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2005

THE ANNOUNCEMENT OF THE CUSTOMS GENERAL ADMINISTRATION

The General Administration of Customs

The Announcement of the Customs General Administration

[2005] No. 20

The Guangdong branch customs, special representative’s offices in Tianjing and Shanghai and the customs directly under the Customs
General Administration, the National Development and Reform Commission, the Ministry of Finance, the General Administration of Quality
Supervision, Inspection and Quarantine:

Pursuant to the procedures prescribed in the Closer Economic Partnership Arrangement (CEPA) between the Chinese Mainland and Macau,
after mutual confirmations by governments of mainland and Macau, the drawing ink and other ink with the HS code of 32159090 (solid
or extracted ) in the attachment “the list of the second batch of imported goods ( goods proposed to be produced) which originates
form Macau and to which zero-tariff is applied by the mainland” of the Supplementary Agreement of the Closer Economic Partnership
Arrangement (CEPA) between the Chinese Mainland and Hong Kong have been produced formally. Zero-tariff will be applied by customs
to the above-mentioned import goods originating from Macau since June 1, 2005.

It is thereby proclaimed.

The General Administration of Customs

May 25, 2005



 
The General Administration of Customs
2005-05-25

 






CIRCULAR OF THE GENERAL OFFICE OF THE CHINA BANKING REGULATORY COMMISSION ON INTENSIFYING RISK DISCLOSURE OF PARTIAL BUSINESS OF TRUST INVESTMENT COMPANIES

Circular of the General Office of the China Banking Regulatory Commission on Intensifying Risk Disclosure of Partial Business of Trust
Investment Companies

Yin Jian Ban Fa [2005] No. 212

Each banking regulatory bureau:

After this year’s working conference on the supervision of non-bank financial institutions, all banking regulatory bureaus have attach
much importance to the delivering of the spirit of the conference to lower levels and its implementation, and all trust investment
companies have also intensified the management of their trust plans. By the end of May, 42% of the total plans of the whole year
have been returned under collective trust plans, with the amount accounting for 47%. The operation of trust projects and the repayment
of due debts are steady on the whole. All banking regulatory bureaus shall go on maintaining the good methods, and further do well
in the risk supervision of trust investment companies.

In the first half of the year, some problems occurred in the securities business and real estate business of some trust projects.
In some areas, funds were even collected in violation of rules by means of taking advantage of transfer of the beneficiary right
to trust property in a disguised form. Firstly, since last year, the securities business involving most trust investment companies
has been consecutively exposed under the influences of the securities market risks, and some undue trust plans are already facing
the risk of repayment when they become due. Some of the projects of the real estate business of trust investment companies have also
manifested great risks. By the end of May, there have been some due trust projects which fail to be liquidated in time, covering
11% in aspects of stock investment business, and 61% in aspects of real estate business. Secondly, some trust investment companies
have delayed the risks by means of renewal, prepayment with fixed-funds, purchase by affiliated transactions, replacement with new
trust plans, etc. with regard to the trust projects which fail to be liquidated on time. Lastly, in some few areas, funds were collected
in violation of rules in a disguised form from the public for trust of property right by way of assignment of the beneficiary right
to trust property, etc., so the risks spread to the public, and the severity must be attached great importance to.

For the purpose of driving the trust investment companies within your jurisdiction to keep away and get rid of the risks of the trust
business, rectify the rule-breaking business activities, we hereby present our Notification as follows concerning the related matters
on reinforcing risk disclosure, etc. of some business of trust investment companies:

1.

Each banking regulatory bureau shall remind the trust investment companies to attach much importance to the variations of the risks
in stock in securities and real estate business, to carefully analyze the arrangement, structure, safety, proceeds and risks of the
funds, and to focus on whether the funds are misappropriated by the trading partners; to attach importance to the changes of the
risks from trading partners, and to hinder the risks of trading counterparts from diverting to trust investment companies. Considering
securities business, the market-to-market and timely monitored risk hindrance measures shall be set up, the stop loss limit of risks
shall be decided, and effective margin-cut operations must be ensured.

2.

Each banking regulatory bureau shall require the trust investment companies to strictly carry out the “Circular of the General Office
of China Banking Regulatory Commission on Related Matters Concerning the Regulation of the Operation and Management of Securities
Business of Trust Investment Companies” ( Yin Jian Ban Tong [2004] No. 265) for the new securities investment business; the real
estate business newly opened shall be in line with the state’s macro-control policies, and sever due diligence investigation shall
be made for such business, while loans shall not be granted for the projects for which the Certificate for Using State-owned Land,
the Planning Permit for Land Used for Construction, the Planning Permit for Construction Project, and the Permit for the Undertaking
Construction of the Project (“four certificates”) have not been gotten; the qualification of an real estate development enterprise
applying for loans shall not be lower than Grade 2 real estate development qualification as ratified by the national administrative
department of construction, and the rate of capital of the development project shall not be lower than 35%.

3.

Each banking regulatory bureau shall drive the trust investment companies to intensify the construction of risk management abilities,
and, by intensifying the institutional construction of internal control, set up and elevate the working regulations, establish the
risk management system sound, strengthen efforts in implementation, and further elevate the abilities in identification, metrology,
supervising and control of the risks in securities and real estate business; it shall make the trust investment companies realize
the importance of professional talented staff, select trading counterparts in earnest, prudentially conduct securities and real estate
business, specify persons responsible for risk management of each project, and set up rules on confirming and investigating obligations
for risks. Each banking regulatory bureau shall also request the companies facing problems recently to carefully check the losses
which have occurred, analyze in details the reasons for being failing to work normally or problems encountered by the due liquidation
projects; in event of operational risks, the relevant persons must bear liabilities.

Each banking regulatory bureau shall timely organize supervision conference with relevant companies, and keep informed of the results
of internal examination and the elevation in respect of institutional defects in trust investment companies, liabilities of persons,
etc.

4.

Each banking regulatory bureau shall closely focus on the liquidation and delivery of the due trust plans, hinder trust investment
companies from delaying risks by violating rules; and shall pay special attention to trust investment companies’ veiling risks by
replacing due collective fund trust with singular trust, and remind trust investment companies not to set up fund pools with single
substitutive trust funds and not to mix up the fund composition risks in mind.

5.

Each banking regulatory bureau shall, according to the principle of prudential supervision, intensify the supervision over property
right trust, and shall, before the Measures on the Administration of Property Right Trusts are announced, run supervision on fund
raising business by way of assignment of the beneficiary right of properties according to the supervisory principle for the fund
trust business. The number of copies of trust contracts shall be computed at the sum of the number of entrusting parties plus the
number of beneficiaries who paid consideration to obtain the beneficiary right, in order to hinder trust investment companies from
collecting funds from the public in a disguised form in violation of the relevant rules.

6.

Each banking regulatory bureau shall, on a monthly basis, conduct a risk monitoring analysis on the securities and real estate business
of the trust investment companies within its jurisdiction, do well in window direction and risk pre-warning; any risk involving social
stability shall be appointed as a major event. It shall adopt effective supervision measures to avoid risks from accumulating and
spreading, and shall report the matters on risks to CBRC in time in accordance with provisions.

7.

