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the China Insurance Regulatory Commission
Circular of the China Insurance Regulatory Commission on Printing and Distributing the Notice on the Provisional Measures for the
Administration of Bond Investments of Insurance Institutional Investors
Bao Jian Fa [2005] No. 72
All insurance companies and insurance asset management companies:
With a view to strengthening the administration of bond investments, diversifying investment products, optimizing the asset structure,
effectively spreading risks and enhancing the asset quality, this Commission has formulated the Provisional Measures for the Administration
of Bond Investments of Insurance Institutional Investors (hereinafter referred to as the Measures) according to the requirements
of insurance fund investments and the bond market. These Measures are hereby printed and distributed to you, and the relevant matters
are notified as follows:
the China Insurance Regulatory Commission
August 17, 2005
Provisional Measures for the Administration of Bond Investments of Insurance Institutional Investors
Chapter I General Provisions
Article 1
With a view to strengthening the administration of bond investments, diversifying investment products, optimizing the asset structure,
effectively spreading risks and enhancing the asset quality, these Measures are formulated in accordance with the Insurance Law of
the People’s Republic of China and other relevant laws and regulations.
Article 2
The term “insurance institutional investors” (hereinafter referred to as insurance institutions) as mentioned in these Measures refers
to those insurance companies and insurance asset management companies that are established and registered upon approval of the China
Insurance Regulatory Commission (hereinafter referred to as the CIRC) and are engaged in bond investments. These Measures shall be
applicable to insurance group companies and insurance holding companies that undertake the bond investments.
Article 3
The term “bonds” as mentioned in these Measures refers to the Renminbi bonds and foreign currency bonds which are issued within the
territory of China by all kinds of issuers.
Article 4
An insurance institution can invest in bonds, which include the government bonds, financial bonds, enterprise (corporate) bonds and
other bonds issued upon approval of the department concerned.
Article 5
An insurance institution shall, in accordance with the requirements of matching assets with liabilities and the supervisory standards
of the CIRC, formulate the strategic plan of asset allocation and investment strategies, allocate bond assets on its own initiative,
and assume risks and the responsibility for its profits and losses by itself.
Article 6
An insurance institution shall, in accordance with the relevant provisions of the CIRC, entrust a third party for the independent
custody of bond assets.
Article 7
The CIRC shall be responsible for formulating policies and regulations on the administration of bond investments of insurance institutions,
adjusting the varieties and proportion of bond investment and carrying out the administration of and supervision over investment
activities.
Chapter II Government Bond Investments
Article 8
When investing in government bonds, an insurance institution may, according to the requirements of asset allocation and investment
strategies, freely determine the proportions of total investment each investment and keep a certain proportion of government bonds.
Chapter III Financial Bond Investments
Article 9
The financial bonds as invested in by an insurance institution include the central bank bills, financial bonds of policy banks, subordinated
bonds of policy banks, financial bonds of commercial banks, subordinated bonds of commercial banks, subordinated term debts of commercial
banks, subordinated term debts of insurance companies and Renminbi bonds of international development institutions, etc..Section
I Central Bank Bills
Article 10
When investing in the central bank bills, an insurance institution may, according to the needs of asset allocation as well as investment
strategies, freely determine the proportions of total investment and each investment.Section II Financial Bonds and Subordinated
Bonds of Policy Banks
Article 11
The financial bonds of policy banks invested in by an insurance institution shall be the financial bonds which, upon approval of the
People’s Bank of China, are issued by policy banks in the national inter-bank bond market in accordance with the Measures for the
Administration of the Issuance of Financial Bonds in the National Inter-bank Bond Market (hereinafter referred to as the Measures
for the Administration).The subordinated bonds of policy banks as invested in by an insurance institution shall be the subordinated
bonds which, upon the qualification examination by the China Banking Regulatory Commission (hereinafter referred to as the CBRC)
and the approval of the People’s Bank of China, are issued by policy banks in the national inter-bank bond market in accordance with
the Measures for the Administration of the Issuance of Subordinated Bonds of Commercial Banks (hereinafter referred to as the Measures
for Subordinated Bonds),.
Article 12
The financial bonds and subordinated bonds of policy banks as invested in by an insurance institution may not be subject to credit
rating.
Article 13
When investing in the financial bonds and subordinated bonds of policy banks, an insurance institution may, according to the requirements
of asset allocation as well as investment strategies, freely determine the proportions of total investment and each investment.
Article 14
If an insurance institution invests in the financial bonds of policy banks issued towards particular investors or in the subordinated
bonds issued privately, the conditions for issuers and the bond credit rating shall be fulfilled in accordance with Articles 11 and
12 of these Measures. The balance of investment in the above-mentioned bonds shall be reckoned in the balance of financial bonds
and subordinated bonds of policy banks, and the proportions of total investment and each investment shall be governed by Article
13 of these Measures.Section III Financial Bonds and Subordinated Bonds of Commercial Banks
Article 15
In the case of the financial bonds and subordinated bonds of commercial banks invested in by an insurance institution, their issuer
shall, in addition to complying with the Measures for the Administration, the Measures for Subordinated Bonds and other relevant
provisions as set down by the People’s Bank of China and the CBRC, satisfy the following conditions:
(1)
Its total assets are no less than RMB 200 billion Yuan;
(2)
Its core capital adequacy ratio is no less than 4 %;
(3)
It has been continuously profitable for last three years;
(4)
It is assessed by a domestic credit rating institution as the long-term credit rating of Class A or a level higher than Class A;
(5)
It is listed overseas and not subject to domestic credit rating, and is assessed as the long-term credit rating of Class BB or a level
higher than Class BB by an international credit rating institution;
(6)
It has timely, sufficiently, accurately and completely disclosed relevant information, which at least includes the total assets, total
liabilities, owners’ equities, operating income, net profits, rate of return on average equity, ratio of non-performing loans, ratio
of bad and doubtful debts, capital adequacy ratio and other indicators and data; and
(7)
Other conditions as prescribed by the CIRC.Where an issuer simultaneously has the domestic credit rating and international credit
rating as mentioned in Items (4) and (5) of the preceding paragraph, the domestic credit rating shall prevail.
Article 16
If an insurance institution invests in the financial bonds and subordinated bonds of commercial banks, the issuer of the aforesaid
bonds shall be assessed as the long-term credit rating of Class A or a level higher than Class A by a domestic credit rating institution.
