to domestic institutions
after obtaining the qualification for overseas financing management services, the admittance administration shall be subject to the
report system, while the matters concerning report procedures and requirements as well as management of related risks shall be handled
by referring to the related provisions on the administration of personal financing management services.

Chapter III Quotas of Foreign Exchanges Purchased for Investments and Conversion Administration

Article 13

Where a commercial bank is entrusted by an investor to provide overseas financing management services with foreign exchanges purchased
with Renminbi, it shall apply with SAFE for the quota of foreign exchanges purchased for overseas financing management services.

Where a commercial bank is entrusted by an investor to invest in overseas financing management with the investor’s own foreign exchanges,
the amount of funds under entrustment shall not be counted into the quota of foreign exchanges purchased for investments as approved
by SAFE.

Article 14

A commercial bank shall, when applying for the quota of foreign exchanges purchased for overseas financing management, provide the
following documents to SAFE:

(1)

the application letter (including but not limited to the basic information on the applicant, the requested quota of foreign exchanges
purchased for investments, the investment plan and etc.) ;

(2)

the approval document on the business qualification by CBRC;

(3)

the draft of the custody agreement;

(4)

the specimen of the agreement of entrustment (in standard form) to be concluded with the certain investor, which shall include the
rights and obligations of both parties, the assumption of proceeds and risks, and other related contents; and

(5)

other documents as required by SAFE.

SAFE shall make a reply on approval or disapproval, inform the applicant in writing and make a copy to CBRC within 20 working days
as of the receipt of the entire application documents.

Article 15

A commercial bank may, within the approved quota of purchased foreign exchanges, issue to investors the overseas financing management
products whose prices are marked in Renminbi, and shall uniformly go through the formalities for purchase of foreign exchanges for
raising Renminbi funds.

Article 16

A commercial bank shall pay the investment principals and proceeds to the investors after the overseas financing management funds
are remitted to China. Where the investor purchases foreign exchanges with Renminbi for investment, the commercial bank shall pay
in Renminbi to the investors after settlement of foreign exchanges; while if an investor makes investments with foreign exchanges,
the commercial bank shall transfer the foreign exchanges into the investor’s original account, or may, if the original account has
been closed up, transfer the foreign exchanges into the account appointed by the investor.

Article 17

The quota of net foreign exchanges purchased by a commercial bank for providing overseas financing management services shall not
exceed the quota of purchased foreign exchanges, which is approved by SAFE.

Article 18

A commercial bank shall take effective measures to offset and manage the foreign exchange rate risks of overseas financing management
services by making use of forward foreign exchange settlement and other businesses.

Chapter IV Administration on Inward and Outward Funds

Article 19

A commercial bank shall, when making overseas financing management investments, entrust another domestic commercial bank approved
by CBRC as qualified for custody business as the custodian to keep all the assets used for overseas investment.

Article 20

In addition to the duties as prescribed by CBRC, the custodian shall fulfill the following functions and duties:

(1)

opening the domestic custody account, the settlement account on use of overseas foreign exchange funds and the securities custody
account in light of the financing management plan on behalf of the commercial bank;

(2)

supervising the commercial bank’s investment operation, and timely reporting it to SAFE when finding any of the commercial bank’s
investment instructions violates any law or rule;

(3)

preserving the related information like the records on the remittance and conversion of the commercial bank’s funds, collection and
payment of foreign exchanges, flow of funds and etc., with the time of preservation to be not less than 15 years;

(4)

making statistical reports on balance of international payments in accordance with the provisions;

(5)

assisting SAFE in inspecting the use of the commercial bank’s funds abroad; and

(6)

other functions and duties as prescribed by SAFE in light of the principle of prudential supervision.

Article 21

A custodian shall submit the related reports according to the following requirements:

(1)

it shall, within 5 working days as of opening the domestic custody account, the settlement account on use of overseas foreign exchange
funds and the securities custody account on behalf of the commercial bank, report it to CBRC and SAFE;

(2)

it shall, within 5 working days as of the day when the commercial bank remits the principals or proceeds out or back, report the remittance
of funds to SAFE;

(3)

it shall, within 5 working days as of the end of each month, report the incomes and expenditures of the commercial bank’s domestic
custody account to SAFE;

(4)

it shall, within 1 month as of the end of each accounting year, submit to SAFE the commercial bank’s statement on using foreign exchange
funds abroad in the last year;

(5)

it shall timely report it to CBRC and SAFE when finding any of the commercial bank’s investment instructions violates any law or rule;
and

(6)

other for-report matters as prescribed by CBRC and SAFE.

Article 22

A commercial bank shall, after receiving SAFE’s approval document on the quota of purchased foreign exchanges, conclude a custody
agreement with the domestic custodian upon the strength of the approval document, and open a domestic custody account. The commercial
bank shall, within 5 working days as of opening the domestic custody account, submit the formal custody agreement to SAFE.

Article 23

The scope of incomes of a commercial bank’s domestic custody account shall be the foreign exchange funds transferred by the commercial
bank into the aforesaid account, the investment principals and proceeds remitted from abroad and other income as prescribed by SAFE.

The scope of expenditures of a commercial bank’s domestic custody account shall be the funds transferred into the settlement account
on use of overseas foreign exchange funds, the funds remitted back to the commercial bank, the currency conversion fees, the custody
fees, the asset management fees, various commissions and other expenditures as prescribed by SAFE.

Article 24

A domestic custodian shall, in light of the principle of prudence and according to the risk management requirements and commercial
practices, select an overseas financing institution as its overseas custody agent.

The domestic custodian shall open the settlement account on use of the commercial bank’s foreign exchange funds and the securities
custody account at the overseas custody agent, and use the aforesaid accounts for the funds settlement business and securities custody
business with overseas securities registration and settlement institutions.

Article 25

A domestic custodian and its overseas custody agent must separately set custody accounts for different commercial banks.

Chapter V Information Disclosure and the Supervision and Management Thereon

Article 26

A commercial bank shall, when intending to buy overseas financing products, accord with the related risk management provisions of
CBRC.

CBRC shall, under the related laws and regulations, supervise and manage the risks in commercial banks’ overseas financing management
services.

Article 27

A commercial bank providing overseas financing management services shall, when selling its products, notify the investors in details
and in an all-round way of the investment plan, product features and related risks, so that the investors may make their choices
independently.

Article 28

A commercial bank providing overseas financing management services shall, at regular intervals, disclose the information on investment
conditions, investment behaviors and risk conditions and etc. to investors.

Article 29

A commercial bank providing overseas financing management services shall, in accordance with the provisions, fulfill the obligations
of making statistical reports on settlement and sale of foreign exchanges.

Article 30

SAFE may, when required by the balance of payments, adjust the quotas of commercial banks that provide overseas financing management
services for purchasing foreign exchanges for investment.

Article 31

CBRC and SAFE may require a commercial bank, a domestic custodian or an overseas custody agent to provide related information on
the commercial bank’s overseas investment activities, and may, when necessary, make on-the-spot inspections on the commercial bank
in light of their supervisory duties.

Article 32

Where a commercial bank falls under any of the following circumstances, it shall, within 5 working days after the circumstance occurs,
report it to CBRC and SAFE for archiving:

(1)

the custodian or the custody agent is changed;

(2)

the registered capital or the structure of shareholders of the company is changed greatly;

(3)

it is involved in any lawsuit or is severely penalized; or

(4)

other circumstances as prescribed by CBRC and SAFE.

Article 33

Where a commercial bank’s domestic custodian is under any of the following circumstances, it shall, within 5 working days after the
circumstance occurs, report it to SAFE:

(1)

its registered capital or stock right structure is changed greatly;

(2)

it is involved in any major lawsuit or is severely penalized; or

(3)

other matters as prescribed by SAFE.

Article 34

Where a commercial bank or its domestic custodian violates these Measures, it shall be imposed upon administrative penalties by SAFE.
If the circumstance is serious, CBRC and SAFE shall have the power to demand the commercial bank to change the domestic custodian,
or to revoke the commercial bank’s quota of foreign exchanges purchased for overseas financing management services. In case the overseas
custody agent refuses to provide related information, CBRC and SAFE shall have the power to demand to change the overseas custody
agent.

Chapter VI Supplementary Provisions

Article 35

Where a commercial bank invests in the financing products in Hong Kong Special Administrative Region or Macao Special Administrative
Region, it shall take the related clauses in these Measures as reference.

Article 36

The power to interpret these Measures shall remain with the People’s Bank of China and CBRC.

Article 37

These Measures shall enter into force as of the date of promulgation.



 
the People’s Bank of China, China Banking Regulatory Commission, the State Administration of Foreign Exchange
2006-04-18

 






ACCOUNTING STANDARDS FOR ENTERPRISES NO. 28 – CHANGES OF ACCOUNTING POLICIES AND ACCOUNTING ESTIMATES AND ERROR CORRECTION

Ministry of Finance

Accounting Standards for Enterprises No. 28 – Changes of Accounting Policies and Accounting Estimates and Error Correction

Cai Kuai [2006] No. 3

February 15, 2006

Chapter I General Provisions

Article 1

These Standards are formulated in accordance with the Accounting Standards for Enterprises – Basis Standards for the purpose of regulating
the application of enterprise accounting policies, the changes of accounting policies and accounting estimates, the recognition and
measurement of the error correction. in the prior periods, as well as the disclosure of relevant information. .