Each banking regulatory bureau shall further elevate the non-on-site supervision report, and shall, by considering the risk supervision
as the key point, elevate the work of non-on-site supervision with scientific philosophy and method of risk supervision. In the supervision
report of the second half of the year, it shall focus on analyzing five categories of risks: first, credit risks chiefly subject
to arduous collection of the original assets, lack of abilities to recover the loan trust on time, and breach of contracts by securities
trading partners; second, market risks chiefly subject to securities market fluctuation; third, liquidity risks caused by the repayment
of the original debts and lack of abilities to repay the due collective trust; fourth, operational risks and moral risks caused by
shareholders or associated parties by virtue of their enclosure of funds or by virtue of rule-breaking operation of senior managers
or employees of companies; fifth, reputation risks of the company and even the whole industry by virtue of inability to repay the
single collective trust plan.

The General Office of the China Banking Regulatory Commission

August 28, 2005



 
The General Office of the China Banking Regulatory Commission
2005-08-28

 






CIRCULAR OF THE GENERAL AFFAIRS DEPARTMENT OF THE STATE ADMINISTRATION OF FOREIGN EXCHANGE ON RELEVANT ISSUES CONCERNING FOREIGN EXCHANGE SALES AND PAYMENTS IN TRANSFERRING GOODS OUT OF THE EXPORT PROCESSING ZONES FOR DEEP PROCESSING

State Administration of Foreign Exchange

Circular of the General Affairs Department of the State Administration of Foreign Exchange on Relevant Issues concerning Foreign Exchange
Sales and Payments in Transferring Goods out of the Export Processing Zones for Deep Processing

Hui Zong Fa [2005] No.66

June 2, 2005

Branches and Exchange Administration Offices of the State Administration of Foreign Exchange in all provinces, autonomous regions,
municipalities under direct control of the Central Government, Branches in the Cities of Shenzhen, Dalian, Qingdao, Xiamen and Ningbo:

In order to promote the carrying-out of the work of foreign exchange sales and payments in transferring goods out of the export processing
zones for deep processing, to regulate banks’ formalities of foreign exchange sales and payments, and to guarantee the enterprise’s
normal business use of foreign exchange, this Circular is hereby given as follows:

I.

Transferring goods out of the export processing zones for deep processing between the transfer-out enterprise in the export processing
zone (hereinafter referred to as the “transfer-out enterprise”) and the transfer-in enterprise without the territory of export processing
zones, bonded zones, and any other zones under the special supervision of the customs authorities (hereinafter referred to as the
“transfer-in enterprise”) shall be valued and settled in foreign currencies.

II.

The designated foreign exchange bank shall handle the formalities of foreign exchange sales and payments of from the transfer-in enterprise
to the transfer-out enterprise upon the documents as follows:

1.

The original copy of the declaration bill for import with the stamp of “Check-off” by the customs authorities and with no faults against
the examination by China Electronic Port System , and with the country (region) of departure as “the People’s Republic of China (142)”,
and the trade mode as “Deep Processing of Imported Materials (0654)”; and

2.

The original copy of the Record List of Exit Goods in the Export Processing Zone, with the country (region) of arrival of the transfer-out
as “the People’s Republic of China (142)”, and the trade mode as “Coming/Leaving of Finished Products from Export Processing Zone
(5100)”; and

3.

The Interplant Contract; and

4.

The Verification Form of Foreign Exchange Payment for Import (in lieu of the Declaration Form).

III.

The designated foreign exchange bank shall handle the formalities of overseas foreign exchange sales and payments for the transfer-in
enterprise upon the documents as follows:

1.

The original copy of the declaration bill for import with the stamp of “Check-off” by the customs authorities and with no faults against
the examination by China Electronic Port System , and with the country (region) of departure as “the People’s Republic of China (142)”,
and the trade mode as “Deep Processing of Imported Materials (0654)”; and

2.

The original copy of the Record List of Exit Goods in the Export Processing Zone, with the country (region) of arrival of the transfer-out
as “the People’s Republic of China (142)”, and the trade mode as “Coming/Leaving of Finished Products from Export Processing Zone
(5100)”; and

3.

The original copy of the Record List of Entry Goods in the Export Processing Zone with the country (region) of arrival for the transfer-out
enterprise as “the People’s Republic of China (142)”, and the trade mode as “Goods Processed in the Export Processing Zone (5015)”;
and

4.

The Interplant Contract; and

5.

The Verification Form of Foreign Exchange Payment for Import (in lieu of the Declaration Form).

IV.

Matters not stated in this Circular shall be subject to the relevant foreign exchange provisions for the transferring of interplant
deep processing without the territory of export processing zone.

In case that any question arises during the process of implementation, please feed it back timely to the General Affairs Department
of the State Administration of Foreign Exchange.

Contact Person: Hu Chunyu

Contact Telephone: 010-68402430

Fax: 010-68402430



 
State Administration of Foreign Exchange
2005-06-02

 






ANNOUNCEMENT OF MINISTRY OF COMMERCE ON TERMINATION OF TRADE BARRIER INVESTIGATION ON JAPANESE MANAGEMENT MEASURES ON LAVER IMPORT

Ministry of Commerce

Announcement of Ministry of Commerce on Termination of Trade Barrier Investigation on Japanese Management Measures on Laver Import

[2005] No.10

February 28, 2005

Ministry of Commerce decided to make a trade barrier investigation on Japanese management measures on laver import (hereinafter referred
to as “Measures under investigation”) on April 22, 2004 at the request of Jiangsu Laver Association in accordance with Temporary
Rules of Foreign Trade Barrier Investigation (hereinafter referred to as “Temporary Rules”).

During the investigation, Ministry of Commerce made investigations on the measures under investigation and consulted with relevant
authorities of Japanese government. According to the results of investigation and consultation, and as well as Japanese adjustment
of the measures under investigation, Ministry of Commerce decided to terminate this investigation in accordance with the provision
of Article 25 of Temporary Rules. Relevant issues are hereby announced as follows:

1.

Applicant

The applicant Jiangsu Laver Association (hereinafter referred to as “the applicant”) submit their application for trade barrier investigation,
asking for trade barrier investigation on Japanese management measures on Laver import.

According the investigation, Jiangsu province is the main production area in China of the products relating to the measures under
investigation, its output accounts for 95 per cent of total output of the products in China. The applicant has 107 members, accounting
for 63 per cent of all the enterprises of laver cultivation and processing in Jiangsu. Laver cultivation area that the applicant
represented by the applicant is 85 thousand mu, accounting for 51 per cent of the total laver cultivation area in Jiangsu province.

2.

The request of the applicant

The applicant thinks that Japanese government takes and maintains the measures, which violate relevant agreement of WTO, on import
of Chinese dry laver and flavour laver. It has hindered and restricted unreasonably Chinese dry and flavour laver into Japanese market
and caused injury to Chinese relevant industries. The applicant requested the investigatory apparatus to make investigations in accordance
with Temporary Rules and believed that the management measures of Japanese government relating to laver import origin have violated
relevant provisions in the agreement of WTO and constituted trade carrier in Chinese dry and flavour laver exporting to Japan. The
applicant has also requested the investgatory apparatus to make consultation with Japanese government and asked them to cancel the
management measures on import origin of dry and flavour laver according to the investigation.

3.

Investigation Procedures

(1)

Investigation Announcement

After the investigation, Ministry of Commerce thinks that the applicant meets with the provisions of Article 5 of Temporary Rules
relating to the applicant qualification and the application and relevant proof materials accord with Article 6 and 7 of Temporary
Rules concerning to the provisions of content and related proofs of the application needed by initiating trade carrier investigation.
According to the result of the investigation, Ministry of Commerce published its Announcement No.16 on April 22, 2004, starting trade
carrier investigation on Japanese management measures on laver import.