Article 17
If an insurance institution invests in the financial bonds and subordinated bonds with guarantee, the credit standing of the guarantor
may not be lower than the credit rating of the issuer.
Article 18
The financial bonds and subordinated bonds of commercial banks invested in by an insurance institution shall comply with the following
provisions for the proportion:
(1)
The total balance of investments in the financial bonds and subordinated bonds of commercial banks may not exceed 30% of the total
assets of the aforesaid insurance institution at the end of last quarter as calculated at the cost price;
(2)
The balances of investments in the financial bonds and subordinated bonds of a same commercial bank may not add up to over 10% of
the total assets of the aforesaid insurance institution at the end of last quarter;
(3)
The portion of investments in a single type of financial bonds or subordinated bonds of commercial banks with the long-term credit
rating of Class AA or a level higher than Class AA at a period may not exceed 20% of the amount of issuance of the aforesaid single
type at the same period, and the balance thereof may not exceed 5% of the total assets of the aforesaid insurance institution at
the end of last quarter; and
(4)
The portion of investments in a single type of financial bonds or subordinated bonds of commercial banks with the long-term credit
rating of Class A or a level higher than Class A at a period may not exceed 10% of the amount of issuance of the aforesaid single
type at the same period, and the balance thereof may not exceed 3% of the total assets of the aforesaid insurance institution at
the end of last quarter.
Article 19
If an insurance institution invests in the financial bonds of commercial banks issued towards particular investors or in subordinated
bonds issued privately, the conditions for issuers and the bond credit rating shall be governed by Articles 15, 16 and 17 of these
Measures. The balance of investments in the above-mentioned bonds shall be reckoned in the balance of financial bonds and subordinated
bonds of commercial banks, and the proportions of total investment each investment shall be governed by Article 18 of these Measures.Section
IV Subordinated Term Debts of Commercial Banks
Article 20
The subordinated term debts of commercial banks as invested in by an insurance institution shall be the subordinated term debts which,
upon approval of the CBRC, are issued by state-owned commercial banks or national joint stock commercial banks in accordance with
the Circular on Including Subordinated Term Debts into the Attached Capital and the Measures for Subordinated Bonds.As for the subordinated
term debts of commercial banks invested in by an insurance institution, their issuer and the subordinated term debts shall comply
with Articles 15 and 16 of these Measures.
Article 21
The subordinated term debts of commercial banks as invested in by an insurance institution shall comply with the following provisions
for the proportion:
(1)
The balance of investments in the subordinated term bonds of commercial banks may not exceed 8% of the total assets of the aforesaid
insurance institution at the end of last quarter as calculated at the cost price;
(2)
The balance of investments in the subordinated term bonds of a same bank may not add up to over 5% of the total assets of the aforesaid
insurance institution at the end of last quarter; and
(3)
The portion of investments in a single type of subordinated term bonds of commercial banks at a period may not exceed 10% of the amount
of issuance of the aforesaid single type at the same period, and the balance may not exceed 3% of the total assets of the aforesaid
insurance institution at the end of last quarter.
Article 22
The term of subordinated term debts of commercial banks as invested in by an insurance institution may not exceed six years.Section
V Subordinated Term Debts of Insurance Companies
Article 23
The subordinated term debts of insurance companies as invested in by an insurance institution shall be the subordinated term debts
which, upon approval of the CIRC, are raised from targeted sources by insurance companies in accordance with the Interim Measures
for the Administration of Subordinated Term Debts of Insurance Companies.
Article 24
The subordinated term debts of insurance companies as invested in by an insurance institution shall comply with the following provisions
for the proportion:
(1)
The balance of investments in the subordinated term bonds of insurance companies may not exceed 20% of the total assets of the aforesaid
insurance institution at the end of last quarter as calculated at the cost price;
(2)
The balance of investments in the subordinated term bonds of a same insurance company may not add up to over 4% of the total assets
of the aforesaid insurance institution at the end of last quarter; and
(3)
The portion of investment in the subordinated term bonds of insurance companies at a period may not exceed 20% of the issuance amount
of subordinated term bonds of insurance companies at the same period, and the balance may not exceed 1% of the total assets of the
aforesaid insurance institution at the end of last quarter.
Article 25
Where an insurance institution has any of the following relations with an insurance company that raises subordinated term debts from
targeted sources, the insurance institution is not allowed to invest in the subordinated term debts raised by the insurance company
from targeted sources:
(1)
The insurance institution is in the control of the insurance company;
(2)
The insurance institution controls the insurance company; or
(3)
Both the insurance institution and the insurance company are in the control of a same third party.Section VI Renminbi Bonds of International
Development Institutions
Article 26
The Renminbi bonds of international development institutions invested in by an insurance institution shall be the Renminbi bonds which,
upon the examination by the department concerned and the approval of the State Council, are issued by international development institutions
in accordance with the Interim Measures for the Administration of the Issuance of Renminbi Bonds by International Development Institutions.
Article 27
When investing in Renminbi bonds of international development institutions, an insurance institution may, according to the requirements
of asset allocation as well as investment strategies, freely determine the proportions of total investment and each investment.
Chapter IV Enterprise (Corporate) Bond Investments
Article 28
In case an insurance institution invests in short-term financing bonds or convertible corporate bonds, it shall be governed by the
provisions on the enterprise (corporate) bond investments.Section I Enterprise (Corporate) Bonds
Article 29
In the case of the enterprise (corporate) bonds invested in by an insurance institution, their issuer shall, in addition to complying
with the relevant provisions of the state, satisfy the following conditions:
(1)
Its net assets are not lower than RMB 2 billion Yuan at the end of last year;
(2)
It has been continuously profitable for the last three fiscal years;
(3)
It has provided the audited financial statements for last three fiscal years in a timely manner;
(4)
The balance of enterprise (corporate) bonds to be repaid may not exceed 40% of its net assets of the latest fiscal year;
(5)
The credit standing of the guarantor may not be lower than the credit rating of the issuer;
(6)
It provides the legal opinions on information disclosure issued by practicing lawyers in a timely manner;
(7)
The financial information, which includes the total assets, total liabilities, revenues of main businesses, assets-liabilities ratio,
EBITDA/interests, quick ratio, rate of return on shareholders’ equities, other indicators and data, is disclosed in a timely manner
; and
(8)
Other conditions as prescribed by the CIRC.