Article 2

The effects on income tax by the changes of accounting policies and the error correction in the prior periods shall be governed by
the Accounting Standards for Enterprises No. 18 – Income Tax.

Chapter II Accounting Policies

Article 3

With regard to identical or similar transactions or events, an enterprise shall adopt the same accounting policies, unless it is otherwise
prescribed by other accounting standards.

The term “accounting policies” refers to the specific principles, basis and accounting treatment methods adopted by an enterprise
for accounting recognition, measurement and reporting.

Article 4

The accounting policies adopted by an enterprise shall be consistent for each accounting period and the prior and subsequent accounting
periods, and shall not be changed randomly. However, if one of the following conditions is satisfied, accounting policy may be changed:

(1)

The requirement by any law, administrative regulation, or national uniform accounting system changes; or

(2)

More reliable and more relevant accounting information shall be provided through changing the accounting policy. .

Article 5

The following items shall not belong to the changes of accounting policies:

(1)

A new accounting policy is adopted for transactions or events occurred in the current period which are different essentially from
those occurred in the prior periods; and

(2)

A new accounting policy is adopted for transactions or events which occur for the first time or are unimportant.

Article 6

Where an enterprise changes an accounting policy according to the requirement of any law, administrative regulation or the national
uniform accounting system, it shall implement it pursuant to the relevant accounting provisions of the state.

If a change in accounting policy can provide more reliable and more relevant accounting information, the retrospective adjustment
method shall be adopted for handling. The amount of cumulative effect by the change in accounting policy shall be adjusted and presented
as the retained earnings at the beginning of the earliest prior period, and the beginning balance of other relevant items as well
as to other comparative data disclosed in the prior period presented shall be adjusted along with, unless the cumulative effect of
a change in accounting policy is not feasible essentially.

The retrospective adjustment method refers to a method whereby, for a change in accounting policy in respect of particular transactions
or events, the changed accounting policy is adopted as if it had been in use from the day when such transactions or events first
occurred, and the relevant items in the financial statements are adjusted accordingly.

The cumulative effect of a change in accounting policy refers to the difference between the adjusted beginning balance of retained
gain of the earliest prior period presented if the adjusted accounting policy had been applied retrospectively for all prior periods
and the present amount of the retained earnings.

Article 7

If it is impracticable to determine the effect of a change in accounting policy for the prior period presented, the new accounting
policy shall be applied from the beginning of the earliest period for which retrospective application is practicable.

If, at the beginning of the current period, it is impracticable to determine the cumulative effect of the change in accounting policy
for all prior periods, the prospective application method shall be adopted.

The term “prospective application method” refers to a method whereby for a change in accounting policy, the new accounting policy
is applied to the transactions or events occurring on the date of change and in subsequent periods; or refers to a method whereby,
for a change in accounting estimate, the effects of the change of the accounting estimate are recognized during the current period
of the change of accounting estimate and in future periods.

Chapter III Changes in Accounting Estimates

Article 8

An enterprise may need to revise its accounting estimates due to a change in the basis for estimates, or due to the obtainment of
new information, accumulation of more experiences as well as the subsequent development and changes. The basis for the changes in
accounting estimates shall be genuine and reliable.

A change in accounting estimate refers to an adjustment to the book value of an asset or liability or to the amount of expense of
an asset during a certain period, resulting from the changes in the current situation of the asset or liability and the expected
economic benefits and obligations.

Article 9

The prospective application method shall be adopted by an enterprise for treating the changes in accounting estimates.

If a change in accounting estimate affects only the current period of the change, the effect of the change shall be recognized in
the period of the change. If any change in an accounting estimate affects both the period of the current change and future periods,
the effects of the change shall be recognized in the period of the change and in future periods.

Article 10

Where it is difficult for an enterprise to determine a change as one in accounting policy or as one in an accounting estimate, it
shall treat it as a change in an accounting estimate.

Chapter IV Corrections of Prior Period Errors

Article 11

Prior period errors refer to the failure to use or misuse of the following two kinds of information and result in the omissions from
or mis-presentation in financial statements for the prior periods :

(1)

The reliable information that was available and could reasonably be expected to be obtained and taken into account when preparing
the financial statements for the prior periods;

(2)

The reliable information that was available when the financial reports of prior periods are authorized for issue;

Generally prior period errors include calculation mistakes, mistakes in applying accounting policies, oversights or misinterpretations
of facts, consequences of fraud, inventory overage, fixed asset overage, etc.

Article 12

An enterprise shall adopt the retrospective restatement method to correct any important errors of prior period, however, unless it
is impractical to recognize the amount of cumulative effects of the prior period error.

The term “retrospective restatement method” refers to a method whereby, when a prior period error is discovered, the relevant items
of the financial statements are corrected as if the prior period error had never occurred.

Article 13

If it is impracticable to recognize the effect of a prior period error, the enterprise may begin to adjust the beginning balance of
the retained earnings of the earliest prior period for which the retrospective restatement is practical, and in the meanwhile, adjust
the beginning balances of other relevant items in the financial statements, or may adopt the prospective application method.

Article 14

An enterprise shall, in the financial statements of the current period where it discovers any important prior period error, adjust
the comparative data of the prior period.

Chapter V Disclosure

Article 15

An enterprise shall, in its notes, disclose the following information related to the changes in accounting polices:

(1)

The character, contents and reasons for the changes of accounting policies;

(2)

The names of the affected items and the adjusted amounts in the financial statements for the current period and all the prior periods
presented; and

(3)

If it is unable to make retrospective adjustments, it shall state the facts, reasons, date of beginning of the application of the
new accounting policies as well as the information about the concrete application thereof.

Article 16

An enterprise shall, in its notes, disclose the following information related to the changes in accounting estimates:

(1)

The contents of and reasons for the changes in accounting estimates;

(2)

The effects amount in the current period and future periods by changes in accounting estimates; and

(3)

If it is unable to recognize the effect amount of a change in the accounting estimate, it shall disclose the facts and reasons.

Article 17

An enterprise shall, in its notes, disclose the following information related to the corrections in prior period errors:

(1)

The nature of the prior period errors;

(2)

The names of the affected items and the corrected amounts in the financial statements for all prior periods presented.

(3)

If it is unable to make a retrospective restatement, it shall state the facts, reasons, time point of beginning the correction of
the prior period error, as well as the information about the concrete correction.

Article 18

In the financial statements of subsequent periods, it is not required to repeatedly disclose any information about the changes of
accounting policies and corrections of prior period errors which have been disclosed in the notes of prior periods.



 
Ministry of Finance
2006-02-15

 






MEASURES FOR THE ANNUAL INSPECTION OF ENTERPRISES

State Administration for Industry and Commerce

Order of the State Administration for Industry and Commerce

No. 23

The Measures for the Annual Inspection of Enterprises, which were amended at the executive meeting of the State Administration for
Industry and Commerce of the People’s Republic of China, are hereby promulgated and shall enter into effect as of the day of March
1, 2006.

Director of the State Administration for Industry and Commerce, Wang Zhongfu

February 24, 2006

Measures for the Annual Inspection of Enterprises

Article 1

In order to strengthen the supervision and administration of enterprises and maintain the order of market economy, these Measures
are formulated in accordance with the Regulation on the Company Registration Administration, the Regulation on the Registration Administration
of Enterprise Legal Persons, and the Regulation on the Registration Administration of Partnership Enterprises.

Article 2

These Measures apply to the limited companies, joint-stock limited companies, non-corporate enterprise legal persons, partnership
enterprises, sole proprietorship enterprises and their branches, the enterprises from foreign countries (regions) that engage in
business operations in China as well as other business operational entities (hereinafter referred to as the enterprises) that have
obtained business licenses.

Article 3

The annual inspection of enterprises (hereinafter referred to as the annual inspection) refers to a supervision and management system
whereby the enterprise registration organs carry out regular inspections according to law on the relevant conditions of enterprise
registration depending on the annual inspection documents submitted by the enterprises once a year.

Article 4

An enterprise shall hand in the annual inspection documents to the enterprise registration organ from March 1 to June 30 every year.
In the case of any justifiable reason, an enterprise may hand in an application for postponing the participation in annual inspection
to the enterprise registration organ before June 30, and 30 days may be postponed upon approval of the enterprise registration organ.
An enterprise shall be responsible for the authenticity of the annual inspection documents it hands in.

An enterprise registered in the current year shall be subject to the annual inspection as of the next year.

Article 5

The enterprise registration organs at all levels shall take charge of the annual inspection of the enterprises registered thereby.

An enterprise registration organ at a higher level may entrust the enterprise registration organ at a lower level for the annual inspection
of the enterprises registered thereby.

An enterprise registration organ may entrust the administrative offices for industry and commerce at the locality of enterprises registered
thereby for the annual inspection of these enterprises.

Article 6

The procedures for annual inspection shall be as follows:

(1)

An enterprise hands in its documents for annual inspection;

(2)

The enterprise registration organ accepts and examines the annual inspection documents;

(3)

The enterprise pays the fee for annual inspection; and

(4)

The enterprise registration organ affixes a seal of annual inspection on the duplicate of the business license of the enterprise and
gives back the duplicate of the business license to the enterprise.