(2)

Investigation

After the publication of investigation announcement, the investigatory apparatus informed the applicant and Japanese embassy in China.
During the investigation, the investigatory apparatus made investigations and verify the information by investigation questionnaires,
investigation on the spot and distributing additional investigation questionnaires in accordance with Temporary Rules. At the request
of the investigatory apparatus, the competent department of relevant industries and industrial intermediary organizations provided
the investigatory apparatus with consultation comments on technique and truthfulness concerning the investigation.

(3)

Consultation

During the investigation, the investigatory apparatus has consulted with relevant authorities of Japanese government for three times
on the measures under investigation. In the third time consultation held in Beijing in the middle of October 2004, Japanese part
promised to take feasible measures and solve actively the problem Chinese paid attention to.

(4)

Termination of the investigation

For the purpose that Chinese and Japanese may continue the consultation and reach a satisfied result for both sides, Ministry of Commerce
published it announcement No. 65 on October 21 2004 in accordance with Article 22 of Temporary Rules, terminating the investigation.
After the termination of the investigation, Chinese and Japanese made consulted many times about concrete measures on solving the
problems that Chinese part paid attention to.

(5)

Others

After the termination of the investigation, the applicants also raised the problem that Chinese baked laver could not be exported
to Japan. The applicant thought that baked laver was also in the range of flavor laver and apply the investigatory apparatus made
an investigation to it and consulted with Japanese government according to the investigation and finally solve the problem of export
of Chinese laver to Japan.

According to the investigation, raw material of faked laver is dry laver, a kind of laver processing product after faking without
any flavour. As for it, Japan has no legal basis or administrative regulations on prohibiting the import of laver, but in fact it
does not permit laver import from any country. As for it, Japanese part promised to make continuous consultation with Chinese part
on trade technical problems of laver including import of faked laver and try to solve the problem Chinese part paid attention to.

4.

Japanese adjustment of the measures under investigation

On February 21, 2005, Ministry of Economy and Industry of Japan published its “import notice” No. 19 in two Japanese newspapers, publishing
Japanese import quota of laver in 2005. Import notice cancelled the management of the origin of imported dry and flavour laver, and
made clear that total Japanese import quota of laver in 2005 is 0.4 billion pieces.

5.

Termination of the investigation

According to the result of the investigation, since Japanese government has cancelled the discriminative measures on Chinese dry and
flavour laver and made relevant promise in solving Chinese laver exporting to Japan, Ministry of Commerce decided to terminate trade
carrier investigation on Japanese management measures on laver import initiated on April 22 2004.

6.

Comments on the termination of the investigation

The comments of interested parties and the public on the termination of the investigation should be submitted to Ministry of Commerce
in writing within 30 days as of the publication of the announcement.

7.

Address of Ministry of Commerce

Bureau of Fair Trade for Import and Export

Add: No.5 Dong Chang An Street, Beijing

Post code: 100731

Tel: 86-10-65198139￿￿65198487

Fax: 86-10-65198172

E-mail: boft_tbi@mofcom.gov.cn

Hereby notified.



 
Ministry of Commerce
2005-02-28

 






CORE INDICATORS FOR THE RISK MANAGEMENT OF COMMERCIAL BANKS (FOR TRIAL IMPLEMENTATION)






Circular of China Banking Regulatory Commission concerning Printing and Distributing the Core Indicators for the Risk Management of
Commercial Banks (for Trial Implementation)

All the banking regulatory bureaus, State-owned commercial banks as well as joint stock commercial banks:

We hereby print and distribute the Core Indicators for the Risk Management of Commercial Banks (for Trial Implementation) (hereinafter
referred to as Core Indicators) are hereby printed and distributed to you, please carry out them accordingly, and the following notification
on the related matters are made:

1.

The report of the data involved in the Core Indicators shall comply with the Circular concerning Printing and Distributing the Index
System of Off-site Monitoring Statements of China Banking Regulatory Commission Yin Jian Ban Fa [2005] No. 265.

2.

The indicator of “operational risk loss ratio” is meaningful to the evaluation of the operational risks of commercial banks, and its
calculation formula and specific specifications shall be determined by China Banking Regulatory Commission (hereinafter referred
to as the CBRC) after further study during the process of trial implementation.

3.

This document shall be forwarded by all the banking regulatory bureaus in time to the urban commercial banks, rural commercial banks,
rural cooperative banks, urban credit cooperatives, rural credit cooperatives, wholly foreign-funded banks as well as Chinese-foreign
equity joint banks under your respective jurisdictions.

4.

The year 2006 is the period of trial implementation for the Core Indicators. The conditions occurred and the opinions for modification
proposed during the course of trial implementation shall be fed back by all the banking regulatory bureaus and commercial banks in
time to the CBRC (contact person: Guo Wuping of the third department of banks; phone: 010-66194561; e-mail: guowuping@cbrc.gov.cn).

China Banking Regulatory Commission

December 31, 2005

Core Indicators for the Risk Management of Commercial Banks (for Trial Implementation)
Chapter I General Provisions

Article 1

In order to strengthen the identification, appraisal and forecast the risks of commercial banks, and effectively prevent financial
risks, the core indicators for the risk management of commercial banks are constituted in accordance with such laws and regulations
as the Banking Supervision Law of the People’s Republic of China, the Law of the People’s Republic of China on Commercial Banks,
the Regulation of the People’s Republic of China on Managing Foreign-funded Financial Institutions.

Article 2

The Chinese-funded commercial banks established within the territory of the People’s Republic of China shall comply with the core
indicators for the risk management of commercial banks.

Article 3

The core indicators for the risk management of commercial banks are the benchmarks for carrying out the risk management of commercial
banks, and a reference system for evaluating, inspecting and forecasting the risks of commercial banks.

Article 4

In accordance with the prescribed specifications, a commercial bank shall calculate the consolidated and unconsolidated core indicators
for risk management at the same time.

Article 5

The horizontal analysis, same-group comparative analysis as well as the inspection and supervision shall be carried out by the CBRC
to all core indicators for the risk management of commercial banks, and the supervisory measures shall be taken selectively in accordance
with the specific conditions.

Chapter II Core Indicators

Article 6

Such levels as risk level, risk migration as well as risk offset shall be included in the core indicators for the risk management
of commercial banks.

Article 7

The risk level indicator is on the basis of the point-of-time data, and is classified as static indicators, including the liquidity
risk indicator, credit risk indicator, market risk indicator, as well as operational risk indicator.

Article 8

The liquidity status of commercial banks and its fluctuation shall be assessed by using the liquidity risk indicator which consists
of the liquidity ratio, core debt ratio, and liquidity gap ratio, and shall be made separate calculation in accordance with RMB and
foreign currency.

(1)

The liquidity ratio refers to the proportion between the balance of liquidity assets and the balance of liquidity liabilities which
shall be 25% or higher. The overall level of the liquidity of commercial banks shall be assessed by using it.

(2)

The core debt ratio refers to the proportion between core debts and debts which shall be 60% or higher.

(3)

The liquidity gap ratio refers to the proportion between on-balance-sheet and off-balance-sheet liquidity gap within 90 days and the
due on-balance-sheet and off-balance-sheet liquidity assets within 90 days which shall be -10% or higher.

Article 9

The credit risk indicator consists of the ratio of non-performing assets, the credit concentration ratio of a single group client
as well as the generalized correlation ratio.

(1)

The ratio of non-performing assets refers to the proportion between non-performing assets and the total amount of assets which shall
be 4% or lower. This indicator is a first-class one, with one second-class indicator-ratio of non-performing loans included; and
the ratio of non-performing loans refers to the proportion between non-performing loans and the total amount of loans which shall
be 5% or lower.

