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LETTER OF CHINA BANKING REGULATORY COMMISSION CONCERNING APPROVING TIANJIN BRANCH OF MITSUI SUMITOMO BANKING CORPORATION TO DEAL IN RMB BUSINESS SERVICES FOR NON-FOREIGN-FUNDED ENTERPRISES

Letter of China Banking Regulatory Commission concerning Approving Tianjin Branch of Mitsui Sumitomo Banking Corporation to Deal in
RMB Business Services for Non-foreign-funded Enterprises

Japan Mitsui Sumitomo Banking Corporation,

The letter which was signed by Masayuki Oku, president of your bank, and was addressed to this Commission on October 31, 2005 has
been received.

The following reply is hereby given to you according to the Regulation of the People’s Republic of China on the Administration of
Foreign-funded Financial Institutions (Order No. 340 of the State Council, hereinafter referred to as the Regulation) and the Detailed
Rules for the Implementation of the Regulation of the People’s Republic of China on the Administration of Foreign-funded Financial
Institutions (Order No. 4, 2004 of China Banking Regulatory Commission, hereinafter referred to as the Detailed Rules):

Your Tianjin Branch is approved to deal in RMB business services for non-foreign-funded enterprises under the scope prescribed in
Article 17 of the Regulation.

After going through the statutory formalities in accordance with the Regulation and the Detailed Rules, your Tianjin Branch may, under
Article 35 of the Detailed Rules, deal in providing foreign exchange business for various clients under the following scope: providing
RMB business services for foreign-funded enterprises, China-based foreign institutions, mainland-based representative offices of
the enterprises established by institute from Hong Kong, Macao and Taiwan, aliens, compatriots from Hong Kong, Macao and Taiwan,
and the non-foreign-funded enterprises, pooling public deposits , granting short-term, medium-term and long-term loans, transacting
acceptance and discount of negotiable instruments, buying and selling government bonds and financial bonds, buying and selling non-stock
negotiable instruments denominated in a foreign currency, providing services on letter of credit and guaranties, conducting transacting
domestic and overseas settlements, buying and selling foreign currencies, buying and selling foreign currencies for itself or on
a commissioned basis, converting foreign currencies, inter-bank funding, bank card business, safety-deposit box, providing credit-standing
investigation and consultation services, as well as other business activities upon the approval of China Banking Regulatory Commission.

China Banking Regulatory Commission

March 13, 2006



 
China Banking Regulatory Commission
2006-03-13

 






ARRANGEMENT BETWEEN THE MAINLAND AND THE MACAO SPECIAL ADMINISTRATIVE REGION ON THE MUTUAL RECOGNITION AND ENFORCEMENT OF CIVIL AND COMMERCIAL JUDGMENTS

Supreme People’s Court

Notification of the Supreme People’s Court of the People’s Republic of China

Fa Shi [2006] No.2

According to Article 93 of the Basic Law of the Macao Special Administrative Region of the People’s Republic of China, the Supreme
People’s Court reached the Arrangement between the Mainland and the Macao Special Administrative Region on the Mutual Recognition
and Enforcement of Civil and Commercial Judgments (hereinafter referred to as the Arrangement) with the Macao Special Administrative
Region upon consultation and signed the Arrangement on February 28, 2006. This Arrangement has been adopted at the 1378th meeting
of the Judicial Committee of the Supreme People’s Court on February 13, 2006 and is hereby promulgated. In light of the unanimity
of both parties, this Arrangement shall come into force as of April 1, 2006.

Supreme People’s Court

March 21, 2006

Arrangement between the Mainland and the Macao Special Administrative Region on the Mutual Recognition and Enforcement of Civil and
Commercial Judgments

In accordance with the Article 93 of the Basic Law of the Macao Special Administrative Region of the People’s Republic of China,
the Supreme People’s Court reached the following arrangements between the Mainland and the Macao Special Administrative Region on
the mutual recognition and enforcement of civil and commercial judgments with the Macao Special Administrative Region upon consultation:

Article 1

The mutual recognition and enforcement of judgments of civil and commercial cases in the Mainland and the Macao Special Administrative
Region (hereinafter referred to as Macao) (including the labor dispute cases in the Mainland and the civil labor cases in the Macao
Special Administrative Region) shall be governed by this Arrangement.

This Arrangement shall also be applicable to the judgments and verdicts of civil damages compensate involved in criminal cases.

This Arrangement shall not be applicable to administrative cases.