Article 30
The enterprise (corporate) bonds as invested in by an insurance institution shall be assessed as the long-term credit rating of Class
AA or a level higher than Class AA by an international credit rating institution.
Article 31
The enterprise (corporate) bonds as invested in by an insurance institution shall comply with the following provisions for the proportion:
(1)
The balance of investments in the enterprise (corporate) bonds may not exceed 30% of the total assets of the insurance institution
at the end of last quarter as calculated at the cost price;
(2)
The balance of investments in the enterprise (corporate) bonds of a same enterprise (corporate) may not add up to over 10% of the
total assets of the insurance institution at the end of last quarter;
(3)
Where the guarantor meets any of the following conditions and provides the irrevocable guarantee, for which the guarantor shall bear
joint and several liabilities, the portion of investments in a single type of enterprise (corporate) bonds made by the insurance
institution at a period may not exceed 20% of the amount of issuance at the same period, and the balance thereof may not exceed 5%
of the total assets of the insurance institution at the end of last quarter:
a.
A financial institution that is assessed as the credit rating of Class AA or a level higher than Class AA for the last year by a domestic
credit rating institution;
b.
Special funds of the state such as the Railway Construction Fund or the Three-Gorges Dam Construction Fund, etc.; or
c.
A non-financial enterprise whose net assets are RMB20 billion Yuan or more at the end of last year.
(4)
Where the guarantor or the guarantee method does not comply with the conditions or provisions as listed in Item (3) of this Article,
the portion of investments in a single type of enterprise (corporate) bonds made by the insurance institution at a period may not
exceed 10% of the amount of issuance at the same period, and the balance thereof may not exceed 3% of the total assets of the aforesaid
insurance institution at the end of last quarter.
Article 32
The provisions for insurance institutions to invest in the unsecured enterprise (corporate) bonds shall be separately formulated by
the CIRC. Section II Convertible Corporate Bonds
Article 33
The convertible corporate bonds as invested in by an insurance institution shall, in addition to complying with the relevant provisions
of the state, satisfy the following conditions:
(1)
The credit standing of the guarantor may not be lower than the credit rating of the issuer of bonds; and
(2)
The specific debt redemption plans and the contract of guarantee shall be provided.
Article 34
The convertible corporate bonds as invested in by an insurance institution shall comply with the following provisions for the proportion:
(1)
The total balance of the enterprise (corporate) bonds, which shall include the balance of investment in the convertible corporate
bonds, may not exceed 30% of the total assets of the aforesaid insurance institution at the end of last quarter as calculated at
the cost price;
(2)
The sum of the balance of investment in the convertible corporate bonds of a same enterprise (corporation), which shall be reckoned
in the balance of the enterprise (corporate) bonds of the same enterprise (corporation), may not exceed 10% of the total assets of
the aforesaid insurance institution at the end of last quarter. In particular, the balance of convertible corporate bonds may not
exceed 5% of the total assets of the aforesaid insurance institution at the end of last quarter as calculated at the cost price;
(3)
Where the guarantor satisfies any of the following conditions, the portion of investment in a single type of convertible corporate
bonds made by an insurance institution at a period may not exceed 20% of the amount of issuance at the same period, and the balance
may not exceed 3% of the total assets of the aforesaid insurance institution at the end of last quarter;
a.
A financial institution that is assessed as the credit rating of Class AA or a level higher than Clas AA for the last year by a domestic
credit rating institution; or
b.
An enterprise whose net assets are RMB20 million Yuan or more at the end of last year.
(4)
If the guarantor does not satisfies the conditions as listed in Item (3) of this Article, the portion of investment in a single type
of convertible corporate bonds made by an insurance institution at a period may not exceed 10% of the amount of issuance at the same
period, and the balance may not exceed 1% of the total assets of the aforesaid insurance institution at the end of last quarter.
Article 35
Where an insurance institution converts the convertible corporate bonds that it invests in into stocks, the Provisional Measures for
the Administration of Stock Investments of Insurance Institutional Investors (hereinafter referred to as the Measures for Stock Investments)
shall be applied to the conversion .Section III Short-term Financing Bonds
Article 36
The short-term financing bonds as invested in by an insurance institution shall be the short-term financing bonds which, after filing
with the People’s Bank of China for record, are issued in the national inter-bank bond market by non-financial enterprises according
to the Measures for the Administration of Short-term Financing Bonds.
Article 37
In the case of the short-term financing bonds as invested in by an insurance institution, their issuer shall meet the following conditions
as well as the conditions as prescribed in the Measures for the Administration of Short-term Financing Bond,:
(1)
Its net assets may not be lower than RMB 2 billion Yuan at the end of last year;
(2)
It has been continuously profitable for last two fiscal years;
(3)
The balance of short-term financing bonds to be redeemed may not exceed 40% of its net assets of the latest fiscal year;
(4)
It has timely disclosed the financial information, which at least includes the total assets, total liabilities, main business income,
assets-liabilities ratio, EBITDA/interests, quick ratio, rate of return on shareholders’ equities, other indicators and data; and
(5)
Other conditions as prescribed by the CIRC.
Article 38
The credit rating of short-term financing bonds as invested in by an insurance institution shall satisfy the following conditions:
(1)
Being assessed as the short-term credit rating of Class A-1 or a level higher than Class A-1 by a domestic credit rating institution;
and
(2)
As for a listed company that is not subject to the credit rating under the Measures for the Administration of Short-term Financing
Bonds, its credit rating and follow-up rating for recent three years shall satisfy either of the following conditions:
a.
Being assessed as the long-term credit rating of Class AA or a level higher than Class AA by a domestic credit rating institution;
b.
Being assessed as the long-term credit rating of Class BBB or a level higher than Class BBB by an international credit rating institution.
Where an issuer simultaneously has the domestic credit rating and international credit rating, the domestic credit rating shall prevail.