(2)

The credit concentration ratio of a single group client refers to the proportion between the total credit amount of the largest group
client and the net capital which shall be 15% or lower. This indicator is a first-class one, with one second-class indicator-the
loan concentration ratio of a single client included; and the loan concentration ratio of a single client refers to the proportion
between the total amount of loans of the largest client and the net capital which shall be 10% or lower.

(3)

The generalized correlation ratio refers to the proportion between the generalized relevant credits and the net capital which shall
be 50% or lower.

Article 10

The risks of commercial banks resulted from altering foreign exchange rates and interest rates by using the market risk indicator
which consists of the ratio of accumulative open foreign exchange positions and the interest rate risk sensitivity.

(1)

The ratio of accumulative open foreign exchange positions refers to the proportion between accumulative open foreign exchange positions
and the net capital, and shall be 20% or lower. Other methods (such as risk valuation method and basic-point present value method)
shall be adopted by a qualified commercial bank at the same time to measure foreign exchange risks.

(2)

The interest rate risk sensitivity refers to the proportion between the impacts of the increase of 200 base points of interest rate
to the net bank value and the net capital, and the index value shall be separately constituted in accordance with the actual risk
supervisory requirements after the promulgation of the related policies.

Article 11

The risks resulted from imperfect internal procedures, omissions or frauds of operational staff or external affairs shall be assessed
by using the operational risk indicator, and is expressed as the loss ratio of operational risks, that is, the proportion between
the losses resulted from operations and the incomes from net interests of the previous three phases plus the average value of non-interest
incomes.

The index shall be constituted by the CBRC after the promulgation of the related policies.

Article 12

The degree of risk changes of commercial banks shall be assessed by using the risk migration indicator which is expressed as the
ratio of asset quality from the previous phase to the current phase, and be classified into a dynamic indicator. This indicator consists
of the migration ratio of pass loans and the migration ratio of non-performing loans.

(1)

The migration ratio of pass loans refers to the proportion between the amount of non-performing loans changing from pass loans and
the pass loans. The pass loans consist of the pass loans and the loans of other asset especially mentioned (OAEM). This indicator
is a first-class one, with such two second-class indicators as the migration ratio of pass loans and the migration ratio of OAEM
loans included: the former means the proportion between the amount of the last four kinds of loans changing from the pass loans and
the pass loans, and the latter means the proportion between the amount of non-performing loans changing from the OAEM loans and the
OAEM loans.

(2)

The migration ratio of non-performing loans consists of the migration ratio of substandard loans and the migration ratio of doubtful
loans. The migration ratio of substandard loans means the proportion between the amount of doubtful loans and loss loans changing
from the substandard loans and the substandard loans, and the migration ratio of doubtful loans means the migration ratio of loss
loans came from the doubtful loans to the doubtful loans.

Article 13

The ability of commercial banks to offset the risk losses shall be assessed by using the risk offset indicator which consists of
the profitability, reserve adequacy degree and capital adequacy degree and other aspects.

(1)

The profitability indicator consists of such three parts as the cost/income ratio, return on assets, and return on capital. The cost/income
ratio means the proportion between business expenses adding depreciation and the business incomes, and shall be 45% or lower; the
return on assets means the proportion between after-tax net profits and the average total amount of assets, and shall be 0.6% or
higher; and the return on capital refers to the proportion between after-tax net profits and the average net assets, and shall be
11% or higher.

(2)

The indicator of reserve adequacy degree consists of the loss reserve adequacy ratio of assets and the loss reserve adequacy ratio
of loans. The loss reserve adequacy ratio of assets is classified into a first-class indicator – the proportion between actual reserves
of credit risk assets and the required reserves, and shall be 100% or higher; and the loss reserve adequacy ratio of loans means
the proportion between actual reserves of loans and the required reserves, shall be 100% or higher, and is a second-class indicator.

(3)

The indicator of capital adequacy degree consists of the core capital adequacy ratio and the capital adequacy ratio: the former refers
to the proportion between core capital and risk-weighted assets, and shall be 4% or higher; and the latter refers to the proportion
between core capital adding subordinate capital and the risk-weighted assets, and shall be 8% or higher.

Chapter III Check and Supervision

Article 14

A statistical and information system consistent with these measures shall be set up by a commercial bank in order to exactly reflect
its risk level, risk migration and risk offsetting abilities.

Article 15

By reference to the Guidelines for the Classification of Loan Risks, the non-credit assets shall be divided into normal assets and
non-performing assets by a commercial bank, so as to calculate the risks of non-credit assets and assess the quality of non-credit
assets.

Article 16

All the indicators shall be incarnated in the daily risk management by a commercial bank, and the risk management methods shall be
perfected.

Article 17

The actual value of all the indicators shall be made regular examination by the board of directors of a commercial bank, and the
management personnel shall be urged to take correction measures.

Article 18

The CBRC shall make regular collection on the related data through the off-site supervisory system, make analysis on all the supervisory
indicators of commercial banks, make evaluation and forecast on their risk level, risk migration as well as risk offset in time.

Article 19

The on-site inspections shall be organized by the CBRC to make verification on the authenticity of data, and main risks of commercial
banks with priority shall be inspected in accordance with the actual value of core indicators, and admonitory talks and risk presentation
shall be implemented.

Chapter IV Supplementary Provisions

Article 20

These Core Indicators by analogy shall be complied with by rural cooperative banks, urban credit cooperatives, rural credit cooperatives,
wholly foreign-funded banks as well as Chinese-foreign joint equity banks, unless it is otherwise prescribed by any law or regulation.

Article 21

Unless it is otherwise prescribed by any law, administrative regulation or ministerial rule, any administrative punishment shall
be carried out directly based on these Core Indicators.

Article 22

The CBRC has the power to interpret the core indicators for the risk management of commercial banks.

Article 23

The core indicators for the risk management of commercial banks shall go into effect as of January 1, 2006. The Management Controlling
and Monitoring Indicators for the Proportion of Assets and Liabilities of Commercial Banks and the Assessment Methods (Yin Fa [1996]
No. 450) shall be abolished at the same time.


Appendix 1

￿￿

Appendix 1:

Table of Core Indicators for the Risk Management of Commercial Banks

￿￿

Type of indicators

First-class indicators

Second-class indicators

Index value

Risk level

Liquidity risk

1. Liquidity ratio

￿￿

￿￿span lang="EN-US">25%

2. Core debt dependency

￿￿

￿￿span lang="EN-US">60%

3. Liquidity gap ratio

￿￿

￿￿span lang="EN-US">-10%

Credit risk

4. Ratio of non-performing assets

4.1 Ratio of non-performing loans

￿￿span lang="EN-US">4%

￿￿span lang="EN-US">5%

5. Credit concentration ratio of a single group client

5.1 Loan concentration ratio of a single client

￿￿span lang="EN-US">15%

￿￿span lang="EN-US">10%

6. Generalized correlation ratio

￿￿

￿￿span lang="EN-US">50%

Market risk

7. Ratio of accumulative open foreign exchange positions

￿￿

￿￿

8. Interest rate risk sensitivity

￿￿

￿￿

Operational risk

9. Loss ratio of operational risk

￿￿

￿￿

Risk migration

Pass loans

10. Migration ratio of pass loans

10.1 Migration ratio of pass loans

10.2 Migration ratio of OAEM loans

￿￿

Non-performing loans

11. Migration ratio of non-performing loans

11.1 Migration ratio of substandard loans

11.2 Migration ratio of doubtful loans

￿￿

Risk offset

Profitability

12. Cost/income ratio

￿￿

￿￿span lang="EN-US">35%

13. Return on assets

￿￿

￿￿span lang="EN-US">0.6%

14. Return on capital

￿￿

￿￿span lang="EN-US">11%

Reserve adequacy degree

15. Loss reserve adequacy ratio of assets

15.1 Reserve adequacy ratio of loans

>100%

>100%

Capital adequacy degree

16. Capital adequacy ratio

16.1 Core capital adequacy ratio

￿￿span lang="EN-US">8%

￿￿span lang="EN-US">4%

￿￿

Appendix 2:

