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INTERPRETATION OF THE SUPREME PEOPLE’S COURT ON SOME MATTERS ABOUT THE APPLICATION OF LAW IN THE TRIAL OF CIVIL CASES INVOLVING UNFAIR COMPETITION

Announcement of the Supreme People’s Court

Fa Shi [2007] No. 2

The Interpretation of the Supreme People’s Court on Some Matters about the Application of Law in the Trial of Civil Cases Involving
Unfair Competition, has been adopted by the 1412th meeting of the Judicial Committee of the Supreme People’s Court on December 30,
2006. It is hereby promulgated and shall enter into force as of February 1, 2007.
The Supreme People’s Court

January 12, 2007

Interpretation of the Supreme People’s Court on Some Matters about the Application of Law in the Trial of Civil Cases Involving Unfair
Competition

(Adopted at the 1412th meeting of the Judicial Committee of the Supreme People’s Court on December 30, 2006 )

For the purpose of correctly hearing the civil cases involving unfair competition, lawfully protecting the legitimate rights and interests
of business operators, and maintaining the order of market competition, the present Interpretation is constituted in accordance with
the General Principles of the Civil Law of the People’s Republic of China, the Anti-unfair Competition Law of the People’s Republic
of China, and the Civil Procedure Law of the People’s Republic of China and in combination with the experiences and actual situation
of the trial practice.

Article 1

Well-known commodities as stipulated in Subparagraph (2) of Article 5 of the Anti-unfair Competition Law refer to those commodities
that have certain market popularity within the territory of China and are known by the public concerned. The people’s court shall
take into account the time, region, volume and targets for selling such commodities, the duration, degree and scope for any promotion
of such commodities, as well as the protection situation as well-known commodities, and make comprehensive judgments when affirming
well-known commodities. The burden of proof for the market popularity of commodities shall be assumed by the plaintiff.

In case an identical or similar name, package or ornament with that typical to a well-known commodity is used within a different region,
it will not constitute the unfair competition as stipulated in Subparagraph (2) of Article 5 of the Anti-unfair Competition Law
if the later user can prove its good faith in using it. Where the sources of commodities of the earlier user are confused due to
the later business activities conducted within the same zone, the people’s court shall give support when the earlier user pleads
the court to order the later to add other signs to make a distinction on the sources of its commodities.

Article 2

In case the name, package and ornament of commodities is the notable characteristics for distinguishing the source of commodities,
it shall be deemed as the typical name, package and ornament as stipulated in Subparagraph (2) of Article 5 of the Anti-unfair Competition
Law. In case of any of the following circumstances, the people’s court shall not ascertain them as the typical name, package and
ornament of well-known commodities:

(1)

the commonly-used name, graphics or model of the commodities;

(2)

the name of the commodities that just directly specifies the quality, major raw materials, functions, utilities, weight, quantity
or any other characteristic of the commodities;

(3)

the shape produced due to the nature of the commodities, the shape of the commodities that should be produced for the purpose of obtaining
technical effects, as well as the shape that produces substantial value to the commodities; or

(4)

other name, package or ornament of the commodities that has no notable characteristic.

In case the notable characteristic occurs upon use under any circumstance as stipulated in Subparagraph (1), (2) or (4) of the preceding
paragraph, it can be regarded as a typical name, package and ornament.

In case the typical name, package or ornament of a well-known commodity includes the name, graphics, or model common to the said commodity
in question, or directly indicates the quality, major raw materials, functions, utilities, weight, quantity or any other characteristic
of the said commodity, or involves the name of the place, if it is used by any other party for narrating commodities impartially,
it shall be deemed that an unfair competition is not constituted.

Article 3

In case the ornament of the business place, the pattern of business appliances, or the clothes of operating personnel, and etc. constitutes
an overall business image with a unique style, it may be ascertained as the ornament as stipulated in Subparagraph (2) of Article
5 of the Anti-unfair Competition Law.

Article 4

In case of any confusion concerning the source of a commodity in the public concerned, including the misapprehension of such a typical
relationship as licensed use or affiliation with the business operator of a well-known commodity, it shall be regarded as causing
the confusion with the well-known commodity of someone else, and making the consumers mistake it to be a well-known commodity as
stipulated in Subparagraph (2) of Article 5 of the Anti-unfair Competition Law.