Article 39
The short-term financing bonds as invested in by an insurance institution shall comply with the following provisions for the proportion:
(1)
The total of the balance of enterprise (corporate) bonds, which shall include the balance of investment in the short-term financing
bonds, may not exceed 30% of the total assets of the aforesaid insurance institution at the end of last quarter as calculated at
the cost price. In particular, the balance of short-term financing bonds may not exceed 10% of the total assets of the aforesaid
insurance institution at the end of last quarter as calculated at the cost price;
(2)
The sum of the balance of investment in the short-term financing bonds of a same enterprise (corporation), which shall be reckoned
in the balance of the bonds of the same enterprise (corporate), may not exceed 10% of the total assets of the aforesaid insurance
institution at the end of last quarter as calculated at the cost price. In particular, the balance of short-term financing bonds
may not exceed 3% of the total assets of the aforesaid insurance institution at the end of last quarter; and
(3)
The portion of investment in a single type of short-term financing bonds at a period may not exceed 10% of the amount of issuance
at the same period, and the balance thereof may not exceed 3% of the total assets of the aforesaid insurance institution at the end
of last quarter.
Chapter V Risk Control
Article 40
An insurance institution shall, in accordance with the requirements as stated in the Guidelines for Risk Control in the Utilization
of Insurance Funds, establish a sound risk control system of bond investment, formulate scientific, rigorous and high-efficiency
business operational procedures and report them to the CIRC for record.
Article 41
The custodian of bond assets as selected by an insurance institution shall be a commercial bank or any other professional financial
institution that satisfies the conditions as prescribed in the Measures for Stock Investments.
Article 42
The relevant provisions as stated in the Guidelines for the Custody of Stock Assets of Insurance Companies (for Trial Implementation)
shall be applied to the contents of the bond custody agreement entered into between an insurance institution and a custodian, the
duties and obligations of the custodian as well as the supervision and administration of the custodian.
Article 43
An insurance institution should intensify the risk management of bond investment, properly arrange the term structure, allocation
of bond types, credit distribution and liquidity requirements of bond portfolio, carry out follow-up administration of the capital
quality, rate of return, risk nature, harms and occurrence of risks of bond investments. It shall regularly analyze and evaluate
the policy risk, credit risk, market risk, liquidity risk and operational risk, and control the overall risks of bond investments
within the endurable range.
Article 44
An insurance institution should establish an assessment system of credit risks of bond issuers and bonds, carry out continuous follow-up
assessment of the credit standing of the bond issuer and bonds, on which decisions with regard to bond investments should be based.
Article 45
An insurance institution shall, according to the credit standing of the bond issuer, the risk degree of bonds and the supervisory
standards of the CIRC, set the investment restrictions, and adjust the investment quota regularly or do so when the credit standing
of the bond issuer is changed.
Article 46
If an insurance institution invests in various bonds (excluding government bonds, central bank bills, financial bonds of policy banks
or subordinated bonds of policy banks) issued or guaranteed by a same issuer, the total of the balance of aforesaid various bonds
may not exceed 20% of the total assets of the aforesaid insurance institution at the end of the previous quarter as calculated at
the cost price.
Article 47
If an insurance institution establishes an investment account for investment-linked insurance products, the proportion of investment
in the financial bonds and subordinated bonds of commercial banks and the enterprise (corporate) bonds may not exceed 100% of the
total assets of the aforesaid account at the end of the last quarter.If an insurance institution establishes an investment account
for universal life insurance products, the proportion of investment in the financial bonds and subordinated bonds of commercial banks
and the enterprise (corporate) bonds may not exceed 80% of the total assets of the aforesaid account at the end of the last quarter.If
an insurance institution establishes an independent account for other insurance products, the proportion of investment in the financial
bonds and subordinated bonds of commercial banks and the enterprise (corporate) bonds may not exceed the proportion as stipulated
in the insurance clause or go against the relevant provisions as prescribed by the CIRC.
Article 48
As for the bonds as invested in by an insurance institution, when the latest follow-up credit rating is downgraded, the insurance
institution shall, in accordance with the relevant provisions as prescribed by the CIRC, work out the adjustment measures and adjust
the above-mentioned bond investments to the prescribed proportion within the time limit.
Article 49
Where the issuer of the bonds as invested in by an insurance institution is under any of the following circumstances, the insurance
institution shall stop investing in the bonds that are newly or already issued by the aforesaid issuer, and shall properly dispose
of the bonds it holds:
(1)
The latest information shows that the issuer fails to satisfy the conditions as prescribed in these Measures;
(2)
The issuer cannot pay the principal or interest on schedule;
(3)
The issuer fails to comply with the relevant provisions to timely, sufficiently, accurately or completely disclose the relevant information;
(4)
The follow-up credit rating cannot be carried out for the issuer according to the provisions; or
(5)
The issuer fails to satisfy any other condition as prescribed by the CIRC.
Article 50
If an insurance institution carries out bond repurchase transactions, it shall effectively control the size of repurchase program
and evade the liquidity risk.In case an insurance institution carries out the bond transactions or repurchase transactions at the
seat of a securities institution, it shall check the balance of standard bonds and the conditions on the repurchase of undue bonds
every day, and avoid the occupation and embezzlement of bonds and capital.When carrying out bond repurchase transactions in the inter-bank
bond market, the insurance institution shall, according to the relevant provisions of the CIRC, determine the standards for selecting
counterparty, and the financing amount of repurchase may not be higher than the fair market price of the aforesaid bonds un
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National Development and Reform Commission, the Ministry of Construction, the Ministry of Railways, the Ministry of Communications,
the Ministry of Information Industry, the Ministry of Water Resources and the Civil Aviation Administration of China
Order of the National Development and Reform Commission, the Ministry of Construction, the Ministry of Railways, the Ministry of Communications,
the Ministry of Information Industry, the Ministry of Water Resources and the Civil Aviation Administration of China
No.27
With a view to standardizing the bidding and tendering activities for goods used for engineering construction projects, safeguarding
the interest of the state, social public interest and legitimate rights and interests of the parties involved in the bidding activities,
ensuring the quality of projects and increasing investment returns, and in accordance with the Bidding Law of the People’s Republic
of China and the division of functions of the relevant departments under the State Council, the National Development and Reform Commission,
the Ministry of Construction, the Ministry of Railways, the Ministry of Communications, the Ministry of Information Industry, the
Ministry of Water Resources and the Civil Aviation Administration of China have adopted the Measures Governing Tender and Bidding
for Goods in Engineering Construction Projects, which are hereby promulgated and shall come into force as of March 1, 2005.