Instructions for the Coverage of Core Indicators for the Risk Management of Commercial Banks

￿￿

￿￿￿￿I. Risk Level
￿￿￿￿i. Liquidity risk
￿￿￿￿1. Liquidity ratio
￿￿￿￿The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
￿￿￿￿Calculation formula:
￿￿￿￿Liquidity ratio = liquidity assets / liquidity liabilities￿￿00%
￿￿￿￿Indicator Explanations:
￿￿￿￿Liquidity assets consist of cash, gold, excess deposit reserves, net assets after inter-bank transaction differences to be mature within one month, receivable interests and other receivables to be mature within one month, pass loans to be mature within one month, securities investments to be mature within one month, bond investments convertible at any time at the secondary market domestic or abroad, as well as other convertible assets to be mature within one month (excluding non-performing assets).
￿￿￿￿Liquidity liabilities consist of the current deposits (excluding fiscal deposits), time deposits to be mature within one month (excluding fiscal deposits), net liabilities after inter-bank transaction differences to be mature within one month, issued bonds to be mature within one month, payable interests and all the accounts payable to be mature within one month, loans from the Central bank to be mature within one month, as well as other liabilities to be mature within one month.
￿￿￿￿2. Core debt dependency
￿￿￿￿The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
￿￿￿￿Calculation formula:
￿￿￿￿Core debt dependency = core debts / total debts ￿￿00%
￿￿￿￿Indicator Explanations:
￿￿￿￿The core debt dependency consists of the time deposits to be mature in three months or longer, the issued bonds, and 50% of current deposits.
￿￿￿￿The term "total debts" means the balance of all the liabilities in the balance sheet constituted in accordance with the accounting system for financial enterprises.
￿￿￿￿3. Liquidity gap ratio
￿￿￿￿The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
￿￿￿￿Calculation formula:
￿￿￿￿Liquidity gap ratio = liquidity gap / on-balance-sheet and off-balance-sheet assets to be mature within 90 days￿￿00%
￿￿￿￿Indicator Explanations:
￿￿￿￿The liquidity gap means the balance of on-balance-sheet and off-balance-sheet assets to be mature within 90 days minus the on-balance-sheet and off-balance-sheet debts to be mature within 90 days.
￿￿￿￿ii. Credit risk
￿￿￿￿4. Ratio of non-performing loans
￿￿￿￿The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
￿￿￿￿Calculation formula:
￿￿￿￿Ratio of non-performing loans = non-performing credit risk assets / credit risk assets￿￿00%
￿￿￿￿Indicator Explanations:
￿￿￿￿The term "credit risk assets" means the on-balance-sheet and off-balance-sheet assets in the balance sheet of a bank for assuming credit risks, and mainly consists of all the loans, inter-bank deposits, inter-bank offers, purchase of reverse-sale assets, bond investments of bank accounts, receivable interests, other receivables, commitments and contingent debts, etc.
￿￿￿￿The term "non-performing credit risk assets" means the part of non-performing assets among the credit risk assets. The "non-performing loans" is a part of non-performing credit risk assets, and has the same definition as that in the "ratio of non-performing loans"; and the CBRC shall separately constitute the classification standards for the credit risk assets excluding loans.
￿￿￿￿4.1 Ratio of non-performing loans
￿￿￿￿The data on the coverage of RMB and foreign currency shall be made separate calculation by using this indicator.
￿￿￿￿Calculation formula:
￿￿￿￿Ratio of non-performing loans = (substandard loans + doubtful loans + loss loans) / all the types of loans￿￿00%
￿￿￿￿Indicator Explanations:
￿￿￿￿The Guidelines for the Classification of Loan Risks (Yin Fa [2001] No. 416), the Circular concerning Promoting and Improving the Classification of Loan Risks (Yin Jian Fa [2003] No. 22) and other related legal provisions shall apply to the classification standards for five grades of loans.
￿￿￿￿The term "pass loans" is defined as the loans for which the borrower can carry out the contract and there are not enough reasons to doubt that the principal or interests of loans could not be repaid in time or in full amount. The "OAEM loans" is defined as the loans for which the borrower has the ability to repay the principal

ANNOUNCEMENT NO. 54, 2005 OF THE GENERAL ADMINISTRATION OF CUSTOMS OF THE PEOPLE’S REPUBLIC OF CHINA

General Administration of Customs

Announcement No. 54, 2005 of the General Administration of Customs of the People’s Republic of China

[2005] No. 54

In accordance with related regulations in Appendix 2 of Mainland and Hong Kong Closer Economic Partnership Arrangement (CEPA) and
Appendix 2 of Mainland and Macao Closer Economic Partnership Arrangement (CEPA), now changes are made to the place of origin standards
of item 91021100 and item 91021200 in Announcement No. 45, 2004 of the General Administration of Customs of the People’s Republic
of China:

I.

Changes about the place of origin standards on Hong Kong watches:

New place of origin standards on Hong Kong watches are:

Assemble component parts and fittings into watches. The main process is to embed the core on the inside of the body, and to assemble
the component parts and fittings, including the fasteners, belts, covers and batteries etc. Then test, adjust and verify the watches,
and follow the ad valorem percentage standard.

Or,

Assemble component parts and fittings into watches. The main process is to embed the core on the inside of the body, and to assemble
the component parts and fittings, including the fasteners, belts, covers and batteries etc. Then test, adjust and verify the watches,
and the design of appearance is finished in Hong Kong and the self-owned brand of watches designated by Hong Kong and responsible
sections in the mainland. There must be obvious mark showing originating from Hong Kong on the watchcase of the self-owned brand
of watches, for example: Made in Hong Kong or Hong Kong, etc.

The above-mentioned Hong Kong self-owned brand means:

1.

Owner of the brand shall be company incorporated in Hong Kong, with valid business registration in Hong Kong and the factory having
been registered for more than one year. And

2.

Owner of the brand shall apply the product brand under timekeeper category in accordance with Trade Marks Ordinance, and become the
registration owner of related brand. And

3.

The registration of trademark/brand includes original brand in Hong Kong and the foreign brand purchased by Hong Kong company incorporated.

Procedure on affirming list for Hong Kong self-owned watches:

Industry and Trade Department of HONG KONG SAR (ITD for short as following) verifies the information submitted by the applicants,
which includes the applicants’ qualification of trademark owners, the registration certificate issued by the trademark registration
division chief and the registration announcement published on “Hong Kong Intellectual Property Bulletin”, in order to ensure that
the related brands are Hong Kong’s self-owned brand within the CEPA frame. HK customs shall make a field inspection to the factories
and verify the situation of manufacturing.

After the verification of ITD and Hong Kong Customs, the ITD shall notify the list to Ministry of Commerce.

Ministry of Commerce shall finish the cognition of Hong Kong self-owned brands with 60 days as of the date of reception of the list.

With the approval of Ministry of Commerce, the list shall be notified to ITD in written forms. Then Place of Origin of CEPA could
be issued by Hong Kong Licence Institution, with which import with Zero Tariff could be permitted.