In case any identical name, package or ornament of a commodity or the one that is no difference with the forged one in terms of visual
effect is used on the same commodity, it shall be deemed as sufficiently to cause the confusion with the well-known commodity of
someone else.

The identity or similarity with the typical name, package or ornament of a well-known commodity may be ascertained with reference
to the principles and methods for judging identical or similar trademarks.

Article 5

In case the name, package or ornament of a commodity is a sign that can not be used as a trademark as stipulated in Paragraph 1 of
Article 10 of the Trademark Law, if the party concerned applies to the court for protection in accordance with Subparagraph (2)
of Article 5 of the Anti-unfair Competition Law, the people’s court shall not give support.

Article 6

A name of any enterprise registered by the enterprise registration competent authority, or a name of any foreign enterprise used
within the territory of China for commercial use shall be ascertained as an enterprise name as stipulated in Subparagraph (3) of
Article 5 of the Anti-unfair Competition Law. A shop name in the name of enterprise that has certain market popularity and is acknowledged
by the public concerned may be ascertained as a enterprise name as stipulated in Subparagraph (3) of Article 5 of the Anti-unfair
Competition Law.

The name of any natural person used in the business operation of commodities shall be ascertained as a name as stipulated in Subparagraph
(3) of Article 5 of the Anti-unfair Competition Law. The pen name or stage name of any natural person that has certain market popularity
and is acknowledged by the public concerned may be ascertained as a name as stipulated in Subparagraph (3) of Article 5 of the Anti-unfair
Competition Law.

Article 7

As regards the commercial use within the territory of China that includes the use of the typical name, package or ornament of a well-known
commodity, or use of the enterprise post_title or name for a commodity, commodity packages or commodity exchange documents, or for advertisements,
exhibitions or any other commercial activities, it shall be ascertained as the use as stipulated in Subparagraphs (2) and (3) of
Article 5 of the Anti-unfair Competition Law.

Article 8

In case of any of the following acts committed by a business operator, if it is sufficient to cause the misapprehension of the public
concerned, it may be ascertained as a false or misleading promotion as stipulated in Paragraph 1 of Article 9 of the Anti-unfair
Competition Law:

(1)

implementing biased or contrastive promotion of commodities;

(2)

implementing the promotion of commodities by adopting unsure scientific viewpoints or phenomena as the facts for final conclusions;
or

(3)

implementing the promotion of commodities by way of using vague language or other deceptive methods.

In case the commodities are publicized by way of obviously exaggerating, if it is insufficient to cause the misapprehension of the
public concerned, it shall not be ascertained as the false or misleading promotion.

The people’s court shall ascertain the false or misleading promotion in light of daily life experiences, the general attention of
the public concerned, the fact misunderstood, as well as the reality of the promotion objects, and etc..

Article 9

If the related information may not be aware of by the related personnel in the field therefrom and is difficult to be obtained, it
shall be ascertained as unknown to the public as stipulated in Paragraph 3 of Article 10 of the Anti-unfair Competition Law.

In case of any of the following circumstances, it may be ascertained that the related information is not unknown to the public:

(1)

It is the common sense or industrial practice as known by people in the related technical or economic field;

(2)

It only involves the simple combination of dimensions, structures, materials and components of products, and can be directly obtained
by observing the products by the public concerned after the products enter into the market;

(3)

It has been publicly revealed on any publication or any other mass medium;

(4)

It has been publicized by reports or exhibits;

(5)

It can be obtained through other public channels; or

(6)

It can be easily obtained with no price.

Article 10

In case the related information has practical or potential commercial value, and can be used for enhancing the competitive advantage
for the obligee, it shall be ascertained as capable of bringing about benefits to the obligee, and having practical applicability
as stipulated in Paragraph 3 of Article 10 of the Anti-unfair Competition Law.

Article 11

If the obligee takes proper protection measures that is suitable for the commercial value or any other specific circumstance for
the purpose of avoiding information divulgence, it shall be deemed as confidentiality measures as stipulated in Paragraph 3 of Article
10 of the Anti-unfair Competition Law.

The people’s court shall ascertain whether the obligee has taken confidentiality measures in accordance with the features of the related
information carrier, the willingness for keeping secret of the obligee, the identifiability degree of the confidentiality measures,
the difficulty for others to obtain it by justifiable methods and other elements.