Article 7

An enterprise shall hand in the documents for the declaration for annual inspection as follows:

(1)

An annual inspection report;

(2)

The certification of the representative or the entrusted agent designated by the enterprise;

(3)

The duplicate of the business license;

(4)

The photocopies of the relevant licensing certificates or approval documents with the seal of the enterprise if there is any business
item pertinent to pre-registration administrative license in the business scope of the enterprise; and

(5)

Other documents are required to hand in prescribed by the State Administration for Industry and Commerce.

An enterprise legal person shall hand in its annual balance sheets and profit and loss statements, and a company or foreign- funded
enterprise shall hand in the audit report issued by an accountant firm.

If an enterprise has any non-legal-person branch, it shall also hand in a photocopy of the duplicate of the branch’s business license.

An enterprise under liquidation shall only hand in the documents mentioned in Paragraph 1.

Article 8

Besides the documents submitted by a non-legal-person branch of an enterprise, the enterprises from foreign countries (regions) that
engage in business operations in China and other business operational entities mentioned in Paragraph 1 of Article 7 of these Measures,
a non-legal-person branch of an enterprise shall also need to hand in the photocopy of the duplicate of the business license of its
parent enterprise that has passed the annual inspection in the previous year, and other business operational entities shall also
need to hand in a photocopy of the qualification certification of its parent institution.

Article 9

A annual inspection report shall include the contents as follows:

(1)

The conditions on the registered items;

(2)

The conditions on the items that are kept on records;

(3)

The conditions on foreign investments;

(4)

The conditions on the establishment and cancellation of branches; and

(5)

The conditions on business operations.

The annual inspection report handed in by a non-legal-person branch of an enterprise, an enterprise from a foreign country (region)
that engages in the business operations in China or other business operational entities shall only include the contents mentioned
in Item (1) of the preceding Paragraph.

Article 10

Where an enterprise hands in comprehensive documents for annual inspection with intact contents, the enterprise registration organ
shall accept them and issue a notice on acceptance, except it affixes a seal of passing the annual inspection on the spot in accordance
with Article 12 of these Measures.

Where the submitted annual inspection documents are not comprehensive or the contents are not intact, the enterprise registration
organ shall not accept them and shall issue a notice on refusal of acceptance that indicates the reasons for the refusal of acceptance.

Article 11

An enterprise registration organ shall, within 5 workdays as of the acceptance of the annual inspection documents, accomplish the
written examination of the contents of the registered items and the recorded items concerned in the annual inspection documents handed
in by an enterprise, unless it shall need to verify the essential contents of the annual inspection documents.

Where the essential contents of the annual inspection documents need to be verified, the enterprise registration organ shall send
two or more functionaries for the verification.

Article 12

Where the annual inspection documents accord with the provisions upon examination, the enterprise registration organ shall affix a
seal of passing the annual inspection on the duplicate of the business license and return the duplicate to the enterprise; otherwise,
the enterprise registration organ shall order the enterprise to make corrections within the time limit, and after the annual inspection
documents are found to accord with the provisions, the enterprise registration organ shall affix a seal of passing the annual inspection
on the duplicate of the business license and return the duplicate to the enterprise. Where the enterprise shall implement the alteration
registration in accordance with law and the items involved in the business license thus shall be altered, the enterprise registration
organ shall affix a seal of passing the annual inspection on the duplicate of the new business license after the alteration registration.

Article 13

An enterprise registration organ shall mainly examine such contents in the annual inspection documents handed in by a company as follows:

(1)

Whether the company has used its name in accordance with the provisions, or whether the company has gone through the formalities of
alteration registration in accordance with the provisions for renaming;

(2)

Whether the company has gone through the formalities of alteration registration in accordance with the provisions for changing its
domicile;

(3)

Whether the company has gone through the formalities of alteration registration in accordance with the provisions for changing its
legal person;

(4)

Whether the company makes a false report on its registered capital, whether its shareholders or promoters have made their contributions
in accordance with the provisions or have withdrawn their capital contributions;

(5)

Whether the relevant licensing certificates or approval documents have been cancelled, revoked or have expired if there is any business
item subject to pre-registration administrative license within the business scope of the company, and whether the business operations
of the company are within the scope of its registered business operations;

(6)

Whether the company has gone through the formalities of alteration registration in accordance with the provisions for the equity transfer
of its shareholders or promoters;

(7)

Whether the business term of the company has come to the due date;

(8)

Whether the company has gone through the formalities for archival filing in accordance with the provisions for the modification of
its articles of association or alteration of its directors, supervisors or managers;

(9)

Whether the company has gone through the formalities for archival filing in accordance with the provisions for the establishment of
a branch, whether any of its branches has been cancelled or been ordered to be closed or its business license has been revoked;

(10)

Whether the liquidation group has gone through the formalities for archival filing in accordance with the provisions after the company
has come into the procedures of liquidation; and

(11)

Whether one natural person has invested to set up two or more one-person limited companies.

Article 14

An enterprise registration organ shall mainly examine such contents in the annual inspection documents handed in by a non-corporate
enterprise legal person as follows:

(1)

Whether the enterprise has used its name in accordance with the provisions, or whether the enterprise has gone through the formalities
of alteration registration in accordance with the provisions for it’s renaming;

(2)

Whether the enterprise has gone through the formalities of alteration registration in accordance with the provisions for changing
its domicile or business place;

(3)

Whether the enterprise has gone through the formalities of alteration registration in accordance with the provisions for changing
its legal person;

(4)

Whether the enterprise has gone through the formalities of alteration registration in accordance with the provisions for changing
its economic nature;

(5)

Whether the relevant licensing certificates or approval documents have been cancelled, revoked or expired if there is any business
item subject to pre-registration administrative license in the business scope of the enterprise, and whether the business operations
of the enterprise are within the scope of its registered business operations;

(6)

Whether have the act of withdrawn or transferred the registered capital;

(7)

Whether the business term of the enterprise has come to the due date;

(8)

Whether the enterprise has gone through the formalities of alteration registration in accordance with the provisions for the setting
up or cancellation of any branch;

(9)

Whether the enterprise has gone through the formalities for archival filing in accordance with the provisions for changing its department
in-charge; and

(10)

Whether the enterprise has modified its articles of association.

Article 15

An enterprise registration organ shall mainly examine such contents in the annual inspection documents handed in by a partnership
enterprise as follows:

(1)

Whether the enterprise has used its name in accordance with the provisions, or whether the enterprise has gone through the formalities
of alteration registration in accordance with the provisions for renaming;

(2)

Whether the enterprise has gone through the formalities of alteration registration in accordance with the provisions for changing
its business place;

(3)

Whether the enterprise has gone through the formalities of alteration registration in accordance with the provisions for changing
the partner in charge of partnership affairs;

(4)

Whether the relevant licensing certificates or approval documents have been cancelled, revoked or have expired if there is any business
item subject to pre-registration administrative license within the business scope of the enterprise, and whether the business operations
of the enterprise are within the scope of its registered business operations;

(5)

Whether the business operational mode of the enterprise is within the scope of its registered business operational modes;

(6)

Whether the enterprise has gone through the formalities of alteration registration in accordance with the provisions for changing
the name or domicile of any of its partners;

(7)

Whether the enterprise has gone through the formalities of alteration registration in accordance with the provisions for changing
the amount or mode of contribution of any of its partners; and

(8)

Whether the enterprise has gone through the formalities of alteration registration in accordance with the provisions for the setting
up or cancellation of any of its branches.

Article 16

An enterprise registration organ shall mainly examine such contents in the annual inspection documents handed in by a sole-investor
enterprise as follows:

(1)

Whether the enterprise has used its name in accordance with the provisions, or whether the company has gone through the formalities
of alteration registration in accordance with the provisions for renaming;

(2)

Whether the enterprise has gone through the formalities of alteration registration in accordance with the provisions for changing
its domicile;

(3)

Whether the enterprise has gone through the formalities of alteration registration in accordance with the provisions for changing
the name or domicile of its contributor;

(4)

Whether the relevant licensing certificates or approval documents have been cancelled, revoked or expired if there is any business
item subject to pre-registration administrative license within the business scope of the enterprise, and whether the business operations
of the enterprise are within the scope of its registered business operations;

(5)

Whether the business operational mode of the enterprise is within the scope of the registered business operational modes; and

(6)

Whether the enterprise has gone through the formalities of alteration registration in accordance with the provisions for changing
the amount or mode of contributions of the contributor.

Article 17

An enterprise registration organ shall mainly examine such contents in the annual inspection documents handed in by a non-legal-person
branch of an enterprise, an enterprise from a foreign country (region) that engaged in business operations in China or any other
business operational entity as follows:

(1)

Whether the relevant enterprise has used its name in accordance with the provisions, or whether it has gone through the formalities
of alteration registration in accordance with the provisions for renaming;

(2)

Whether the relevant enterprise has gone through the formalities of alteration registration in accordance with the provisions for
changing its business (operation) place;

(3)

Whether the relevant enterprise has gone through the formalities of alteration registration in accordance with the provisions for
changing its person-in-charge;

(4)

Whether the relevant licensing certificates or approval documents have been cancelled, revoked or expired if there is any business
item subject to pre-registration administrative license within its business scope, and whether its business operations are within
the scope of its registered business operations; and

(5)

Whether any other business entity has gone through the formalities of alteration registration in accordance with the provisions for
changing its parent institution.