The watch products that affirmed to be the Hong Kong self-owned brands shall clearly print brand name on the Place of Origin Certificate
of CEPA for verification by Customs in mainland.

II.

Changes about the place of origin standards on Macao watches:

New place of origin standards on Macao watches are:

Assemble component parts and fittings into watches. The main process is to embed the core on the inside of the body, and to assemble
the component parts and fittings, including the fasteners, belts, covers and batteries etc. Then test, adjust and verify the watches,
and follow the ad valorem percentage standard.

Or,

Assemble component parts and fittings into watches. The main process is to embed the core on the inside of the body, and to assemble
the component parts and fittings, including the fasteners, belts, covers and batteries etc. Then test, adjust and verify the watches,
and the design of appearance is finished in Macao and the self-owned brand of watches designated by Macao and responsible sections
in the mainland. There must be obvious mark showing originating from Macao on the watchcase of the self-owned brand of watches, for
example: Made in Macao, Made in Macao, Macao or Macao, etc.

The above-mentioned Macao self-owned brand means:

1.

Owner of the brand shall register at Businesses and Vehicles Registry, with industry registration for more than one year. And

2.

Owner of the brand shall apply the product brand under timekeeper category in accordance with Macao Industry Property Legal System,
and become the registration owner of related brand. And

3.

The registration of trademark/brand includes original brand in Macao and the foreign brand purchased by Macao company incorporated.

Procedure on affirming list for Macao self-owned watches:

Macao Economic Services of MACAO SAR (MES for short as following) verifies the information submitted by the applicants, which includes
the applicants’ qualification of trademark owners, the registration certificate issued by MES and the registration announcement published
on “Macao Special Administrative Region Bulletin “, in order to ensure that the related brands are Macao’s self-owned brand within
the CEPA frame. MES customs shall make a field inspection to the factories and verify the situation of manufacturing.

After the verification of MES, the MES shall notify the list to Ministry of Commerce.

Ministry of Commerce shall finish the cognition of Macao self-owned brands with 60 days as of the date of reception of the list.

With the approval of Ministry of Commerce, the list shall be notified to MES in written forms. Then Place of Origin of CEPA could
be issued by MES, with which import with Zero Tariff could be permitted.

The watch products that affirmed to be the Macao self-owned brands shall clearly print brand name on the Place of Origin Certificate
of CEPA for verification by Customs in mainland.

The above-mentioned place of origin standards shall be implemented as of November 15, 2005.

General Administration of Customs of the People’s Republic of China

November 14, 2005

 
General Administration of Customs
2005-11-14

 



AMENDMENT V TO THE CRIMINAL LAW

Amendment V to the Criminal Law of the People’s Republic of China

Order of the President of the People’s Republic of China 

No. 32 

The Amendment V to the Criminal Law of the People’s Republic of China, adopted at the 14th Meeting of the Standing Committee of
the Tenth National People’s Congress of the People’s Republic of China on February 28, 2005, is hereby promulgated and shall
go into effect as of the date of promulgation. 

Hu Jintao 

President of the People’s Republic of China 

February 28, 2005 

 

(Adopted at the 14th Meeting of the Standing Committee of the Tenth National People’s Congress on February 28, 2005) 

1. One article is added after Article 177 as Article 177(a), which reads: “Whoever commits one of the following acts which hamper
the administration of credit cards shall be sentenced to fix-term imprisonment of not more than three years or criminal detention
and shall in addition, or shall only, be fined not less than RMB 10,000 yuan but not more than 100,000 yuan; if the amount involved
is huge or if there are other serious circumstances, he shall be sentenced to fix-term imprisonment of not less than three years
but not more than 10 years and shall, in addition, be fined not less than 20,000 yuan but not more than 200, 000 yuan: 

“(1) knowingly holding or transporting forged credit cards, or knowingly holding or transporting forged blank credit cards in relatively
large quantities; 

“(2) illegally holding other persons’ credit cards in relatively large quantities; 

“(3) obtaining credit cards by using false identity certification; and 

“(4) selling, buying, or providing other persons with, forged credit cards or credit cards obtained by using false identity certification. 

“Whoever steals, buys or illegally provides information and materials about other persons’ credit cards shall be punished in
accordance with the provisions of the preceding paragraph. 

“Any staff member of a bank or any other financial institution who, taking advantage of his position, commits the act mentioned
in Subparagraph ( 2) shall be given a heavier punishment.” 

2. Article 196 is revised to read: “Whoever commits fraud by means of a credit card in any of the following ways shall, if the
amount involved is relatively large, be sentenced to fixed-term imprisonment of not more than five years or criminal detention and
shall, in addition, be fined not less than 20,000 yuan but not more than 200,000 yuan; if the amount involved is huge, or if there
are other serious circumstances, he shall be sentenced to fixed-term imprisonment of not less than five years but not more than 10
years and shall, in addition, be fined not less than 50,000 yuan but not more than 500,000 yuan; if the amount involved is especially
huge, or if there are other especially serious circumstances, he shall be sentenced to fixed-term imprisonment of not less than 10
years or life imprisonment and shall, in addition, be fined not less than 50,000 yuan but not more than 500,000 yuan or his property
shall be confiscated: 

“(1) using a forged credit card, or using a credit card obtained by using false identity certification; 

“(2) using an invalidated credit card; 

“(3) illegally using another person’s credit card; and 

“(4) overdrawing with ill intentions. 

“Overdrawing with ill intentions as mentioned in the preceding paragraph means that a credit card holder who, for the purpose of
illegal possession, overdraws beyond the norm set or beyond the time limit and refuses to repay the overdrawn amount after the bank
that issues the card urges him to do so. 

“Whoever steals a credit card and uses it shall be convicted and punished in accordance with the provisions in Article 264 of this
Law.” 

3. One paragraph is added to Article 369 as the second paragraph and this Article is revised to read: “Whoever sabotages weapons
or equipment, military installations or military telecommunications shall be sentenced to fixed-term imprisonment of not more than
three years, criminal detention or public surveillance; whoever sabotages major weapons or equipment, military installations or military
telecommunications shall be sentenced to fixed-term imprisonment of not less than three years but not more than 10 years; if the
circumstances are especially serious, he shall be sentenced to fixed-term imprisonment of not less than 10 years, life imprisonment
or death. 

“Whoever unintentionally commits the crime mentioned in the preceding paragraph, thus causing serious consequences, shall be sentenced
to fixed-term imprisonment of not more than three years or criminal detention; if the consequences are especially serious, he shall
be sentenced to fixed-term imprisonment of not less than three years but not more than seven years. 

“Whoever in wartime commits any of the crimes mentioned in the preceding two paragraphs shall be given a heavier punishment.” 

4. This Amendment shall go into effect as of the date of promulgation.

Notice: All Rights Reserved to the Legislative Affairs Commission of the Standing Committee of the National People’s Congress.






CIRCULAR OF THE MINISTRY OF FINANCE, THE STATE ADMINISTRATION OF TAXATION OF THE PEOPLE’S REPUBLIC OF CHINA, ON ISSUES CONCERNING THE TAXATION POLICY OF SHANGHAI WORLD EXPO IN 2010

Circular of the Ministry of Finance, the State Administration of Taxation of the People’s Republic of China, on Issues Concerning
the Taxation Policy of Shanghai World Expo in 2010

Cai Shui [2005] No. 180

Financial offices (bureaus) of all provinces, autonomous regions, municipalities and separately listed cities in plan, national tax
bureaus and local tax bureaus, and financial bureau of Xinjiang Production and Construction Corps:

Approved by the State Council, here announces issues concerning the taxation policy of Shanghai World Expo in 2010 for purposes of
ensuring a complete success of Shanghai World Expo in 2010, fully showing forth the achievements of China’s reform and opening up
and advocating the theme of the Shanghai World Expo—-“better city, better life”, and promoting communications of economic, social,
cultural and technical achievements among countries and regions.