Makai, Director of the National Development and Reform Commission
Wang Guangtao, Minister of the Ministry of Construction
Liu Zhijun, Minister of the Ministry of Railways
Zhang Chunxian, Minister of the Ministry of Communications
Wang Xudong, Minister of the Ministry of Information Industry
Wang Sucheng, Minister of the Ministry of Water Resources
Yang Yuanyuan, Director of the Civil Aviation Administration of ChinaJanuary 18, 2005
Measures Governing Tender and Bidding for Goods in Engineering Construction Projects
Chapter I General Provisions
Article 1
These Measures are formulated with a view to standardizing the bidding and tendering activities for goods used in engineering construction
projects, safeguarding the interest of the state, social public interest and legitimate rights and interests of the parties involved
in the bidding activities, ensuring the quality of projects and increasing investment returns, and in accordance with the Bidding
Law of the People’s Republic of China and the division of functions of the relevant departments under the State Council.
Article 2
These Measures shall be applicable to the bidding and tendering activities for goods used in engineering construction projects legally
subject to bidding within the territory of the People’s Republic of China. The goods as mentioned in the preceding Paragraph refer
to important equipment and materials for engineering construction projects.
Article 3
Those engineering construction projects that comply with the scope and standards as prescribed by the Provisions on the Bidding Scope
and Scale Standards for Engineering Construction Projects (Order No.3 of the former State Planning Commission) shall be conducted
by choosing goods suppliers through bidding.No entity or individual may evade bidding activities by splitting a project legally subject
to bidding into parts or by any other means.
Article 4
The principles of openness, fairness, justice and good faith shall be observed in bidding and tendering activities for goods in engineering
construction projects. No bidding and tendering activity for goods shall be restricted on the ground of areas or departments.
Article 5
Bidding and tendering activities for goods in engineering construction projects shall be responsible by tenderees pursuant to law.When
the tenderee of an engineering construction project carries out an overall contracting bidding for the project, and if the goods
outside the overall contracting scope amount reached to the state scale standards, the tenderee of the engineering construction project
shall organize the bidding and tendering activities according to law.When the tenderee of an engineering construction project carries
out an overall contracting bidding for the project, if the goods in the form of temporarily evaluated price as included in the overall
contracting scope amount reached to the state scale standards, the bid winner of the overall contracting and the tenderee of the
engineering construction project shall jointly organize the bidding and tendering activities. The assumption of risks and liabilities
by both parties involved shall be stipulated in the contract.The tenderee of the engineering construction project or the bid winner
of the overall contracting may entrust a bidding agency that has lawfully obtained the qualification to undertake the bid invitation
agency services. The guidance price set down by the government shall be implemented for the charges for the bid invitation agency
services, which shall be paid by the tenderee; if there are other agreements among the tenderee, the bidding agency and the bidder,
such agreements shall prevail.
Article 6
The departments of development and reform, construction, railways, communications, information industry, water resources and civil
aviation, etc. at all levels shall, according to the division of functions of administrative supervision over engineering construction
projects set forth by the State Council and the people’s governments at all levels, conduct supervision over the bidding and tendering
activities for goods in engineering construction projects, and investigate and punish illegal acts therein.
Chapter II Invitations to Bid
Article 7
The tenderee of an engineering construction project shall be the legal person or any other organization that proposes the project
for bid invitation and that carries out the bid invitation. The bid winner of a overall contracting as set forth in Paragraph 3 of
Article 5 of these Measures shall also be a tenderee when carrying out the joint bid invitation.
Article 8
An engineering construction project legally subject to bidding shall meet the following conditions for carrying out bidding for goods:
(1)
The tenderee has been established according to law;
(2)
Where examination, approval or archival formalities are required pursuant to the relevant state provisions, the said formalities have
been completed;
(3)
There are corresponding funds or the source of funds has been confirmed; and
(4)
Being able to put forward requirements on the use of goods and on the technologies.
Article 9
For an engineering construction project legally subject to bidding, if the project shall be submitted to the examination and approval
department for examination and approval according to the state provisions concerning the examination and approval of investment projects,
the tenderee shall include the relevant bid invitation contents such as the bid invitation scope, the bid invitation method (open
bid invitation or selective bid invitation) and the bid invitation organizational form (self bid invitation or entrusted bid invitation)
in the feasibility study report to the examination and approval department for examination and approval, and the project examination
and approval department shall send a copy of its opinions on the bid invitation to the relevant administrative supervision department.For
an enterprise investment project that applies to financial funds arranged by government, the bid invitation contents as prescribed
in the preceding Paragraph shall be decided in the official reply by the examination and approval department for fund application
reports.
Article 10
Bid invitations for goods include open bid invitations and selective bid invitations.
Article 11
The method of open bid invitation shall be adopted for the purchase of goods for state key construction projects and local key construction
projects as determined by the people’s governments of all provinces, autonomous regions and municipalities directly under the Central
Government; and the method of selective bid invitation may be adopted upon approval if it is under any of the following circumstances:
(1)
The technologies of goods are complex or have other special requirements, and there are only a few potential bidders available;
(2)
The project involves state security, state secret or disaster rescue, and is fit for the bid invitation but not for open bid invitation;
(3)
The money saved by the open bid invitation to be carried out is not worth the costs incurred therefrom;
(4)
Other circumstances that are unfit for open bid invitation as provided by laws and administrative regulations.Selective bid invitations
for goods for key state construction projects shall be subject to the approval of the development and reform department under the
State Council; and selective bid invitations for local key construction projects shall be subject to the approval of the people’s
governments of the relevant provinces, autonomous regions and municipalities directly under the Central Government.
Article 12
In the case of open bid invitations, the tenderee shall issue announcements on the bid invitation. With respect to the goods legally
subject to the bidding, the announcements on the bid invitation shall be published in newspapers or periodicals or information networks
designated by the State.In the case of selective bid invitations, the tenderee shall issue bid invitation letters to 3 or more specific
legal persons or other organizations with the goods supply capacity and with good credit standing.
Article 13
An announcement on bid invitation or a bid invitation letter shall indicate at least the following information:
(1)
Name and address of the tenderee;
(2)
Names, quantity, technical specifications and the fund source of goods subject to the bid invitation;
(3)
Place and date of delivery;
(4)
Place and time for obtaining bid invitation documents or preliminary qualification examination documents;
(5)
Charges to be collected for bid invitation documents or preliminary qualification examination documents;
(6)
Place and expiry date for submitting applications for preliminary qualification examination or the tender documents; or
(7)
Qualifications required as a bidder.