Article 2

The “judgments” as mentioned in this Arrangement include the judgments, verdicts, decisions, mediation agreements and orders to pay
in the Mainland; and include the judgments, verdicts, rulings of confirming reconcilement, decisions or instructions of judges in
Macao.

The “requested party” as mentioned in this Arrangement refers to either party of the Mainland or Macao that accepts the application
for recognition and enforcement of the judgment.

Article 3

In respect to an effective judgment with the content of payment made by the court of one party and, the party involved can file an
application for recognition and enforcement to the competent court with the jurisdiction of the other party.

In respect to a judgment without the content of payment or which needs not to be implemented but must be recognized through judicial
procedures, the party involved may solely file an application for recognition to the court of the other party or may directly use
this judgment as the evidence in the litigation procedures of the court of the other party.

Article 4

The mainland court that has the power to accept the applications for the recognition and enforcement of judgments shall be the intermediate
people’s court at the locality of the domicile, habitual residence or property of the party against whom the application is filed.
Where there are two or more intermediate people’s courts that all have the jurisdiction, the applicant shall choose one of intermediate
people’s courts to submit the application.

The court in Macao that has the power to accept the applications for the recognition of judgments shall be the intermediate court,
and the court that has the power to enforce shall be the primary court.

Article 5

Where the party against whom the application is filed has the property both in the Mainland and Macao that can be enforced , the applicant
may file an application for enforcement with the court of either place.

When the applicant files an application for enforcement to the court of one place, he/it can file an application to the court of another
place for seal-up, seizure or freeze of the property of the enforced party . After the court of one place enforces the judgment,
the applicant may, upon the strength of the enforcement certification issued by the court of one place, apply to the court of another
place for adopting enforcement measures of property execution for the insufficient part.

The total amount of property executed by the courts of two places shall not exceed the amount determined according to the judgment
or prescribed by the law.

Article 6

An application form for the recognition and enforcement of judgments shall indicate the following matters:

(1)

If the applicant or the party against whom the application is filed is a natural person, the application form shall indicate his name
and domicile; if the applicant or the party against whom the application is filed is a legal person or any other organization, the
application form shall indicate its name and domicile, the name, position and domicile of its legal person or main principal;

(2)

The case number and date of adjudication of the judgment for which an application for recognition and enforcement is filed; and

(3)

The reasons and targets for the application for the recognition and enforcement as well as the implementation circumstance of this
judgment by the court that renders this judgment.

Article 7

An application form shall be attached with the duplicate of the effective judgment or the certification with the seal of the court
that renders this effective judgment as well as the relevant documents that can prove the following matters issued by the court that
renders this effective judgment or by the enpost_titled organ :

(1)

The summons is delivered according to law, unless it is proved by the judgment;

(2)

A person with no capacity of litigation has an agent according to law, unless it is proved by the judgment;

(3)

The judgment has been served to the parties involved and has come into effect according to the law of the place where the judgment
is rendered;

(4)

The duplicate of the legal person business license or corporate registration certificate shall be provided if the applicant is a legal
person; and

(5)

The certification on the implementation of the judgment provided by the court that renders the judgment.

In case the court of the requested party maintains that it has thoroughly known the relevant matters, the relevant documents may be
exempted .

In case the court of the requested party is still doubtful about the authenticity of the judgment provided by the party involved,
it may request the court that renders this effective judgment for confirmation.

Article 8

An application form shall be made in Chinese. In case the attached judicial documents or relevant documents are not made in Chinese,
the Chinese translation thereof shall be provided. If the judgment rendered by the court is not made in Chinese, the Chinese translation
thereof issued by the court shall be provided.

Article 9

After the court receives an application form for recognition and enforcement of the judgment filed by an applicant, it shall serve
the application form to the party against whom the application is filed.

The party against whom the application is filed shall have the right to put forward the plea of defense.

Article 10

The court of the requested party shall examine the application for recognition and enforcement as soon as possible and render the
verdict.

Article 11

In case any of the following circumstances exist through examines and verifies by the court of the requested party , the ruling of
non recognize the judgment shall be made:

(1)

The matter verified in the judgment shall be subject to the exclusive jurisdiction of the court of the requested party according to
the laws of the requested party;

(2)

The court of the requested party has disposed any similar action, and the aforesaid action is put forward prior to the judgment to
be recognized, and the court of the requested party has the jurisdiction;

(3)

The court of the requested party has recognized or enforced the judgment or arbitration award rendered by the court or arbitral organ
other than itself for the same lawsuit;

(4)

The party that loses the case has not been lawfully summoned or the person with no capacity to take part in litigation is not provided
with any agent according to the laws of the place where the judgment is rendered;

(5)

The judgment for which an application for the recognition and enforcement thereof has not come into force or is ruled not to be enforced
due to retrial according to the laws of the place where the judgment is rendered; or

(6)

The recognition and enforcement of the judgment in the Mainland would be contrary to the basic principles of the laws or social public
interests of the Mainland; or the recognition and enforcement of the judgment in Macao would be contrary to the basic principles
of the laws or public order of Macao.