1.

Bureau of Shanghai World Expo Coordination and its consigned Shanghai World Expo (Group) Co., LTD will enjoy preferential tax policies
on revenues from the Expo.

2.

The Bureau of International Expositions and participants of Shanghai World Expo in 2010 will enjoy relevant preferential tax policies.

3.

This circular takes effect as from the date of your receipt, and the imposed tax will not be handed back.

4.

In view of the wide involvement and long-lasting implementation of the preferential tax policies of Shanghai World Expo in 2010,
all local financial and tax departments should focus on the implementation of above preferential tax policies, and report the newly
emerged tax-related affairs and problems encountered in implementation to Ministry of Finance and State Administration on Taxation.

Ministry of Finance

State Administration of Taxation

December 31, 2005



 
Ministry of Finance, State Administration of Taxation
2005-12-31

 






NOTICE OF THE STATE ADMINISTRATION OF TAXATION ON CANCELLATION OF EXPORT REBATE (EXEMPTION) LIQUIDATION

The State Administration of Taxation

Notice of the State Administration of Taxation on Cancellation of Export Rebate (Exemption) Liquidation

Guo Shui Fa [2005] No.197

To bureaus of state taxation of all provinces, autonomous regions, cities directly under State planning:

In order to standardize the administration of export rebate (exemption), the State Administration of Taxation, after consideration
and study, decided to cancel the liquidation of export rebate (exemption). The relating particulars are hereby given as follows:

1.

The bureaus of state taxation (herein after referred to tax authorities), mainly responsible for rebate(exemption) of goods exported
in the last year, shall, as of January 1,2006, not undertake liquidation of export rebate (exemption).

2.

The enterprise herein, as for the exported goods of the last year, shall declare export rebate (exemption) to tax authorities, in
accordance with the time limit for declaration of export rebate (exemption) prescribed in such documents as Notice of the State
Administration of Taxation on Relevant Issues of Export Rebate (Exemption) Regulation (Guo Shui Fa [2005] No.64), Supplementary Notice
of the State Administration of Taxation on Relevant Issues of Export Rebate (Exemption) Regulation [2005] No.113) and etc. The tax
authorities shall, in accordance with the regulations hereof, take up, check, examine and reply the export rebate of the enterprises
hereof.

3.

Tax authorities, after having canceled export rebate (exemption) liquidation, shall further strengthen daily administration of export
rebate(exemption), do well the statistics of relevant data and the submission hereof. Bureaus of state taxation of all provinces,
autonomous regions, cities directly under State planning shall, three days before the end of every month(postponed in case of holiday),
submit to the State Administration of Taxation (Department of Import and Export Tax Administration) Monthly Progress Report of Export
Tax Rebate (Exemption) (Appendix 1) and within 10 days after the end of every month, submit to the State Administration of Taxation(Department
of Import and Export Tax Administration) Quarterly Statistics of Special Policy of Export Tax Rebate(Exemption) ( Appendix 2) and
Quarterly Statistics of Cigarette Export Tax Rebate (Exemption) (Appendix 3).

4.

The Notice shall come into effect as of January 1,2006. Where the previous provisions are in conflict with that in the Notice, the
Notice shall prevail. Notice of the State Administration of Taxation on Measures for Export Rebate (Exemption) (Guo Shui Fa [1999]
No.6), and such provisions as Article 5 and article 2 and etc. in Notice of the Ministry of Finance and the State Administration
of Taxation on Further Extending Export Rebate (Exemption) (Cai Shui [2002] No.7) shall cease to be effective.

The Notice is hereby given.

Appendix:

1.Monthly Progress Report of Export Tax Rebate (Exemption)(Omitted)

2.Quarterly Statistics of Special Policy of Export Tax Rebate (Exemption)(Omitted)

3.Quarterly Statistics of Cigarette Export Tax Rebate (Exemption)(Omitted)



 
The State Administration of Taxation
2005-12-09

 






GUIDE FOR SECURITIES SELF-SUPPORT BUSINESS OF SECURITIES COMPANIES

China Securities Regulatory Commission

Notice of China Securities Regulatory Commission on Transmission of Guide for Securities Self-support Business of Securities Companies
and on Strengthening its Operation

To securities companies:

In recent years, self-support business of securities companies have been accompanied with operation with non-normative account, unproportional
position, concentrated shareholding or suspected manipulation of the market, which might trigger the breakout of corporation risks.
This Commission, on the basis of comprehensive control of securities companies, carried out survey on the operation of securities
companies and raises more detailed requirements on its supervision in such documents as Notice on Promoting Self-regulation, Legitimate
Operation and Innovation of Securities Companies ( Zheng Jian Ji Gou Zi[2005]No.37). Nowadays, most securities companies are, on
the basis of self -survey and in accordance with the requirements of the Commission herein, rectifying their operation, and some
are vigorously exploring how to ameliorate and perfect its self-support business mechanism, some of the remaining, however, have
failed to report and record account in accordance with the requirements herein, carried out inefficient rectification and violated
the relating rules to increase the position scale and etc. In order to promote reform of the self-support business mechanism of securities
companies, to prevent the risk in self-support business, China Securities Regulatory Commission formulated Guide for Securities Self-support
Business of Securities Company and transmitted it, on the basis of having solicited opinions in the circle of securities. The related
particulars are hereby notified as follows for the abidance and implementation hereof by securities companies:

China Securities Regulatory Commission

November 11, 2005

Guide for Securities Self-support Business of Securities Companies

Chapter ￿￿neral Principle

Article 1

In order to standardize self-support business of securities companies and to effectively control risk, this Guide is hereby formulated
in accordance with provisions of related laws and rules and the requirement of standardization of self-control.

Article 2

Securities companies shall, in accordance with the requirement of this Guide and the management characteristic and business operation
of the companies herein, establish perfect self-control management system, investment decision-making mechanism, operation flow and
risk monitoring mechanism to undertake self-support business on the premise that risk can be estimated, controlled and endured.

Article 3

Securities companies shall establish and perfect responsibility-affix-to person mechanism. Where violation of law occurs in self-support
business, responsibilities shall be affixed to person.

Chapter ￿￿cision-making and authorization

Article 4

Securities companies shall establish relatively concentrated investment mechanism and authorization mechanism with the integration
between rights and responsibilities. Decision-making mechanism of self-support business shall in principle be established in accordance
with such a system: board of directors–investment decision-making institution–self-support sectors.

Article 5

Board of director, the supreme decision-making institution of the self-support business, on the basis of severe abidance of the risk
control indicator criterion in monitoring provisions, shall, in accordance with such situation as asset, debt, profit and loss, and
abundance of capital in the companies herein, work out the scale of self-support, endurable risk and etc., and put them into practice
by means of board of directors’ decision-making, with the specific investment operation management of self-support business decided
by the decision-making institutions of the authorized company by the board of directors herein.

Investment decision-making institutions, the supreme decision-making institution, shall be responsible for the settlement of specific
asset arrangement strategy, investment proceedings and investment types and etc.

Self-support business sector, the executive institution of self-control, shall, within the scope of decision-making set by investment
decision-making institution and in accordance with its authorized rights, be answerable for the decision-making and execution of
investment particulars.