Article 18

An enterprise registration organ or administrative office for industry and commerce that is authorized to implement the annual inspection
shall report the annual inspection circumstance to the authorizing enterprise registration organ before July 31.

An enterprise registration organ shall, before July 31, report the annual inspection circumstance to the administrative office for
industry and commerce at the locality of enterprises, and the administrative office for industry and commerce shall bring the annual
inspection information into the economic registration information of the enterprises.

Article 19

If an enterprise fails to accept the annual inspection in accordance with the provisions, the enterprise registration organ shall
order it to accept the annual inspection within the time limit. If it is a company, it shall be imposed a fine from RMB 10, 000 Yuan
to RMB100, 000 Yuan. If it is a subsidiary, a non-corporate enterprise legal person or any of its branches or an enterprise from
a foreign country (region) that engages in business operations in China or any other business operational entity, it shall be imposed
a fine less than RMB 30,000 Yuan. And if it is a partnership enterprise, a sole-investor enterprise or any of its branches, it shall
be imposed a fine less than RMB 3,000 Yuan.

If an enterprise still fails to accept the annual inspection within the time limit after being ordered to do so, the enterprise registration
organ shall announce it. If it still fails to accept the annual inspection within 60 days as of announcement, its business license
shall be revoked in accordance with law.

Article 20

If an enterprise keeps from actual situation or resorts to deceits in the annual inspection, the enterprise registration organ shall
order it to make corrections within the time limit. If it is a company, it shall be imposed a fine from RMB10, 000 Yuan to RMB 50,000
Yuan. Where the circumstance is serious, its business license shall be revoked. If it is a subsidiary, a non-corporate enterprise
legal person or any of its branches or an enterprise from a foreign country (region) that engages in business operations in China
or any other business entity, it shall be imposed a fine less than RMB 30,000 Yuan. If it is a partnership enterprise, a sole-investor
enterprise or any of its branches, it shall be imposed a fine less than RMB 3,000 Yuan.

Article 21

Where an enterprise registration organ finds, in the course of annual inspection, that an enterprise commits any act in violation
of the provisions on enterprise registration administration, it may, except to order the enterprise to make corrections give punishment
on the enterprise in accordance with the provisions on enterprise registration administration.

Article 22

Where an enterprise registration organ or any of its functionaries refuses to implement the annual inspection for an enterprise which
accords with the provisions or implements the annual inspection for an enterprise which fails to accord with the provisions, or arbitrarily
charges fees by taking advantage of annual inspection, charges fees by making use of annual inspection, deducts other fees, asks
for or accepts property or money of others or seeks for other interests, the principal and other persons who are directly responsible
shall be subject to the corresponding liabilities n accordance with the laws and disciplines.

Article 23

The formats of the reports on annual inspection and the styles of the seals for annual inspection shall be uniformly regulated by
the State Administration for Industry and Commerce.

Article 24

These Measures shall be implemented as of March 1, 2006. The Measures for the Annual Inspection of Enterprises, which was promulgated
on December 13, 1996(Order of the State Administration for Industry and Commerce, No.61) and was amended on December 3, 1998 (Order
of the State Administration for Industry and Commerce, No.86), shall be abolished simultaneously.



 
State Administration for Industry and Commerce
2006-02-24

 






MEASURES FOR THE LICENSING FOR PRODUCTION AND OPERATION OF NON-PHARMACEUTICAL PRECURSOR CHEMICALS

the State Administration of Work Safety

Order of the State Administration of Work Safety of the People’s Republic of China

No. 5

The Measures for the Licensing for Production and Operation of Non-pharmaceutical Precursor Chemicals, which were deliberated and
adopted at the director general’s executive meeting of the State Administration of Work Safety on March 21, 2006, are hereby promulgated,
and shall come into force as of April 15, 2006.

Director General Li Yizhong

April 5, 2006

Measures for the Licensing for Production and Operation of Non-pharmaceutical Precursor Chemicals

Chapter I General Provisions

Article 1

For the purpose of strengthening the administration on non-pharmaceutical precursor chemicals, regulating the production and operation
of non-pharmaceutical precursor chemicals, preventing non-pharmaceutical precursor chemicals from being used to manufacture drugs
and maintaining economic and social order, the present Measures are formulated in accordance with the Regulation on the Administration
of Precursor Chemicals (hereinafter referred to as the Regulation) as well as other relevant laws and administrative regulations.

Article 2

The term “non-pharmaceutical precursor chemicals” as mentioned in the present Measures shall refer to the non-pharmaceutical major
materials and chemical auxiliary substances which are prescribed in the Attached Table of the Regulation and may be used to produce
drugs.

As for the classes and varieties of non-pharmaceutical precursor chemicals, please see the Attached Table of the present Measures,
the Catalogue of Classes and Varieties of Non-pharmaceutical Precursor Chemicals.

When the adjustment to the Attached Table of the Regulation, the Catalogue of Classes and Varieties of Precursor Chemicals or to the
Catalogue of Hazardous Chemicals involves the Attached Table of the present Measures, the Catalogue of Classes and Varieties of Non-pharmaceutical
Precursor Chemicals shall be adjusted accordingly and promulgated.

Article 3

The state adopts a license system for the production and operation of non-pharmaceutical precursor chemicals. The production and operation
of non-pharmaceutical precursor chemicals of Class I shall be subject to the license-based administration, while the production and
operation of precursor chemicals of Class II and Class III shall be subject to the archival certificate-based administration.

The administrative departments of work safety of the people’s government of all provinces, autonomous regions, or municipalities directly
under the Central Government shall take charge of the examination and approval of the production and operation of non-pharmaceutical
precursor chemicals of Class I within their respective jurisdictions and the issuance of the licenses thereof.

The administrative departments of work safety of the people’s government in cities divided into districts shall take charge of the
issuance of archival certificates for production and operation of non-pharmaceutical precursor chemicals of Class II or for production
of non-pharmaceutical precursor chemicals of Class III within their respective jurisdictions.

The administrative departments of work safety of the people’s government at the county level shall take charge of the issuance of
archival certificates for operation of non-pharmaceutical precursor chemicals of Class III within their respective jurisdictions.

Article 4

The State Administration of Work Safety shall supervise and guide the licensing for production and operation of non-pharmaceutical
precursor chemicals all over the country and the archival filing administration thereof.

The administrative departments of work safety of the people’s government at the county level or above shall take charge of implementing
the supervision and administration of the system of licensing for production and operation of non-pharmaceutical precursor chemicals
within their respective jurisdictions.

Chapter II Licensing for Production and Operation

Article 5

Whoever intends to produce or operate a non-pharmaceutical precursor chemical of Class I shall not engage in the production or business
activities until having obtained the license for production or operation of the non-pharmaceutical precursor chemicals.

Article 6

Whoever intends to produce or operate a non-pharmaceutical precursor chemical of Class I shall meet the conditions as prescribed in
Article 7 and Article 9 of the Regulation.

Article 7

Where a producer applies for a license for the production of a non-pharmaceutical precursor chemical, it shall submit the following
documents and materials to the administrative department of work safety of the local people’s government at the provincial level,
and shall be responsible for the authenticity thereof:

(1)

A letter of application for the license for production of the non-pharmaceutical precursor chemical (in duplicates);

(2)

Introduction materials of the production equipment, warehousing facilities and pollutant treatment facilities;

(3)

Precursor chemical management rules and plan on responding to environmental emergencies;

(4)

Work safety management rules;

(5)

Materials proving that its legal representative or principal person-in-charge, as well as its technicians and managers have corresponding
knowledge on work safety;

(6)

Materials proving that its legal representative or principal person-in-charge, as well as its technicians and managers have corresponding
knowledge on precursor chemicals and have no records on drug-involved crimes;

(7)

A counterpart of its industrial and commercial business license (photocopy); and

(8)

Directions of the product package and the directions to use chemicals.

Where a producer belongs to hazardous chemical-producing entities, it shall, in addition, submit its work safety license of hazardous
chemical production enterprise, and the hazardous chemical registration certificate (photocopies), without having to submit the documents
and materials as required by Items (4), (5) and (7) of the present article.

Article 8

When applying for a license for operation of a non-pharmaceutical precursor chemical, a business entity shall submit the following
documents and materials to the administrative department of work safety of the local people’s government at the provincial level,
and shall be responsible for the authenticity thereof:

(1)

A letter of application for the license for operation of the non-pharmaceutical precursor chemical (in duplicates);

(2)

Introduction materials of the production site and the warehousing facilities;

(3)

Precursor chemical management rules and the sales network documents containing the contents such as sales institutions, sales agencies
and users, etc.;

(4)

Materials proving that its legal representative or principal person-in-charge and its sales staff and managers have corresponding
knowledge on precursor chemicals and have no records on drug-involved crimes;

(5)

A counterpart of its industrial and commercial business license (the photocopy); and

(6)

Directions of the product package and the directions to use chemicals.

Where a producer belongs to hazardous chemical-producing enterprises, it shall, in addition, submit its license for operation of hazardous
chemicals (photocopy), without having to submit the documents and materials as required by Item (5) of the present article.