Article 12

The court shall timely serve the verdict after it renders a verdict with regard to the request for recognition and enforcement of
the judgment .

In case the party involved is not satisfied with the verdict in which the recognition of the judgment is approved or not, he/it may
request the review to the people’s court at the next higher level in the Mainland, or may file an appeal according to the provisions
of laws in Macao. In case he/it is not satisfied with the verdict made during the course of enforcement, he/it may seek for relief
from the court at the next higher level in accordance with the provisions of laws of the requested party.

Article 13

Where a judgment is recognized by verdict, it shall have equal effectiveness with the judgment rendered by the court of the requested
party. If any payment shall be conducted according to the judgment, the party involved may apply to the jurisdictional court of
the requested party for the enforcement.

Article 14

When the court of the requested party can not recognize or enforce all the requests confirmed in a judgment, it may recognize or enforce
some requests thereinto.

Article 15

Before or after the court accepts an application for recognition and enforcement of the judgment, it may take preservation measures
for the property of the party against whom the application is filed according to the provisions in the laws of the requested party
on the property preservation and upon the strength of the application of the applicant.

Article 16

While the court of the requested party accepts an application for recognition and enforcement of the judgment, or where the judgment
has been recognized and enforced, if the party involved files a same lawsuit, the court of the requested party shall not accept it.

Article 17

As to the judgment that can not be recognized according to Item (1), (4) or (6) of Article 11 of this Arrangement, the applicant
shall not file any application for recognition and enforcement any more. However, if the court of the requested party has the jurisdiction
in accordance with its laws, the party involved may file another lawsuit to the local court with the facts of the same case.

With regard to the judgment as mentioned in Item (5) of Article 11 of this Arrangement shall refer to the application that the applicant
may file another application for recognition and enforcement after the circumstance for not recognizing the judgment eliminates.

Article 18

In order to applicable for this Arrangement, all the authentication formalities shall be exempted for the original, duplicate and
translation made or notarized by the competent public institution (including notaries public) of one party, and they can be used
by the other party.

Article 19

When an applicant applies for the recognition and enforcement of the judgment in accordance with this Arrangement, he/it shall pay
the litigation costs and enforcement costs in accordance with the provisions of laws of the requested party.

In case the applicant is approved to be able to suspend, reduce or exempt the payment of litigation costs at the place where the effective
judgment is rendered, he/it shall enjoy the equal treatment when it files an application for recognition and enforcement of the judgment
with the court of the requested party.

Article 20

Unless it is prescribed by this Arrangement, the recognition and enforcement of civil and commercial judgments shall be governed by
the laws and regulations of the requested party.

Article 21

The request for recognition and enforcement put forward before this Arrangement comes into force shall not be applicable for this
Arrangement.

As to the judgments rendered by the courts in the Mainland and Macao from December 20, 1999 until before the entry-into-effect of
this Arrangement, if the party involved fails to apply for the recognition and enforcement with the court of the other party or the
court of the other party refuses to accept, the application still may be filed after the entry-into-effect of this Arrangement.

The time limit for the party involved to file an application for the recognition and enforcement of judgments rendered by the court
in Macao during the aforesaid term with the people’s court in the Mainland shall be calculated anew as of the entry-into-effect of
this Arrangement.

Article 22

Where this Arrangement meets any problem or needs to be altered during the course of implementation thereof, the Supreme People’s
Court and the Macao Special Administrative Region shall solve it through consultation.

Article 23

In order to implement this Arrangement, the Supreme People’s Court and the Court of Final Appeal of Macao shall mutually provide the
relevant legal materials.

The Supreme People’s Court and the Court of Final Appeal of Macao shall mutually circulate the notice on the enforcement of this Arrangement
every year.

Article 24

This Arrangement shall come into force as of April 1, 2006.