In case of any of the following normal circumstances that is sufficient to prevent the divulge of any classified information, it shall
be ascertained that the obligee has taken the confidentiality measures:

(1)

To limit the access scope of the classified information, and the contents shall only be notified to related personnel that must be
aware of the information;

(2)

To take such preventive measures as locking the carrier of the classified information up;

(3)

To tag a confidentiality sign on the carrier of classified information;

(4)

To adopt passwords or codes on the classified information;

(5)

To conclude a confidentiality agreement;

(6)

To limit visitors to the classified machinery, factory, workshop or any other place or bring forward any confidentiality request;
or

(7)

Any other reasonable measure for guaranteeing the confidentiality of information.

Article 12

As regards obtaining business secrets through development and research by itself or reverse engineering, it shall not be ascertained
as an infringement upon business secrets as stipulated in Subparagraphs (1) and (2) of Article 10 of the Anti-unfair Competition
Law.

Reverse engineering referred to in the preceding paragraph means to obtain the related technical information on the products in technical
methods by way of disassembling, mapping or analyzing the products gotten from public channels. Any party concerned that knows the
business secrets of someone else by unjustifiable methods and then claims its acquisition as lawful in excuse of reverse engineering
shall not be supported.

Article 13

The name list of clients among business secrets generally refers to the special client information that is different from related
public information, including the name, address, contact information, business habits, intent, and contents of the clients and comprise
the name roll of clients that collects lots of customers as well as the specific customers that have kept a long-term and stable
transaction relationship.

In case a client develops market transactions with the entity due to relying on an employee thereof, after this employee leaves his
post, if it can be proved that this client voluntarily chooses to perform market transactions with the said employee or the new entity
he works for, it shall be ascertained that no unfair methods has been adopted, except it is otherwise stipulated between this employee
and the former entity.

Article 14

As regards any party concerned that claims that someone else has infringed upon its business secret, it shall be responsible for
providing proof to verify that its business secret satisfies the statutory requirements, the information of the other party concerned
is identical or substantially identical with its business secret, and the other party concerned has adopted unfair methods. Among
others, the evidence for proving that its business secret satisfies the statutory requirements shall comprise the carrier, specific
contents, and commercial value of this business secret as well as the specific confidentiality measures taken for this business secret.

Article 15

If the licensee of the license contract for sole use of the business secret raises an action as regards infringement upon any business
secret, it shall be accepted by the people’s court in accordance with related laws.

If the licensee of the license contract for exclusive use, jointly with the obligee, raises an action, or the licensee raises an action
independently under the circumstance that the obligee may not do so, it shall be accepted by the people’s court in accordance with
the related laws.

If the licensee of the license contract for common use, jointly with the obligee, raises an action, or the licensee raises an action
independently upon authorization of the obligee in written form, it shall be accepted by the people’s court in accordance with the
related laws.

Article 16

When the people’s court make an adjudication of the civil liability to stop the infringement on any business secret, the time for
stopping the infringement shall generally be prolonged to the time when this business secret has been aware of by the general public.

In case the time for stopping the infringement arbitrated in accordance with the preceding paragraph is clearly unacceptable, if it
is under the circumstance that the competitive advantage of the obligee to this business secret is protected, the infringer may be
ordered to stop using this business secret within a certain period or scope.

Article 17

As regards determining the damages for the acts infringing on business secrets as stipulated in Article 10 of the Anti-unfair Competition
Law, it may be performed with reference to the methods of determining damages for patent infringements, and as regards determining
the damages for the unfair competition acts as stipulated in Article 5 , 9 or 14 of the Anti-unfair Competition Law, it may be performed
with reference to the methods of determining damages for infringing upon registered trademark rights.

If any business secret has been aware of by the general public due to any tort, the damages shall be determined subject to the commercial
value of this business secret. The commercial value of this business secret shall be ascertained in light of such elements as the
research and development costs, the income from implementing this business secret, possible benefits, and the time for maintaining
the competitive advantage, and etc..

Article 18

The power to adjudicate the civil cases of the first instance concerning the unfair competition as stipulated in Article 5 , 9, 10
or 14 of the Anti-unfair Competition Law shall generally remain with the intermediate people’s court.