Article 6

Securities companies shall establish the authorization system of self-support business, confirm the range of authorized rights, its
time limit and responsibilities, make written record in the process of authorization to ensure the effective execution of authorized
system.

Securities companies shall establish business management system with clear administrative levels and definite responsibilities, work
out standardized business flow, and make clear the responsibilities of related sectors and positions of self-support business.

Article 7

Management and operation of self-support business shall be exclusively responsible by the self-support business of securities companies,
and non-self-support business sectors and its branches shall not carry out self-support business in any form.

Article 8

Important decisions mentioned in self-support business in the process of scale of self-support, at risk limitation, asset arrangement,
business authorization and etc., shall be made collectively and in written form and kept in the archives after the signature by related
personnel.

Chapter ￿￿eration of Self-support Business

Article 9

Self-support business must, in the name of securities company of itself, be undertaken through special self-support post, with non-self-support
business sector responsible for the management of self-support account, including opening account, cancelling account, using registration
and etc.

Self-support business shall establish and perfect the examination and auditing system of self-support system, and is forbidden to
lend self-support account, use non-self-support post to undertake disguised self-support business and extra-account self-support
business.

Article 10

Self-support business shall strengthen fund allocation and accounting of self-support business, with non-self-support business responsible
for allocation of self-support business fund.

Debit and credit of self-support fund must be operated in the name of the company, and is forbidden in the individual name; cash withdrawal
from self-support business is also forbidden.

Article 11

Self-support business shall perfect the investment justification mechanism, establish investment pool system, with self-support sectors
operating within the range of limited self-support scale and endurable risk, and choosing investment from investment pool.

Article 12

Self-support business shall establish and perfect the mechanism and decision-making of profit stop and loss stop mechanism, with the
implementation and actual assessment in conformity with the written procedure and written record.

Article 13

Establishment of rigorous operational flow, research on investment variety, formulation of portfolio and implementation of transaction
directive shall be separated from each other and charged by different persons; auditing and compulsory record shall be made, backup
system of self-support business shall be established, perfected and be charged by special personnel for its administration. .

Article 14

Liquidation and statistics of self-support business shall be implemented by special personnel, and reconciled duly with fund liquidators
of financial sector, and subsequently recorded by relating personnel.

Independent liquidation system on self-support fund shall be undertaken, with the separation of self-support business post with the
liquidation post of brokerage, asset management business and of otherwise business.

Chapter ￿￿sk Monitoring

Article 15

Firewall shall be established to ensure the strict separation of self-support business with such businesses as brokerage, asset management,
and investment bank in personnel, information, account, fund and accounting.

Article 16

Organs and functions of investment decision-making, investment operation and risk control shall be independent from each other; background
functions such as account management, fund liquidation and accounting shall be charged by independent sector or post so as to form
effective balanced supervision mechanism in the whole process of self-support business.

Article 17

Risk monitoring sector shall be capable to normally implement functions and acquire information an data in self-support business operation,
and thoroughly monitor risk in risk monitoring through establishing real-time monitoring system, establish effective risk monitoring
report mechanism, submit risk monitoring system to the board of directors and decision-making institutions, and inform relating information
to self-support business sectors and up-to-standard sectors. In case of discovering potential risk or irregular performance in business
operation or risk control indicators, risk monitoring sector herein shall report it to the board of directors and raise proposal
for its solution. The board of directors and investment decision-making institution as well as the relating sectors of self-support
business shall render feedback promptly to the proposal hereof, with written record being made in the process of report and feedback.

Article 18

Risk monitoring sector shall, in accordance with its real situation, enthusiastically borrow internationally advanced management experience,
introduce and develop effective risk control management tools, gradually establish and perfect such processes as risk identity, survey
and monitoring to make risk monitoring more scientific.

Article 19

Risk monitoring sector shall establish mark-to-market system of self-support business, perfect integrated analysis and monitoring
system of risk exposure of self-support business and total profit and gain, perfect quantizing indicator system of risk control,
and undertake regular sensitivity analysis and pressure test upon market value variation of self-support business and of the potential
influence of risk control indicator centered on the company’s net capital.

Article 20

Risk monitoring sector shall establish and perfect functions of risk monitoring system of self-support business, and set the corresponding
risk monitoring value to improve dynamic monitoring efficiency through dynamic variation automatically indicated by early warming
trigger equipment.

Article 21

Risk monitoring sector shall improve the transparency of self-support business. Securities self-support operation dealing system and
the monitoring system shall set necessary opening function or data interface so as to notice and check the self-support business
of securities companies.

Article 22

Risk monitoring sector shall establish and perfect the correcting and handling mechanism for defects in self-support operation risk
monitoring, with the risk monitoring sector, in accordance with the result of investigation and of assessment, be responsible for
raising rectifying and correcting measures and undertaking follow-up examination.

Article 23

Risk monitoring sector shall establish perfect file management system for investment decision-making and investment operation to ensure
its availability for checking after investment.

Article 24

Risk monitoring sector shall establish perfect achievement assessment and incentive system, perfect performance of evaluation mechanism,
follow the principle of objectivity, fairness and quantization to evaluate the investment capability and achievement performance
on self-support personnel.

Article 25

The auditing sector shall regularly undertake comprehensive audit upon the according-to-law operation, profit and loss, risk monitoring
and etc., and issue auditing report hereon.

Article 26

The auditing sector shall strengthen professional ethics and good faith education upon self-support personnel, intensify the awareness
of the confidentiality, according-to-law operation, risk control upon self-support personnel. Key self-support operation personnel
shall, before leaving office, be audited by auditing sectors.

Chapter ￿￿formation Report

Article 27

Report mechanism shall be established in self-support business. The content of report includes but not limits to: implementation of
decision-making, self-support asset quality, self-support profit and loss, risk monitoring and otherwise important particulars.

The board of directors shall review, sign signature and feedback the interior report of self-support business.

Article 28

Securities companies shall establish and perfect their self-support business report system, be consciously subject to exterior supervision.
Securities companies shall, in accordance with the requirement of supervisory sector and securities exchange, subject their self-support
business operation.

Content of the report includes:

1)

account and post of self-support business;

2)

Important decision-making engaged in scale of self-support business, limit of risk, asset allocation, business authorization and etc.;

3)

Risk monitoring report of self-support business;

4)

Other particulars needed reporting.

Article 29

Securities companies shall clarify the responsible sector, report process and person responsible, and, render corresponding punishment
to the persons with direct responsibility and leading reasonability for false record, misleading statement, or gross negligence,
and promptly report it to the supervisory sector.

Chapter ￿￿pendix

Article 30

The Guide shall be interpreted by China Securities Association.

Article 31

The relating terms of the Guide is given as follows:

1)

Risk exposure refers to the securities exposure (net position) formed as a result of difference between long position and short position
of certain securities type held by a securities company for certain period.

2)

Risk monitoring valve refers to certain indicator to control risk set in risk monitoring system. Risk monitoring valve generally includes
trading limit, risk limit and profit-stop and -loss-stop limit and etc.

3)

Sensitivity analysis refers to the potential influence of single or several market risk factors (interest rate, exchange rate and
stock price and etc.), with the invariability of other conditions, upon financial products and its integrated market value.

4)

Pressure test refers to the test of risk endurance in non-normative market, i.e. assessment on loss of financial products and its
integrated value under extreme market conditions such as volatile variation of such market risk factors as interest rate, exchange
rate, stock price and etc., or unexpected political or economic event.

Article 32

The Guide shall come into effect as of the date of its promulgation.



 
China Securities Regulatory Commission
2005-11-11

 






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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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