Article 14
The tenderee shall make the bid invitation documents or preliminary qualification examination documents in public at the time and
place as set forth in the announcement on bid invitation or the bid invitation letter. It shall be no less than 5 working days computed
from the day when the bid invitation documents or preliminary qualification examination documents are sent out to the day when the
sending thereof is stopped. The tenderee shall affix its seal or stamp on the bid invitation documents or preliminary qualification
examination documents. The tenderee may issue the bid invitation documents through information networks or other media. The bid invitation
documents issued through information networks or other media have the same legal binding force as that of written bid invitation
documents and, in the case of inconsistence, the written bid invitation documents shall prevail, unless otherwise provided for by
laws, administrative regulations or the bid invitation documents.The charges collected for bid invitation documents or preliminary
qualification examination documents shall be reasonable and may not be for the purpose of making profit. No bid invitation document
or preliminary qualification examination document may be returned after they are sent out, unless it is due to any force majeure.
The tenderee may not illegally terminate the bid invitation after it has issued the announcement on bid invitation, or has sent out
the bid invitation letters, the bid invitation documents or preliminary qualification examination documents. In case the bid invitation
is terminated due to any force majeure, a bidder shall be enpost_titled to claim for returning the bid invitation documents and take back
the charges for purchasing the bid invitation documents.
Article 15
The tenderee may, according to the characteristics and needs of the goods subject to the bidding, make qualification examinations
of the potential bidders or bidders where there are provisions in laws or administration regulations on the qualifications of potential
bidders or bidders such provisions shall be observed.
Article 16
The qualification examination shall be divided into preliminary qualification examination and post qualification examination.The preliminary
qualification examination refers to the qualification examination of the potential bidders made before the tenderee sells the bid
invitation documents or sends out bid invitation letters. As a general rule, the said method shall be applicable to open bid invitations
with a lot of potential bidders or those for bulk goods or for goods with complex technologies, or to selective bid invitations for
which it is necessary to choose potential bidders openly. The post qualification examination refers to the qualification examination
of bidders made after the tenders are opened. As a general principle, the post qualification examination shall be carried out when
the preliminary appraisal begins in the process of bid evaluation. .
Article 17
Where the preliminary qualification examination is adopted, the tenderee shall issue an announcement on preliminary qualification
examination, which shall be governed by the provisions in Articles 12 and 13 of these Measures concerning bid invitation announcements.
Article 18
As a general principle, the preliminary qualification examination documents shall include:
(1)
An invitation letter of preliminary qualification examination;
(2)
Instructions for applicants;
(3)
Requirements in relation to the qualifications;
(4)
Requirements in relation to other outstanding achievements;
(5)
Standards and methods for qualification examination; and
(6)
The method for notifying the results of preliminary qualification examination.
Article 19
Where the preliminary qualification examination is adopted, the tenderee shall explicitly indicate in the preliminary qualification
examination documents the standards and methods for qualification examination; where the post qualification examination is adopted,
the tenderee shall explicitly indicate in the bid invitation documents the standards and methods for qualification examination. When
carrying out the qualification examination, the tenderee may not change or supplement the indicated standards and methods for qualification
examination, or make qualification examination to the potential bidders or the bidders according to any standard or by using any
method that has not been indicated.
Article 20
After the preliminary qualification examination, the tenderee shall issue notices to those potential bidders passing the preliminary
qualification examination and inform them of the time, place and method of acquiring the bid invitation documents, and shall inform
unqualified potential bidders of the results of the preliminary qualification examination at the same time. Where potential bidders
who pass the preliminary qualification examination are less than 3, the tenderee shall carry out a renew preliminary qualification
examination.The bidding by bidder who failed in the post qualification examination shall be handled as the nullified bidding by the
bid evaluation committee.
Article 21
As a general rule, bid invitation documents shall include:
(1)
A bid invitation letter;
(2)
Instructions for bidders;
(3)
Formats of tender documents;
(4)
Technical specifications and parameters, and other requirements;
(5)
Standards and methods for bid evaluation; and
(6)
Main terms of the contract.The tenderee shall provide for substantial requirements and conditions in the bid invitation documents
and indicate that the failure to meet any substantial requirement or condition will cause the refusal of the bid, and indicate them
in an eye-catching fashion. No requirement or condition that has not been stated may be treated as a substantial requirement or condition
for tender evaluation. In respect to the non-substantial requirements and conditions, the maximum scope and number of items permissible
for variations and the methods for adjusting these variations shall be provided for.Where the State prescribes special demands in
the aspects of technologies, standards and quality of goods subject to bidding, the tenderee shall put forward the said special demands
in the bid invitation documents, and take them as substantial requirements and conditions.
Article 22
In case the goods subject to bidding need to be divided into different bid packages, the tenderee shall do so in a reasonable manner,
and determine the date of delivery of each bid package, and faithfully indicate them in the bid invitation documents.
Article 23
In case the tenderee permits the bid winner to subcontract non-principal goods, it shall indicate it in the bid invitation documents.
No main facility or main part of supply contract may be required or permitted to be sub-contracted.Unless the bid invitation documents
prescribed that the supplier of standard goods may not be altered, if the bid winner changes the supplier of standard goods with
the consent of the tenderee, it shall not be regarded as subcontracting or illegal subcontracting.
Article 24
The tenderee may require the bidders to submit alternative tender schemes, except for tender documents in line with the bid invitation
documents, however, explanations shall be made in the bid invitation documents, and no alternative tender scheme of the bidder that
is not meet the winning bid conditions may be taken into account.
Article 25
The technical standards provided for in the bid invitation documents shall meet the provisions in the state technical rules.The technical
standards provided for in the bid invitation documents may not require or indicate a certain patent, trademark, name, design, place
of origin or supplier, or contain other contents that have inclination or that exclude any potential bidder. Where the tenderee
must quote the technical standards of a certain supplier so as to correctly or clearly explain the technical standards of the goods
to be bid, it shall add the words “or an equivalent to” after the references.