Each higher people’s court may determine some grass-roots people’s courts to accept the civil cases of the first instance concerning
unfair competition in accordance with the actual situation of its jurisdiction and upon approval of the Supreme People’s Court, and
those grass-roots people’s courts that have been approved to hear civil cases regarding intellectual property may continue the acceptance
of cases concerning unfair competition.

Article 19

The present Interpretation shall enter into force as of February 1, 2007.



 
The Supreme People’s Court
2007-01-12

 






CIRCULAR OF THE MINISTRY OF FINANCE, STATE DEVELOPMENT AND REFORM COMMISSION, GENERAL ADMINISTRATION OF CUSTOMS AND STATE ADMINISTRATION OF TAXATION ON IMPORT TAXATION POLICIES TO IMPLEMENT THE OPINIONS OF THE STATE COUNCIL OF INVIGORATING EQUIPMENT MANUFACTURING

Circular of the Ministry of Finance, State Development and Reform Commission, General Administration of Customs and State Administration
of Taxation on Import Taxation Policies to Implement the Opinions of the State Council of Invigorating Equipment Manufacturing

Cai Guan Shui [2007] No. 11

The competent departments of finance, development and reform (planning), economy and trade, and taxation at various levels in all
provinces, autonomous regions, municipalities directly under the Central Government and cities specifically designated in the state
plan, the finance bureau and development and reform committee of Xinjiang Production and Construction Corps, Guangdong Sub-Administration
of China Customs and the customs offices directly affiliated to the General Administration of Customs, the offices of financial inspection
commissioners in all provinces, autonomous regions, municipalities directly under the Central Government and cities specifically
designated in the state plan:

For the purpose of raising core competitiveness and capacity for independent innovation of domestic enterprises, promoting the development
of equipment manufacturing and implementing the preferential policies of import taxation to invigorate the equipment manufacturing,
it is hereby notified:

I.

In the key equipment manufacturing areas which have been ascribed by the State Council to be effective in promoting the sustainable
development of national economy and stimulating for industrial restructuring, upgrading and enterprise innovation (see Appendix I),
the Ministry of Finance will formulate special import taxation policies together with State Development and Reform Commission, General
Administration of Customs and State Administration of Taxation and refund the previously levied import tariffs and value-added taxes
for the key parts and accessories imported for development and manufacturing of these equipment, and raw materials which cannot be
produced domestically. The refunded money will be generally used as national investment to the research and development of new products
and the cultivation of capacity for independent innovation.

II.

With the detailed knowledge of development, manufacturing, supply and demand at home and abroad, as well as the domestic production
of key parts and accessories and raw materials of various key technological equipment, Ministry of Finance will, together with State
Development and Reform Commission, General Administration of Customs and State Administration of Taxation, formulate special import
taxation policies with respect to the key areas of equipment manufacturing, including the specifications and requirements of various
key equipment, the scope of the key parts and accessories which have to be imported for equipment manufacturing and of the raw materials
which cannot be produced domestically, as well as the disposition of refunded tax. The special import taxation policies for the aforementioned
areas will be implemented after the Ministry of Finance discusses with the departments concerned.

III.

As of the announcement of special import taxation policies, the manufacturing enterprises of relevant key technological equipment,
should they need to import the key parts and accessories and raw materials within the scope of the import taxation policy, may file
the application of enjoying the preferential policy to the Ministry of Finance through the provincial government or the provincial
department of finance; enterprises under the central government may file the application directly to the Ministry of Finance (see
the Appendix II for the document of application).

IV.

The Ministry of Finance will examine the documents submitted by the enterprises for tax refund and will invite State Development and
Reform Commission and so on to assess the specifications of technological equipment developed and manufactured by the applying enterprises
and see whether they are in consistent with the policy. The Ministry of Finance shall give a response to the applying enterprises
within 40 days after they receive the application. A confirmation will be issued by the Ministry of Finance to the enterprises which
are confirmed to have met the conditions of tax refund and the time limit will be specified for the refunded tax to be used as national
capital.

V.