Article 9

The administrative departments of work safety of the people’s governments of all provinces, autonomous regions, or municipalities
directly under the Central Government shall handle the letters of application as well as the documents and materials submitted by
applicants respectively according to the following:

(1)

Where the issues in the application do not fall within its purview, it shall immediately issue a written document on refusing to accept
the application;

(2)

Where the application materials contain any error that may be corrected on the spot, it shall permit or require the applicant to correct
the aforesaid error on the spot;

(3)

Where the application materials are incomplete or fail to meet the requirements, it shall inform the applicant in written form once
for all of the contents to be supplemented either on the spot or within 5 working days. And it shall be deemed to have accepted the
application as of receipt of the application materials, if it fails to inform the applicant within the time limit; or

(4)

Where the application materials are complete, meet the requirements or are supplemented and corrected completely as required, it shall
be deemed to have accepted the application as of receipt of the application materials or as of full supplement and correction of
the materials.

Article 10

The administrative departments of work safety of the people’s governments of all provinces, autonomous regions, or municipalities
directly under the Central Government shall examine the accepted application materials, and may make on-site checks when necessary.

Article 11

As of the date of acceptance, the administrative departments of work safety of the people’s governments of all provinces, autonomous
regions, or municipalities directly under the Central Government shall make a decision on issuing or refusing to issue the license
within 60 working days in case of an application for the license for production of a non-pharmaceutical precursor chemical, or within
30 working days in case of an application for the license for operation of such a chemical.

Where an issuance is granted, it shall deliver the license to the applicant or notify the applicant to fetch the license within 10
working days as of making the decision; where an issuance is not granted, it shall notify the applicant in written form and explain
the reasons thereof within 10 working days.

Article 12

The valid term of a license for production or operation of a non-pharmaceutical precursor chemical shall be 3 years. Where the producer
or operator needs to continue producing or operating a non-pharmaceutical precursor chemical of Class I after the expiry of the valid
term of the license, it shall file an application for replacement of the license to the original administrative department that has
issued its license, and submit the corresponding materials within 3 months prior to the expiry of the valid term of the license,
and obtain a new license after examination to be qualified.

Article 13

Where a producer or operator of a non-pharmaceutical precursor chemical of Class I is under any of the following circumstances within
the valid term of its license for production or operation of the non-pharmaceutical precursor chemical, it shall apply for modification
of its license to the original administrative department that has issued its license:

(1)

Its legal representative or principal person-in-charge is changed;

(2)

Its name is changed;

(3)

The main flow of the licensed varieties is changed; or

(4)

Any variety needs to be added or the quantity needs to be increased.

As for the modification under Item (1) or (3) of the present article, the application shall be filed within 20 working days as of
the time of alteration; while for the modification under Item (2) of the present article, the application shall be filed after the
industrial and commercial business license is modified.

The producer or operator concerned shall provide the relevant materials which proves that the modified legal representative or principal
person-in-charge meets the requirements in Item (5) or (6) of Article 7 or Item (4) of Article 8 of the present Measures to apply
for the modification under Item (1) of the present article. The producer or operator concerned shall provide a counterpart of the
modified industrial and commercial business license (photocopy) to apply for the modification under Item (2) of the present article.
The producer or operator concerned shall separately provide the statement on the change of the main flow or the relevant information
required by Item (3) of Article 8 to apply for the modification under Item (3) of the present article. The producer or operator
concerned shall provide the relevant information required by Items (2), (3) and (8) of Article 7 or Items (2), (3) and (6) of Article
8 of the present Measures to apply for the modification under Item (4) of the present article.

Article 14

With respect to an accepted application for modification under Item (1), (2) or (3) of Article 13 of the present Measures, the administrative
department for the issuance of licenses may go through the procedures for modification of the license for production or operation
of the non-pharmaceutical precursor chemical concerned after checking the documents and materials submitted by the applicant.

With respect to an accepted application for modification under Item (4) of Article 13 of the present Measures, the administrative
department for issuance of licenses shall go through the procedures for modification of the license for production or operation of
the non-pharmaceutical precursor chemical in accordance with Article 10 and Article 11 of the present Measures.

Article 15

Where any of the original technicians, sales staff or managers of the producer or operator of a non-pharmaceutical precursor chemical
is changed, the newly appointed person shall have corresponding knowledge on work safety and precursor chemicals.

Article 16

Where the producer or operator of a non-pharmaceutical precursor chemical of Class I no longer produces or operates the non-pharmaceutical
precursor chemical, it shall go through the procedures for nullification of the license within 3 months after stopping the production
or operation.

Chapter III Archival Filing of Production and Operation

Article 17

Whoever produces or operates a non-pharmaceutical precursor chemical of Class II or Class III shall go through the archival filing
of production or operation of the non-pharmaceutical precursor chemical.

Article 18

Whoever produces a non-pharmaceutical precursor chemical of Class II or Class III shall report the varieties under production, the
quantity and etc. to the administrative department of work safety of the local people’s government at the districted city level for
archival filing within 30 working days as of the day of production.

Whoever operates a non-pharmaceutical precursor chemical of Class II shall report the varieties under operation, the quantity, the
main flow and etc. to the administrative department of work safety of the local people’s government at the districted city level
for archival filing within 30 working days as of starting operation.

Whoever operates a non-pharmaceutical precursor chemical of Class III shall report the varieties under operation, the quantity, the
main flow and etc. to the administrative department of work safety of the local people’s government at the county level for archival
filing within 30 working days as of starting operation.

Article 19

The producer of a non-pharmaceutical precursor chemical of Class II or Class III shall submit the following materials for archival
filing:

(1)

A letter of application for archival filing of the varieties, quantity, sales volume and etc. of the non-pharmaceutical precursor
chemical;

(2)

Precursor chemical management rules;

(3)

Directions of the product package and the directions to use chemicals; and

(4)

A counterpart of its industrial and commercial business license (photocopy).

Where a producer belongs to hazardous chemical-producing enterprises, it shall, in addition, submit its work safety license of hazardous
chemical production enterprise and its hazardous chemical registration certificate (photocopies), without having to submit the documents
and materials required by Item (4) of the present article.

Article 20

The operator of a non-pharmaceutical precursor chemical of Class II or Class III shall submit the following materials for archival
filing:

(1)

A letter of application for archival filing of the varieties for sale, sales volume, main flow and etc. of the non-pharmaceutical
precursor chemical;

(2)

Precursor chemical management rules;

(3)

Directions of the product package and the directions to use chemicals; and

(4)

A counterpart of its industrial and commercial business license (photocopy).

Where a producer belongs to hazardous chemical-producing enterprises, it shall, in addition, submit its license for operation of hazardous
chemicals, without having to submit the documents and materials required by Item (4) of the present article.

Article 21

The competent department for archival filing of production and operation of a non-pharmaceutical precursor chemical of Class II or
Class III shall issue the archival certificate on the same day of the receipt of the materials as prescribed in Article 19 or Article
20 of the present Measures for archival filing.

Article 22

The valid term of a certificate on archival filing of production and operation of a non-pharmaceutical precursor chemical of Class
II or Class III shall be three years. Where the producer or operator needs to continue the production or operation after the expiry
of the valid term, it shall go through the archival filing procedures once again within 3 months prior to the expiry of the valid
term of the archival certificate.

Article 23

Where the legal representative or principal person-in-charge, the name or the address of the producer or operator of a non-pharmaceutical
precursor chemical of Class II or Class III is changed, the producer or operator shall go through the archival filing procedures
once again within 30 working days as of modification of the industrial and commercial business license; while where any archived
variety for production or operation is added or the main flow is changed, the producer or operator shall go through the archival
filing procedures once again within 30 working days as of such change or addition.

Article 24

Where the producer or operator of a non-pharmaceutical precursor chemical of Class II or Class III no longer produces or operates
the non-pharmaceutical precursor chemical, it shall go through the procedures for nullification of the archival filing within 3 months
as of terminating the production or operation.

Chapter IV Supervision and Administration

Article 25

The administrative departments of work safety of the people’s government at the county level or above shall strengthen the supervision
and inspection over the production and operation of non-pharmaceutical precursor chemicals.

The administrative departments of work safety of a people’s government at the county level or above may check the scene, consult and
photocopy the relevant materials, record the relevant information, detain the relevant evidential materials and illegal articles
when supervising or inspecting the activities of producing or operating non-pharmaceutical precursor chemicals; and they may temporarily
seal up the relevant sites when necessary.

The entities or individuals under inspection shall truthfully provide the relevant information and articles, and shall not refuse
to provide or conceal them.

Article 26

A producer or operator shall report the information such as the varieties, quantity, main flow and etc. of the non-pharmaceutical
precursor chemical it produced or operated the last year to the administrative department of work safety that has granted the license
or handled the archival filing by March 31 of each year.

The administrative departments of work safety shall report the gathered information on the non-pharmaceutical precursor chemicals
produced and operated last year within their respective jurisdictions to the administrative departments of work safety at the higher
level within 10 working days as of receipt of a report.

Article 27

The administrative departments of work safety at each level shall set up archives on license and archival filing of non-pharmaceutical
precursor chemicals, and shall strengthen information management.