Article 26
The bid invitation documents shall expressly provide for all tender evaluation factors including the price, as well as the methods
for evaluating tenders according to such factors.The tender evaluation standards, methods and bid winning conditions may not be changed
during the process of tender evaluation.
Article 27
A tenderee may, in the bid invitation documents, require the bidders to submit a tender deposit as the name of themselves. The tender
deposit may be, apart from cash, letter of guaranty issued by a bank, confirmed checks, bank drafts or cash checks, or any other
lawful form of guaranty as recognized by the tenderee. The tender deposit may not exceed 2% of the total tender price in general
, however, the maximum may not exceed RMB 800,000 yuan. The valid period of the tender deposit shall be the same as that of the tenders.A
bidder shall submit the tender deposit to the tenderee or the bidding agency prior to the expiry date for submitting tender documents
according to the method and amount required by the bid invitation documents.Where a bidder fails to submit the tender deposit as
required by the bid invitation documents, its tender document shall be nullified.
Article 28
The bid invitation documents shall fix an appropriate valid period for tenders, so as to ensure that the tenderee have enough time
to finish the tender evaluation and sign a contract with the bid winner. The valid period for tenders shall be computed as of the
expiry date of submitting tender documents as provided for in the bid invitation documents.If any special circumstance occurs prior
to the expiration of the original valid period of tenders, the tenderee may, in written form, ask all bidders to extend the valid
tendering period. For bidders agreeing the extension may not require or be allowed to modify substantial contents of their tender
documents, however, the valid period of their tender deposits shall be extended accordingly; for bidders refusing the extension,
their tenders shall be invalidated, however, such bidders have the right to withdraw their tender deposits. The tenderee shall launch
a renew bid invitation if there are less than three bidder agreeing the extension of the valid period of tenders.
Article 29
With respect to the questions raised by the potential bidders during the course of reading bid invitation documents, the tenderee
shall give answers in written form or through a preliminary tender meeting or via the internet, however, the tenderee shall notify
answers in written form to all potential bidders who have bought the bid invitation documents at the same time. Those answers shall
be a part of the bid invitation documents.Unless it is expressly required by the bid invitation documents, the presence of the bid
preliminary meeting is not compulsory, upon the decision by the potential bidders themselves, and the possible risks occurred therefrom
shall be assumed by themselves
Article 30
The tenderee shall fix a reasonable period of time for the bidders to formulate their tender documents, The goods legally subject
to bidding, the period of time shall be no less than 20 days from the date of the issue of the bid invitation documents to the date
of the closing of the submission of tender documents.
Article 31
The tenderee may adopt two-phase bidding procedures if the technical standards of goods can not be exactly worked out.At the first
phase, the tenderee may firstly require potential bidders to submit technical suggestions, explicitly state technical standards,
quality and other characters of the goods. The tenderee may carry out consultations and discussions with the bidders in regard to
the suggested contents, so as to form uniform technical standards and then to formulate the bid invitation documents.At the second
phase, the tenderee shall provide the formal bid invitation documents including the uniform technical standards to bidders that
have submitted technical suggestions at the first phase , and the bidders shall submit final tender documents with the price included
pursuant to the requirements of the formal bid invitation documents.
Chapter III Bidding
Article 32
A bidder is a legal person or any other organization that responds to the bid invitation and participates in the bidding competition.
Two or more legal persons with the same legal representative, a parent company, wholly-owned subsidiary or any of its holding companies
may not simultaneously offer tenders for the same bid invitation for goods.One manufacturer can only entrust one agency to participate
in the bidding for the goods with the same model of the same brand, otherwise the tenders shall be nullified.
Article 33
A bidder shall draw up the tender documents pursuant to the requirements provided for in the bid invitation documents. The tender
documents shall respond to the substantial requirements and conditions set forth in the bid invitation documents.As a general rule,
the tender documents shall include:
(1)
A bid letter;
(2)
A bid table;
(3)
Detailed descriptions of technical performance parameters;
(4)
Business and technical variations list;
(5)
Bid deposit;
(6)
Relevant qualification certificates; and
(7)
Other contents as required in the bid invitation documents.Each bidder shall indicate the actual situation of goods pursuant to the
bid invitation documents, and if any bidder plans to contracting out any minor part in the supply contract after winning the bid,
he shall state it in the tender documents.
Article 34
A bidder shall serve the sealed tender documents to the place as prescribed in the bid invitation documents prior to the deadline
for submission of tender documents as required in the bid invitation documents. The tenderee shall, after receiving the tender documents,
issue to the bidder a proof marked with the recipient and time of receipt, and no entity or individual may unseal the tender documents
before the opening of tenders.The tenderee may not accept those tender documents or amendments thereof sent by way of telegraph,
telex, facsimile or e-mail.The tender documents served after the deadline for submission of tender documents as required in the bid
invitation documents are void, and the tenderee shall reject them and turn them back to the bidder intact.Where the bidders that
submit tender documents are less than three, the tenderee shall renew a bid invitation. Where there are still less than 3 bidders,
the bid invitation for an engineering project must be bidding may not be carried out any more after putting on record in the relevant
administrative supervision department, or the bid opening and bid evaluation can be carried out to two qualified bidders
Article 35
Prior to the deadline for submission of tender documents as required in the bid invitation documents, a bidder may supplement, modify,
replace or withdraw the submitted tender documents, and notify the tenderee in written form. The contents supplemented and modified
shall be a part of the tender documents.
Article 36
After the deadline for submission of tender documents, a bidder may not supplement, modify, replace or withdraw its tender documents.
If a bidder does so, the tenderee will not accept them; and if a bidder withdraws its tender documents, it tender deposit will be
confiscated.
Article 37
A tenderee shall take good care of the accepted tender documents, notices of modification or withdrawal, alternative tender schemes,
etc., and keep them strictly secret.
Article 38
Two or more legal persons or other organizations may form an association to jointly participate in the tendering as one bidder.No
party to the said association may solely bid in its own name after signing the agreement on the joint bidding, neither may it form
any new association or participate in any other association to bid in the same project; otherwise the bidding shall be invalidated.
Article 39
Each party of the association shall file an application to the tenderee for forming an association at the time of preliminary qualification
examination of bidders. If they fail to do so, no association may be formed for the bidding after the preliminary qualification examination
is completed.The tenderee may not force the bidders passing the preliminary qualification examination to form an association.