The manufacturing enterprises of relevant key technological equipment shall make separate customs declaration for goods listed on
the catalogue which enjoy special import taxation policies. Those which have obtained the confirmation of tax refund issued by the
Ministry of Finance shall go through the procedures for the refund in the local customs with it. The specific procedures shall be
in line with the Circular of the Ministry of Finance, State Economy and Trade Commission, State Administration of Taxation and General
Administration of Customs on Rebating Some of the Imported Goods ([1994] No.42).

VI.

The enterprises shall, after they receive the refund, transfer the refunded money to national capital within time limits, differentiating
the situations as follows:

1.

Enterprises exclusively funded by the state shall take the refund as the registered capital;

2.

Other enterprises shall transfer it to the national capital in ways as follows: incorporated enterprises with state-owned shares shall
have them hold the shares transferred from the newly-added national capital (if more than one state owners exist, the proportion
of shares held shall be decided by themselves); those without state-owned shares shall have the state-owned assets operation company
authorized the local governments at various levels hold those shares.

3.

The listed companies shall act in accordance with the regulations of private placement issued by China Securities Regulatory Commission.

VII.

The offices of financial inspection commissioners across the country shall supervise and examine the progress of the transfer from
refund to national capital. After the transfer, the enterprises shall submit the duplicate of accounting voucher to the Ministry
of Finance as well as the local office of financial inspection commissioners, and do the registration of ownership of state-owned
assets. If enterprises fail to make the transfer within the time limits, the refund shall be timely returned to the national treasury.
Should any enterprises violate the aforementioned regulations, they will be punished in accordance with Measures for Punishment of
Illegal Financial Activities (Decree No. 427 of the State Council).

VIII.

At the end of every year that a preferential policy of import taxation has been implemented, the Ministry of Finance will, together
with State Development and Reform Commission and General Administration of Customs and State Administration of Taxation, adjust the
catalogue of refunded goods for next year’s special import taxation policies according the general situation of application of enterprises
and policy implementation.

IX.

For the key technological equipment whose imported parts and accessories and raw materials have been refunded, the import tariff exemption
policy for the complement plant and set of equipment shall be repealed after the examination and confirmation of Ministry of Finance,
State Development and Reform Commission, General Administration of Customs and State Administration of Taxation; for some of the
complete plants, the Ministry of Finance and State Development and Reform Commission will, on the basis of strict examination, adopt
the transition measures of reducing the refunds or tightening the scope of tariff exemption according to the supply and demand of
related industries, continue to grant the import taxation privilege for a certain period; after the transition period the import
tariff exemption policy shall be repealed.

Appendix:

1.

The 16 Key Areas of Technological Equipment

2.

The Application Document for Tax Refund

Ministry of Finance

State Development and Reform Commission

General Administration of Customs

State Administration of Taxation

January 14, 2007
Appendix I:
The 16 Key Areas of Technological Equipment

1.

Large sized clean and high-efficiency power equipment: new energy generating equipment such as nuclear power generating plant of a
million Km/h, supercritical thermal power generating plant, gas-steam circulation power generating plant, large sized circulation
fluidized bed boiler, large sized hydro-power generating plant and pumped storage power station, large sized direct air-cooled generating
plant and high-power wind power generator.

2.

UHV Transmission Equipment: complete equipment of UHV transmission with alternating current of 1000000 volts and direct current of
￿￿00000 volts, and key transmission equipment with alternating current of 500000 volts and direct current of 750000 volts.

3.

Large sized petrochemical equipment: large sized plant of petrochemical equipment of million-ton-level and complete equipment of Px,
PTA and polyester.

4.

Complete plant of coal chemical equipment.

5.

Complete plant of cold and hot continuous sheet rolling and that of surface coating and plating.

6.

Large sized plant of underground coal mining, elevating and washing and that of opencast mining.

7.

Large sized plant of ship and ocean engineering: large sized equipment of ocean petroleum engineering, large sized high-tech and high
added value ships such as ore and crude oil carrier of 300000 tons, floating production storage and offloading vessels, container
carriers with more than 1000 containers, liquefied natural gas carriers and high-power diesel engines.

8.

Equipment of railway transport: express trains at the speed of 200km/h plus and new subway trains.

9.

Large sized equipment of environmental protection and integrated utilization of resources: large sized equipment of environmental
protection such as equipment of air and urban pollution control and industrial sewage treatment and that of solid waste disposal,
and equipment of integrated utilization of resources such as seawater desalination and scrap car salvage.