Article 28

An administrative department of work safety shall timely report the information on the licensing for production and operation of non-pharmaceutical
precursor chemicals as well as on the revocation of licenses and etc. to the public security organ or administrative department for
industry and commerce at the same level, and report the relevant information on issuance of licenses and archival certificates to
the administrative department of commerce.

Chapter V Penalty Provisions

Article 29

In case of any of the following acts, the administrative departments of work safety of the people’s government at the county level
or above may stop accepting the producer’s or operator’s application for licensing for production or operation of or for archival
filing of its non-pharmaceutical precursor chemical for 3 years as of the time when the department prescribed in Article 38 of the
Regulation makes the administrative penalty decision:

(1)

Unlawfully producing or operating non-pharmaceutical precursor chemicals without being licensed or archived;

(2)

Forging application materials to obtain the license for production or operation of or the certificate for archival filing of a non-pharmaceutical
precursor chemical by fraud;

(3)

Using others’ license for production or operation of or certificate for archival filing of a non-pharmaceutical precursor chemical;
or

(4)

Using a forged, altered or invalidated license for production or operation of or certificate for archival filing of a non-pharmaceutical
precursor chemical.

Article 30

In case of any of the following acts, the administrative departments of work safety of the people’s government at the county level
or above shall make a warning to the producer or operator, order it to make corrections within a time limit, and impose on it/him
a fine of 10,000 Yuan up to 50,000 Yuan; and the non-pharmaceutical precursor chemical which is produced or operated in violation
of provisions may be confiscated. Where the producer or operator fails to make corrections within the time limit, it shall be ordered
to stop production or operation within a time limit for rectification. Where it remains to be unqualified after the rectification
within the time limit, its corresponding license shall be revoked:

(1)

The producer or operator of a precursor chemical fails to accord with the provisions to establish precursor chemical management rules
or safety management rules;

(2)

It lends the license or archival certificate to others for use;

(3)

It produces or operates a non-pharmaceutical precursor chemical that exceeds the licensed varieties and quantity;

(4)

The directions of the package of the precursor chemicals and the directions to use such chemicals fail to meet the requirements as
prescribed in the Regulation; or

(5)

The producer or operator of a non-pharmaceutical precursor chemical fails to truthfully or timely report the information on annual
production or operation, etc. to the administrative department of work safety.

Article 31

Where an entity or individual who produces or operates a non-pharmaceutical precursor chemical refuses to accept the supervision and
inspection by the administrative departments of work safety, the administrative departments of work safety of the people’s government
at the county level or above shall order it to make corrections, and make a warning to the directly responsible person-in-charge
and other persons directly liable. Where the case is serious, the entity shall be imposed upon a fine of 10,000 Yuan up to 50,000
Yuan, while the directly responsible person-in-charge and the persons directly liable shall be imposed upon a fine of 1,000 Yuan
up to 5,000 Yuan.

Article 32

Where any of the working staff of an administrative department of work safety abuses his powers, neglects his duties, practices favoritism
for himself or his relatives or divulges an enterprise’s commercial secret during the administrative work, he shall be imposed upon
administrative sanctions according to law; where any crime is constituted, he shall be subject to criminal liabilities according
to law.

Chapter VI Supplementary Provisions

Article 33

The licenses for production or operation of non-pharmaceutical precursor chemicals and the certificates for archival filing thereof
shall be produced under the supervision of the State Administration of Work Safety.

The pattern and format of the annual report on non-pharmaceutical precursor chemicals and that of the letter of application for licensing,
archival filing or modification shall be prescribed by the State Administration of Work Safety.

Article 34

The present Measures shall come into force as of April 15, 2006. Attached Table:Catalogue of Classes and Varieties of Non-pharmaceutical Precursor Chemicals

Class I

1.

1-Phenyl-2-Propanone

2.

3, 4-Methylenedioxyphenyl-2-Propanone

3.

Piperonal

4.

Safrole

5.

Sassafras oil

6.

Isosafrole

7.

N-acetylanthranilic acid

8.

Anthranilic acid

Class II

1.

Penylacetic acid

2.

Acetic anhydride￿￿> 3.

Trichloromethane￿￿> 4.

Aether￿￿> 5.

Piperidine￿￿>

Class III

1.

Toluene￿￿> 2.

Acetone￿￿> 3.

Methyl ethyl ketone￿￿> 4.

Potassium permanganate￿￿> 5.

Sulfuric acid

6.

Hydrochloric acid￿￿>Notes:

1.

The salts that might contain the substances of Class I and Class II shall also be under control.

2.

The varieties marked with ‘￿￿are hazardous chemicals.



 
the State Administration of Work Safety
2006-04-05

 






OFFICIAL REPLY OF MINISTRY OF COMMERCE ON RELATED ISSUES OF TRANSACTING CONFIRMATION LETTER OF EXEMPTION OF FOREIGN-FUNDED ENTERPRISES OF ENCOURAGED CATEGORIES

Ministry of Commerce

Official Reply of Ministry of Commerce on Related Issues of Transacting Confirmation Letter of Exemption of Foreign-funded Enterprises
of Encouraged Categories

Ministry of Commerce

April 6, 2006

Departments of commercial administration of all provinces, autonomous regions, municipalities, separately listed cities in plan and
Xinjiang Production and Construction Corps:

1.

Since no adjustment has been made to regulations of “confirmation letter” and “import certification” and the formality procedures,
all departments should continue to implement the current regulations strictly.

2.

In accordance with above formality procedures and specific operating measures, functions, authorities and related requirements of
commercial departments of transacting “confirmation letter” and “import certification” remain unchanged. Please all commercial departments
continue to well accomplish tasks strictly in line with related regulations.

3.

All departments of commercial administration should strictly follow related regulations, go thorough formalities of exemption for
imported facilities of qualified foreign-funded enterprises and enhance overseas cooperation, reporting situations of transaction
to Ministry of Commerce for registration timely.

Ministry of Commerce will strengthen supervision and instruction on formalities of “confirmation letter” and “import certification”
below limitation, those unregistered or falling short of related regulations will be corrected or canceled. For cases of gross violation,
Ministry of Commerce will suspend releasing qualification of “confirmation letter” and “import certification”, and inform related
customs of suspending formalities of export exemption together with General Administration of Customs.

If encountering any problem, please report to Ministry of Commerce (Department of Foreign Investment Administration).

Ministry of Commerce

Apr 6, 2006



 
Ministry of Commerce
2006-04-06

 






STEVEDORING LEVY (COLLECTION) AMENDMENT REGULATIONS 2007 (NO. 1) (SLI NO 16 OF 2007) – REG 2

Commencement

These Regulations commence on the day after they are registered.

ADMINISTRATIVE MEASURES FOR THE SECURITIES REGISTRATION AND SETTLEMENT

Order of China Securities Regulatory Commission

No. 29

The Administrative Measures for the Securities Registration and Settlement are hereby promulgated and shall enter into effect as of
July 1, 2007.

Chairman of China Securities Regulatory Commission, Shang Fulin

April 7, 2006

Administrative Measures for the Securities Registration and Settlement
Chapter I General Provisions

Article 1

In order to regulate the securities registration and settlement activities, protect the lawful rights and interests of investors,
maintain the securities registration and settlement order, guard against the securities registration and settlement risks and safeguarding
the safe and efficient operation of the securities market, these Measures are formulated in accordance with the Securities Law, the
Company Law and other laws and administrative regulations.

Article 2

These Measures shall be applied to the registration and settlement of stocks, bonds, shares of securities investment funds, as well
as other securities and securities derivatives (hereinafter referred to as the securities) listed in the stock exchanges.

The registration and settlement business about the non-listed securities shall be carried out with reference to these Measures.

If there are separate provisions in the laws, administrative regulations or of China Securities Regulatory Commission (hereinafter
referred to as CSRC) about the registration and settlement business about the foreign capital stocks listed in China, such provisions
shall prevail.

Article 3

The principles of openness, fairness, equity, safety and efficiency shall be followed in the securities registration and settlement
activities.

Article 4

Securities registration and settlement institutions are non-profitable legal persons that provide centralized registration, depository
and settlement services for the securities trading.

The securities registration and settlement business shall be governed by the method of nationally centralized and unified operations,
and be dealt with in the form of the centralized and unified processing by securities registration and settlement institutions.

The securities registration and settlement institutions shall carry out the industrial self-discipline management.

Article 5

The securities registration and settlement activities shall be subject to the laws, administrative regulations, the provisions of
the CSRC and the business operational rules formulated by the securities registration and settlement institutions in accordance with
law.

Article 6

The CSRC shall supervise and administer the securities registration and settlement institutions as well as securities registration
and settlement activities according to law.

Chapter II Securities Registration and Settlement Institutions

Article 7

The establishment and dissolution of securities registration and settlement institutions shall be subject to the approval of the
CSRC.

Article 8

A securities registration and settlement institution shall perform the functions as follows:

(1)

The establishment and management of securities accounts and settlement accounts;

(2)

The depository and transfer of securities;

(3)

The registration of the roster of securities holders as well as the registration of their rights and interests;

(4)

The liquidation and delivery of securities and capital as well as the relevant management;

(5)

The distribution of securities rights and interests upon the strength of the entrustment of issuers;

(6)

Providing the inquiry, information, consultancy and training services relating to the securities registration and settlement business
according to law; and

(7)

Other businesses as approved by the CSRC.