Chapter IV Bid Opening, Bid Evaluation and Award of Bid
Article 40
The bid opening shall be carried out at the same time as the deadline for submitting tender documents as fixed in the bid invitation
documents; the place of bid opening shall be the place as fixed in the bid invitation documents.Each bidder or its authorized representative
shall be enpost_titled to attend the bid opening meeting, or decide by itself not to attend the bid opening meeting.
Article 41
The tenderee will reject those tender documents that are under any of the following circumstances:
(1)
The tender documents haven’t been served within the time limit or to the designated place; or
(2)
The tender documents haven’t been sealed as required in the bid invitation documents.The tender evaluation committee will, after the
preliminary examination, deal with a tender as nullified if the tender documents are under any of the following circumstances:
(1)
The tender documents bear no entity’s stamp or no signature or stamp of the legal representative or the agent authorized thereby;
(2)
There is no letter of attorney issued by the legal representative;
(3)
The tender hasn’t been filled out pursuant to the prescribed format, the contents are incomplete or the key words are indistinct and
illegible;
(4)
The bidder has submitted two or more tender documents with different contents, or quote two or more prices for the same goods in one
copy of tender documents and without declaring which one is final, unless the bid invitation documents provide for the submission
of alternative tender schemes;
(5)
The name or organizational structure of a bidder is inconsistent with that in the preliminary qualification examination, and no effective
certification has been provided;
(6)
The valid period for bidding doesn’t meet the requirements as provided for in the bid invitation documents;
(7)
No tender deposit has been submitted as required in the bid invitation documents;
(8)
In the case of tendering through a bid invitation association, no agreement on the joint bidder as signed by the parties to the association
has been submitted; or
(9)
Other circumstances that may result in the nullification of bid as provided for in the bid invitation documents.In case the tender
evaluation committee nullifies all bids, or nullifies part of bids bring on less than 3 effective bids, and the bid is evidently
lack of competition, so as to decide all bids will be nullified, and the tenderee shall launch a new bid invitation.
Article 42
The tender evaluation committee may, in written form, require a bidder to make necessary clarifications, explanations or amendments
with respect to the contents in the tender documents with unclear meaning, inconsistent statements on the same issue or obvious errors
in wording or calculation. The tender evaluation committee may not raise any implied or inductive questions to the bidder, or explicitly
indicate to the bidder the omissions and mistakes in the tender documents.
Article 43
The tender evaluation committee shall nullify a bid if the tender documents make no response to the substantial requirements and conditions
as provided for in the bid invitation documents, and may not allow the bidder to make such a bid to become a responding one by modifying
or canceling its differences or reservations not in conformity with the requirements.
Article 44
The minimum bidding pricing method shall generally be adopted for carrying out the bid evaluation for goods with simple technologies
or requiring the uniform technical standards, performance and manufacturing technical requirements. As a general rule, the comprehensive
evaluation method shall be adopted for carrying out the bid evaluation for goods with complex technologies or technical standards,
performance and manufacturing technical requirements that are hard to be unified.The minimum bidding price may not be lower than
the cost.
Article 45
The alternative tender schemes submitted by a bidder that compli
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the Ministry of Construction
Circular of the MOC on Relevant Matters concerning the Supplementary Agreement II to Hong Kong/Mainland CEPA and the Supplementary
Agreement II to Macao/Mainland CEPA as Approved by the State Council
Jian Zong [2005] No. 219
The construction departments of all provinces and autonomous regions, the construction commissions of all municipalities directly
under the Central Government, the construction administrations of Shandong and Jiangsu Provinces, the Construction Bureau of Xinjiang
Production and Construction Corps, the Engineering Bureau of the Barracks Section of the General Logistics Department,
With a view to promoting the establishment of closer economic relations between Hong Kong, Macao and the Mainland, encouraging the
Hong Kong and Macao service providers to incorporate foreign trade enterprises in the Mainland, and in accordance with the Supplementary
Agreement to Hong Kong/Mainland Closer Economic Partnership Arrangement and the Supplementary Agreement II to Macao/Mainland Closer
Economic Partnership Arrangement as approved by the State Council, the relevant matters are hereby notified as follows:
1.
As to a Hong Kong or Macao service provider that has incorporated a construction engineering design enterprise or urban planning service
enterprise in the Mainland, its performances in Hong Kong, Macao and the Mainland may be regarded as a basis for evaluating the qualifications
of the enterprise applicant incorporated in the Mainland.
2.
The relevant qualification requirements on the construction engineering design enterprise applicant as provided in Article 15 of
the Rules for the Administration of Foreign-funded Construction Engineering Design Enterprises (Order of the Ministry of Construction
No. 114) are relaxed. That is to say, when a foreign-funded construction engineering design enterprise to be incorporated in the
Mainland applies for the qualifications of a construction engineering design enterprise, the number of the Hong Kong/Macao residents
who have obtained the qualifications of Chinese certified architect and certified engineer shall be not less than 1/4 of the total
certified practitioners, and the number of the Hong Kong/Macao residents who have relevant professional design experience shall be
not less than 1/4 of the total technical backbones as provided in the standards for the classification of qualifications; when a
Sino-foreign joint venture construction engineering design enterprise or a Sino-foreign cooperative construction engineering design
enterprise to be incorporated in the Mainland applies for the qualifications of a construction engineering design enterprise, the
number of the Hong Kong/Macao residents who have obtained the qualifications of Chinese certified architect and certified engineer
shall be not less than 1/8 of the total certified practitioners and the number of the Hong Kong/Macao residents who have relevant
professional design experience shall be not less than 1/8 of the total technical backbones as provided in the standards for the classification
of qualifications.
3.
When two or more Hong Kong/Macao service providers incorporate a joint venture or cooperative urban planning service enterprise in
the Mainland, the performances of both or all of the companies in Hong Kong, Macao and the Mainland may be consolidated as a basis
for evaluating the qualifications of the enterprise incorporated in the Mainland.
4.
The requirement on residence of Hong Kong/Macao professionals and technicians in the Mainland shall be relaxed; their residence in
Hong Kong/Macao shall be included in the time of residence in the Mainland.
5.
This Circular shall be implemented as of January 1, 2006.
Ministry of Construction
December 6, 2005
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the Ministry of Construction
2005-12-06
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