10.

Large sized construction plant: tunnel boring machines, etc.

11.

Key project automation control system and key testing precision instruments.

12.

Large sized, precision and high-speed numerical control equipment, numerical systems and functional units

13.

New textile machines: complete polyester staple fibre plant with daily output of 200 tons plus, high-speed adhesive filament continuous
spinning machine, modern complete plant of cotton spinning, electromechanically integrated rapier loom and air jet loom.

14.

New and high-powered agricultural plant: high-powered tractor, head-feed rice combine, corn combine and cotton picker.

15.

Key equipment of integrated circuit, new flat panel display manufacturing machine, electronic components and elements, lead-free complete
plant, digital medical imaging equipment and specialized equipment of bio-engineering and medical production.

16.

Civil aircraft, engine and other airborne equipment.

Appendix II:
The Application Document for Tax Refund

I.

The nature, shareholding structure, registered capital and business scope of the applying enterprise;

II.

The financial status of the applying enterprise

III.

The progress of development and manufacturing and key technological equipment and the production plan of the applying enterprise,
including the name and specifications of the key technological equipment which applies for tax refund;

IV.

The variety, quantity, import time and value of the key parts and accessories and raw materials which will be under the preferential
policy of import taxation, as well as the estimated amount of import tariff that will be paid.

V.

The specific plan of transferring the refunded money to national capital, which shall be approved by the organs of power of the enterprise,
either the general manager’s meeting for the enterprises solely funded by the state or the meeting of stakeholders for incorporated
enterprises. It shall include the stakeholders, the price of the potential shares, and the specific time of the transfer. The listed
corporations shall offer the letter of commitment to the effect that the aforementioned plan has been submitted to the meeting of
stakeholder for deliberation. Those without state-owned shares shall submit the letter of intention of equity participation signed
with the state-owned asset operation companies authorized by governments at various levels.



 
Ministry of Finance, State Development and Reform Commission, General Administration of Customs, State Administration
of Taxation
2007-01-14

 






CIRCULAR OF CHINA BANKING REGULATORY COMMISSION ON THE FURTHER PREVENTION OF THE RELATED RISKS IN THE TRANSACTIONS BETWEEN BANKING FINANCIAL INSTITUTIONS AND SECURITIES COMPANIES

Circular of China Banking Regulatory Commission on the Further Prevention of the Related Risks in the Transactions between Banking
Financial Institutions and Securities Companies

Yin Jian Fa [2006] No. 97

Each banking regulatory bureau, policy bank, state-owned commercial bank, joint stock bank, and financial asset management company,
credit company, financial company and financial lease company under the direct supervision of China Banking Regulatory Commission:

In recent years, many risks existed in some transactions between banking commercial institutions and securities companies, particularly,
in business of entrusted financial management and inter-bank lending. Recently, the related departments have discovered and investigated
the irregular acts conducted by several commercial banks in their business of depositing and keeping the trading settlement funds
of clients and the illegal acts conducted by a few enterprises to misappropriate bank credit funds for stock speculation. For the
purpose of effectively preventing the risks in the transactions between banking financial institutions and securities companies,
guaranteeing the lawful operation of the business of depositing and keeping the trading settlement funds of clients by the commercial
banks, seriously forbidding the bank funds from entering into the stock market by various means, and guaranteeing the safe and stable
operation of the banking industry, the related matters are hereby informed as follows:

1.

Further strengthening the awareness of lawful operations and risks, and effectively avoiding inter-market risks

Any banking financial institution shall constantly reinforce the financing risk management of securities companies, improve the ability
to warn against risks in advance, increase the asset preservation strength, effectively set up a “firewall” between banks and the
securities market, and seriously avoid the inter-market or inter-industry transfer of risks. When any banking financial institution
engages in the business of depositing and keeping the trading settlement funds of clients, it shall make effective supervision over
the trading settlement funds of clients strictly according to the related provisions, and shall not grant any institution or individual
any loan that is guaranteed by the trading settlement funds of clients.

2.

Setting up and perfecting various rules and systems, consummating the internal control mechanism, and improving the risk management
level.