Article 9

A securities registration and settlement institution shall not carry out any of the activities as follows:

(1)

The investments that are irrelevant to the securities registration and settlement business;

(2)

Purchasing non-self-use real estate;

(3)

Purchasing or selling securities not under Article 65 or 66 of these Measures; or

(4)

Other activities as prohibited by the laws, administrative regulations or the CSRC.

Article 10

The following matters of securities registration and settlement institutions shall be reported to the CSRC for approval:

(1)

The formulation or revision of Articles of association or business operational rules;

(2)

The important international cooperation and communication activities or the important affairs related to Hong Kong, Macao or Taiwan;

(3)

The formulation or adjustment of main charging items or rates related to the securities registration and settlement;

(4)

The appointment or removal of the chairman or deputy chairman of the board of directors, the general manager or deputy general manager;
or

(5)

Other matters that shall be reported to the CSRC for approval.

The “business operational rules” as mentioned in the Item (1) of the preceding Paragraph means the rules about the securities registration
and settlement business, such as the management of securities accounts, securities registration, securities custody and depository,
securities settlement and management of settlement participants of the securities registration and settlement institutions.

Article 11

The following matters and documents of securities registration and settlement institutions shall be reported to the CSRC:

(1)

The detailed rules for the business operations;

(2)

The formulation or alteration of the business management rules, the business resumption plans and the emergency handling procedures;

(3)

The handling of the registration and settlement business related to new securities varieties or the alteration of the modes for registration
and settlement business;

(4)

The acquisition or deprivation of the qualifications of settlement participants or settlement banks;

(5)

The discovery of significant business operational risks or technical risks, significant illegal or irregular acts, or the involvement
in significant lawsuits;

(6)

The appointment or removal of the general manager of any subsidiary, the assistant of the general manager of the company, or the person-in-charge
of a department of the company;

(7)

Annual work reports on the relevant business operations or the conditions on the implementation of the relevant state provisions;

(8)

Annual financial reports audited by an accountant firm, schemes on financial budgets and final accounts, projects with large expenses,
the hiring or replacement of accountant firms;

(9)

The main business cooperation agreements reached with stock exchanges, and the sample formats of various business agreements reached
with the securities issuers, settlement participants and settlement banks; and

(10)

Other matters and documents that the CSRC requires reporting.

Article 12

A securities registration and settlement institution shall properly keep the original vouchers as well as the relevant documents
and materials about the registration, depository and settlement, which shall be kept for not less than 20 years.

Article 13

A securities registration and settlement institution shall manage the data and materials exclusively, which formulates for the securities
registration and settlement business. Without the consent of the securities registration and settlement institution, any organization
or individual may not use the data and materials under exclusive management for any commercial purpose.

Article 14

A securities registration and settlement institution and its staff members shall keep confidential the data and materials related
to the securities registration and settlement business according to law.

A securities registration and settlement institution shall refuse the inquiry of the data and materials related to the securities
registration and settlement, except for the circumstances as follows:

(1)

The securities holder inquires about his or its’ own securities materials;

(2)

The securities issuer inquires about the roster of securities holders and the relevant materials;

(3)

The stock exchange requires the securities registration and settlement institution to provide the relevant data and materials in order
to perform its functions according to law; or

(4)

The people’s court, the people’s procuratorate, the public security organ or the CSRC inquires or obtains evidences in the light of
statutory conditions and procedures.

A securities registration and settlement institution shall take effective measures to facilitate the securities holders’ inquiry about
the holding records of their own securities.

Article 15

A securities registration and settlement institution shall make public its business operational rules, and the main charging items
and rates related to the securities registration and settlement.

If a securities registration and settlement institution formulates or revises its business operational rules, adjusts the main charging
items or rates related to the securities registration and settlement, it shall solicit the opinions of the relevant market participants.

Article 16

The staff members of securities registration and settlement institutions shall be dedicated to their posts, deal with affairs according
to law, and shall not seek for unjustifiable interests by taking advantage of their posts or divulge the business secrets of relevant
entities or individuals they have known.

If a securities registration and settlement institution violates the Securities Law or these Measures, the CSRC shall give it an administrative
punishment; and the principal and other persons who are directly responsible for shall be subject to administrative punishments.

Chapter III Management of Securities Accounts

Article 17

An investor shall hold the securities through his securities accounts, and the securities accounts shall be used for recording the
balance of securities held by the investor as well as the information on the change of securities.

Article 18

The securities shall be recorded in the securities accounts of the securities holders themselves, however, if any of the laws, administrative
regulations or the CSRC prescribe that the securities may be recorded in the securities accounts of a nominal holder, such provisions
shall prevail.

In order to perform their duties according to law, a securities registration and settlement institution may require a nominal holder
to provide the relevant materials about the owners of securities rights and interests under its name.

Article 19

An investor shall submit an application to a securities registration and settlement institution to open a securities account.

Applying for opening a securities account, an investor shall ensure that the materials he/it submits for opening the account are true,
accurate and integral.

Article 20

A securities registration and settlement institution may directly open securities accounts for investors, or may entrust securities
companies to do so.

A securities registration and settlement institution shall follow the principles of facilitating investors and optimizing the allocation
of account resources when opening securities accounts for investors.

Article 21

Where a securities company opens a securities account on commission, it shall apply to a securities registration and settlement institution
for the acting qualification for opening accounts.

When opening securities accounts on commission, a securities company shall examine the authenticity, accuracy and integrity of the
originals of valid identity cards and other account opening materials provided by the investors in the light of the business operational
rules of the securities registration and settlement institution, and the relevant account opening materials shall be properly kept
for not less than 20 years.

Article 22

The investor may not provide his/its securities account to any other person to use.

Article 23

According to the business operational rules, a securities registration and settlement institution shall supervise over the opening
of securities accounts by the acting account opening institutions. If the acting account-opening institution violates the business
operational rules, the securities registration and settlement institution may suspend or cancel its acting qualification for opening
accounts in the light of the business operational rules, and ask the CSRC to suspend or cancel its relevant licensed securities business
in accordance with the relevant provisions; and the principal and other persons held to be directly responsible shall singly or concurrently
be subject to warning, fine, revocation of practicing qualifications or securities practicing qualifications, etc.

Article 24

A securities company shall keep informed of the materials and the credit status of its clients, and supervise over the use of securities
accounts of its clients. If a securities company finds that any of its clients commits any illegal act during the course of using
the securities account, it shall handle it in the light of the business operational rules of the securities registration and settlement
institution, and timely report it to the securities registration and settlement institution and the stock exchange. If any legal
person establishes a securities account in any other’s name or makes use of the securities account of any other’s for purchasing
and selling of securities, the securities company shall also report it to the CSRC, which shall punish it in accordance with law.

Article 25

If an investor commits the illegal act during the period of opening or using a securities account, the securities registration and
settlement institution shall, according to law, take measures to limit the use of or write off the illegal securities account, etc.

Chapter IV Securities Registration

Article 26

An issuer of listed securities shall entrust a securities registration and settlement institution to deal with the registration of
the securities it has issued.

A securities registration and settlement institution shall reach a securities registration and service agreement with the securities
issuer that entrusts it to deal with the securities registration business and specify the rights and obligations of both parties.

A securities registration and settlement institution shall formulate and publish the model texts of securities registration and service
agreements.

A securities registration and settlement institution may deal with the registration of listed governmental bonds according to the
requirements of the competent department for government bonds.

Article 27

In accordance with the records of securities accounts, a securities registration and settlement institution shall confirm the facts
of the securities holders’ holding the securities, and implement the registration of the roster of securities holders.

Article 28

After the public issuance of securities, a securities issuer shall submit the roster of securities issuers that have issued the securities
and other relevant materials to the securities registration and settlement institution. The securities registration and settlement
institution shall deal with the initial registration of the roster of securities issuers based thereon.

A securities issuer shall guarantee the legality, truthfulness, accuracy and integrity of the materials it submits. A securities registration
and settlement institution shall not be responsible for the losses and legal consequences incurred from the mistakes in the roster
of securities issuers or other relevant materials made by the securities issuers.

Article 29

Where the securities are listed and traded in a stock exchange, the securities registration and settlement institution shall deal
with the alteration registration of the roster of securities issuers according to the delivery results of the securities transactions.

If the securities are transferred by way of agreement-based transfer, inheritance, compulsory enforcement or administrative appropriation,
the securities registration and settlement institution shall alter the balance of the relevant securities account in the light of
its business operational rules, and deal with the corresponding alteration registration of the roster of securities issuers.

If the securities are mortgaged, locked or frozen and thus the rights of the owner thereof are limited, the securities registration
and settlement institution shall indicate it on the roster of securities holder.

Article 30

A securities registration and settlement institution shall guarantee the truthfulness, accuracy and integrity of the roster of securities
holders and the transfer registration records, and shall not disguise, forge or destroy any of them.

Article 31

In the light of its business operational rules and the agreements, a securities registration and settlement institution shall regularly
circulate the roster of securities holders and other relevant materials to the securities issuers.

Article 32

If a securities issuer applies for providing the distribution of rights and interests and other agency services, it shall submit
the relevant materials and pay the money to the securities registration and settlement institution in the light of the business operational
rules and the agreement.

If a securities issuer fails to perform the aforesaid obligation in time, the securities registration and settlement institution has
the right to delay or refuse the handling thereof, and the securities issuer shall issue an announcement and explain the relevant
conditions in time.

Article 33

If a securities issuer or its liquidation group terminates the securities registration or other relevant service agreement, the securities
registration and settlement institution shall provide it with the roster of securities holders and other registration materials according
to law.

Chapter V Custody and Depository of Securities

Article 34

An investor shall entrust a securities company with the custody of its securities, and the securities company shall keep its own
securities and the securities of its clients under its custody at a securities registration and settlement institution, except for
being otherwise prescribed by the laws, administrative regulations or the CSRC.

Article 35

A securities registration and settlement institution shall set up general ledgers for the securities of the securities companies’
clients and general ledgers for its own securities for the statistics of the securities of the securities companies’ clients and
its own securities.

A securities company shall entrust a securities registration and settlement institution to maintain for its clients’ securities account
and its own securities account, except for being otherwise prescribed by the laws, administrative regulations or the CSRC.

Article 36

When buying or selling securities, an investor shall conclude a securities trading, trusteeship and settlement agreement with a securities
company.

A securities registration and settlement institution shall formulate and publish the necessary Articles of the securities registration
and settlement in the securities trading, custody and settlement agreement. The necessary Articles shall include but not be limited
to the contents as follows:

(1)

The securities company shall submit an application for the trading of securities upon the strength of the entrustment of its client
and in the light of the securities trading rules, complete the delivery of securities and capital with its client according to the
transaction results, and assume the corresponding obligations of delivery; while the client shall allow the securities company to
entrust a securities registration and settlement institution to deal with the securities delivery between its/his securities account
and the securities delivery account of the securities company after concentrated transactions;

(2)

If a pledge-type repurchase transaction is implemented, the investor and the securities company shall submit the pledged coupons for
repurchase to the securities registration and settlement institution in the light of the business operational rules. The relationship
of credits and debts between the investor and the securities company shall not affect the securities registration and settlement
institution, which, in the light of the business operational rules, carries out its right to the pledged coupons as submitted by
the securities company; and

(3)

The securities company may entrust the securities registration and settlement institution to transfer the net bought-in securities
into its securities disposal account when a client defaults in the delivery of capital, and require the client to make up the capital
within the stipulated time limit. The securities company may refuse to transfer the capital equivalent to the amount of defaulted
securities to the client temporarily when a client defaults in the delivery of securities.

Article 37

A securities company shall report the matters concerning the establishment, alteration and termination of securities custody relationships
with its clients to the securities registration and settlement institution.

The aforesaid matters shall be recorded down by the securities registration and settlement institution.

Article 38

If a client requires the securities company to transfer its/his securities to an other securities company for custody, the relevant
securities company shall handle it according to the relevant business operational rules of the stock exchange and the securities
registration and clearing institution, and shall not refuse to do so except for being otherwise prescribed by laws, administrative
regulations or the CSRC.

Article 39

A securities company shall take effective measures to ensure the safety of the securities under custody, and shall not misappropriate
or sell the aforesaid securities without authorization.

A securities registration and clearing institution shall take effective measures to ensure the safety of the securities it keeps,
and shall not misappropriate or sell the aforesaid securities without authorization.

Article 40

The pledge, lock-up, freeze or deduction of securities shall be managed by the securities company, which entrusts the custody of
the securities and the securities registration and settlement institution in the light of the relevant provisions as set down by
the securities registration and settlement institution.

Chapter VI Liquidation and Delivery of Securities and Capital

Article 41

To participate in the centralized liquidation and delivery of securities and capital, a securities company shall apply to the securities
registration and settlement institution for obtaining the qualification of a settlement participant, conclude a settlement agreement
with the securities registration and settlement institution and specify the obligations and obligations of both parties.

If the securities company has not obtained the qualification of a settlement participant, it shall conclude an entrusted settlement
agreement with a settlement participant so as to entrust the settlement participant for the centralized liquidation and delivery
of securities and capital on its behalf.

The model texts of the settlement agreement and the entrusted settlement agreement shall be formulated and published by the securities
registration and settlement institution.

Article 42

A securities registration and settlement institution shall choose a qualified commercial bank as the settlement bank for dealing
with the capital transfer.

The conditions for settlement banks shall be prescribed by the securities registration and settlement institution.

Article 43

The settlement of securities and capital shall be governed by the principle of graded settlement. The securities registration and
settlement institution shall take charge of dealing with the centralized liquidation and delivery between itself and the settlement
participants; and the settlement participants shall be responsible for handling the centralized liquidation and delivery between
themselves and their own clients.

Article 44

A securities registration and clearing institution shall establish an account of centralized securities delivery and an account of
centralized capital delivery so as to deal with the centralized liquidation and delivery between itself and the settlement participants.

In accordance with the rules as set down by the securities registration and settlement institution, a settlement participant shall
apply for opening an account of centralized securities delivery and an account of centralized capital delivery so as to deal with
the delivery of securities and capital. A settlement participant engaging in the self-management business and the brokerage business
simultaneously shall apply for opening an account of self-management securities and capital delivery and an account of the clients’
securities and capital delivery separately for dealing with the self-management securities and capital delivery and the securities
and capital delivery for the brokerage business.

Article 45

If a securities registration and settlement institution adopts the method of multi-lateral netting settlement, it shall act as a
central counter party (CCP) of the settlement participants in accordance with the business operational rules, and deal with the liquidation
and delivery by taking a settlement participant as a settlement unit in the light of the principle of delivery versus payment (DVP).

Article 46

The settlement agreement concluded by a securities registration and settlement institution and the settlement participant in the
multi-lateral netting settlement shall include:

(1)

As to a securities exchange contract for which the settlement participant takes charge of settlement, the right of both settlement
participants to the aforesaid contract to collect the securities or capital from the opposite party and the obligation of the aforesaid
opposite party to pay the capital or securities shall be both transferred to the securities registration and settlement institution;
and

(2)

The securities registration and settlement institution shall enjoy the right and perform the obligation of both settlement participants
to the original contract to the opposite party after accepting the right and obligation prescribed in the preceding paragraph.

Article 47

When a securities registration and settlement institution implements multi-lateral netting liquidation, it shall compute the net
amounts receivable and payable according to the netting of the securities and capital of the settlement participants, and notify
the liquidation results to the settlement participants upon conclusion of the liquidation in time.

If a securities registration and settlement institution adopts the other settlement method, it shall implement the liquidation in
accordance with the relevant business operational rules.

Article 48

Before conducting a centralized delivery, a settlement participant shall collect the securities and capital payable from its clients,
and shall retain sufficient securities and capital in its securities delivery account and its capital delivery account.

The securities transfer between a settlement participant and its clients shall be dealt with by a securities registration and settlement
institution on commission.

Article 49

In the period of a centralized delivery, a securities registration and settlement institution shall collect the capital and securities
payable from the settlement participants at the time of delivery, and shall deliver the securities and capital receivable at the
same time. The delivery may not be revoked after being completed.

If a settlement participant has not sufficiently performed the obligation of securities or capital delivery, it cannot obtain the
corresponding capital or securities.

With respect to a settlement participant which engages in the self-management business and the brokerage business or asset management
business simultaneously, the securities registration and settlement institution can use the capital in the self-management capital
delivery account of the aforesaid settlement participant to complete the delivery if the capital in its client’ capital delivery
account is not sufficient.

Article 50

A settlement participant shall deliver the securities and capital receivable to its clients after conducting a centralized delivery.

The securities transfer between a settlement participant and its clients shall be dealt with by a securities registration and settlement
institution on commission.

Article 51

A securities registration and settlement institution shall, in the settlement business operational rules, separately prescribe the
time limits for the centralized delivery of securities and capital between the settlement participants and itself as well as the
centralized delivery of securities and capital between a settlement participant and its clients.

A settlement participant shall accomplish the work of delivering the securities and capital within the prescribed time limit for delivery.

Article 52

Where the liquidation results are wrong because of the securities registration and settlement institution, the settlement participant
may require the securities registration and settlement institution to make corrections after performing the obligation of delivery,
and assume the direct losses it has suffered.

Chapter VII Risk Prevention and Handling of Delivery Default

Section I Risk Prevention and Control Measures

Article 53

A securities registration and settlement institution shall take the measures as follows so as to strengthen the risk prevention and
control of the securities registration and settlement business:

(1)

Constituting perfect risk prevention rules and internal control rules;

(2)

Establishing a perfect technical system, and formulating technical standards and criteria that shall be observed by all settlement
participants;

(3)

Establishing perfect entrance standards and risk evaluation system for the settlement participants and the settlement banks; and

(4)

Making backups for the settlement data and the technical system, and formulating business-related emergency dealing with procedures
and operational procedures.

12Page 1 of 2

CONSTITUTION ACT, 1982 – page 22

NOTES (1) The enacting clause was repealed by the Statute Law Revision Act, 1893, 56-57 Vict., c. 14 (U.K.). It read as...

CONSTITUTION ACT, 1982 – page 21

CONSTITUTION ACT, 1982 – page 20

CONSTITUTION ACT, 1982 – page 19

CONSTITUTION ACT, 1982 – page 18

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