Any banking financial institution shall integrate the financing to securities companies into a uniform credit management system, and
set up a risk identification and appraisal mechanism according to its business varieties and business scale; and when it engages
in business, it shall carry out a comprehensive appraisal of the qualifications and credits of securities companies, in particular,
shall pay more attention to avoiding the risks in respect of entrusted financial management or inter-bank lending business.

3.

Seriously forbidding the misappropriation of bank credit funds for stock speculation

It is seriously forbidden for any enterprise or individual to misappropriate any bank credit fund from entering the stock market directly
or indirectly, and a banking financial institution shall not grant any loan to any enterprise or individual for stock speculation.
Where any loan is of the misappropriated for stock speculation, a banking financial institution shall immediately adopt timely and
necessary measures to recover the loan. If any enterprise or individual conducts any irregular act, it or he shall be punished seriously,
and the CBRC or its dispatched office shall record such irregular act into the credit management system in collaboration with the
related departments.

4.

Reinforcing the management of individual consumption credits, and avoiding consumption loans from entering into the stock market in
any disguised form

A banking financial institution shall conduct the business of individual consumption credits strictly according to the related laws
and regulations, practically reinforce the management of individual consumption credits, and avoid consumption loans from entering
into the stock market in any disguised form. A banking financial institution shall intensify the examination of the borrowers’ motives,
loan purposes, and repayment sources, etc., and shall not grant individual consumption credits to those clients failing to provide
reasonable loan purposes, or repayment sources; and shall intensify the follow-up capital check to individual consumption loans of
large amount, and guarantee that the loans are used in accordance with the contract. A banking financial institution shall set up
an effective follow-up assessment system for the business of individual consumption loans, sum up experiences and lessons in a timely
manner, and make improvements.

5.

Intensifying the “three examinations” system of loans, and reinforcing the follow-up capital supervision

A banking financial institution shall further reinforce the controlling ability to the loan management, practically fulfill the “three
examinations” system of loans, in particular, reinforce the follow-up examination, carry out an effective track-up and check of the
loan purposes, and avoid the misappropriation of loans; and shall reinforce the control of the borrowers’ accounts, avoid enterprises
from mixing the use of their own funds and credit funds, impose main monitor on the enterprises not only borrowing credit funds but
also conducting stock speculation, and seriously avoid the credit funds from being misappropriated for stock speculation.

6.

Actively taking measures, and doing a good job in risk investigation and disposal

A banking financial institution shall pay more attention to the existing risks and problems in the transactions with securities companies,
further inspect its own initiative, conduct further investigations of possible risks in the transactions with securities companies.
As regards the types of occurred risks, a banking financial institution shall reinforce the collection thereof, adopt effective legal
measures, legally keep the credits and interests of banks, and try to decrease risks and losses; and shall report to the banking
regulatory organ in a timely manner for any important matter.

7.

Reinforcing supervisory cooperation, and closely assisting the investigation and punishment of illegal and irregular acts

The dispatched institutions of CBRC shall reinforce coordination and cooperation with the dispatched institutions of CSRC as well
as other financial regulatory organs, consummate the information exchange and sharing mechanism with other regulatory organs, abundantly
share the sources for supervision, conduct joint check when necessary, and form a combined force of supervision, so as to severely
handle and combat those illegal or irregular acts of misappropriating credit funds for stock speculation.

8.

Strengthening the accountability system, and enhancing the strength to punish related persons held to be responsible

The dispatched institutions of CBRC shall, during the process of risk disposal and assets liquidation, severely punish the persons
held to be responsible for the occurrence of risks in accordance with the related provisions, fortify punishment, and complement
the accountability system; and shall, in accordance with laws and regulations as well as the requirements as indicated in the present
Circular, investigate the acts of misappropriating the trading settlement funds of clients or credit funds for stock speculation
occurred in the transactions between banking financial institutions and securities companies, and fortify the punishment of those
institutions committing illegal or irregular acts and those persons held to be responsible.

All the banking regulatory bureaus shall forward this Circular to each banking regulatory sub-bureau, urban commercial bank, urban
credit cooperative, rural commercial bank, rural cooperative bank, rural credit cooperative, foreign-funded bank, financial asset
management company, credit trust company and financial company within their respective jurisdictions.

China Banking Regulatory Commission

December 31, 2006



 
China Banking Regulatory Commission
2006-12-31

 






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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