 
Supreme People’s Court
2006-03-21

 






ANNOUNCEMENT NO.20, 2006 OF THE MINISTRY OF COMMERCE OF THE PEOPLE’S REPUBLIC OF CHINA

Ministry of Commerce

Announcement No.20, 2006 of the Ministry of Commerce of the People’s Republic of China

[2006] No. 20

Ministry of Commerce issued announcement on April 13, 2005, on starting the anti-dumping investigation on imported Spandex originating
from Japan, Singapore, ROK, Taiwan region and the U.S.. The investigated product is listed under No. 54024920￿￿54026920 of Import
and Export Tariffs of the People’s Republic of China.

Since this case is rather complicated, Ministry of Commerce decided to postpone the investigation period for another 6 month, namely
ending on October 13, 2006, in accordance with Article 26 of Anti-dumping Regulations of People’s Republic of China.

Ministry of Commerce

April 3, 2006



 
Ministry of Commerce
2006-04-03

 






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

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

Yin Jian Fa [2006] No.22

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

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

China Banking Regulatory Commission

April 18, 2006

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

Article 1

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

Article 2

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

Article 3

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

Article 4

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

Chapter II Corporate Governance

Article 5

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

1.

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

2.

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

3.

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

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

4.

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

5.

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

6.

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

7.

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

8.

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

9.

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

10.

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

Article 6

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

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

1.

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

2.

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

3.

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

4.

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

5.

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

Article 7

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

1.

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

2.

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

3.

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

Article 8

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

1.

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

2.

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

3.

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

4.

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

Article 9

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

1.

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

2.

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

3.

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

Article 10

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

1.

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

2.

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

3.

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

Article 11

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

1.

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

2.

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

Article 12

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

1.

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

2.

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

3.

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

Article 13

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

1.

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

2.

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

Article 14

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

1.

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

2.

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

Chapter III Evaluation and MonitoringIndexes

Article 15

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

Article 16

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

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

Article 17

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

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

Article 18

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

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

Article 19

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

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

Article 20

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

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

Article 21

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

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

Article 22

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

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

Article 23

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

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

1.

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

2.

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

3.

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

4.

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

5.

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

Chapter IV Examination and Report

Article 24

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

Article 25

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

Article 26

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

Chapter V Supplementary Provisions

Article 27

CBRC shall be responsible for interpretation of the present Guidance .

Article 28

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



 
China Banking Regulatory Commission
2006-04-18

 






ANNOUNCEMENT NO. 31, 2006 OF MINISTRY OF COMMERCE, ON ADJUSTING THE SCOPE FOR HANDCRAFTS EXPORTED TO EU LISTED IN ANNOUNCEMENT NO. 49, 2005 OF MINISTRY OF COMMERCE

Ministry of Commerce

Announcement No. 31, 2006 of Ministry of Commerce, on Adjusting the Scope for Handcrafts Exported to EU Listed in Announcement No.
49, 2005 of Ministry of Commerce

[2006] No. 31

In accordance with regulations on implementing Memorandum of Understanding and reaching relative administrative arrangements, the
Scope for Handcrafts Exported to EU Listed in Announcement No. 49, 2005 of Ministry of Commerce is now adjusted as follows:

1.

Category 5 and Category 26 shall be added to Article 1 of Appendix 1 of Announcement No. 49, 2005 of Ministry of Commerce; one-piece
dress Knit or crocheted by hand shall be added to Appendix 2.

2.

Other issues shall still be in line with Announcement No. 49, 2005 of Ministry of Commerce.

This Announcement shall be implemented as from the date of promulgation.

Ministry of Commerce

April 28, 2006



 
Ministry of Commerce
2006-04-28

 






NOTICE OF THE MINISTRY OF FINANCE AND THE STATE ADMINISTRATION OF TAXATION ABOUT ADJUSTING THE SCOPE OF TAX REFUND POLICY ON DOMESTICALLY-MADE FACILITIES PURCHASED BY FOREIGN FUNDED PROJECTS

Ministry of Finance, State Administration of Taxation

Notice of the Ministry of Finance and the State Administration of Taxation about Adjusting the Scope of Tax Refund Policy on Domestically-made
Facilities Purchased by Foreign Funded Projects

Cai Shui [2006] No.61

The public finance departments or bureaus, the bureaus of state taxes of all provinces, autonomous regions, municipalities directly
under the Central Government, and cities specifically designated in the state plan, and the finance bureau of the Xinjiang Production
and Construction Corps:

The Changes have been taken place on correlative policies since the tax refund policy has been implemented on the domestic-made facilities
purchased by foreign funded projects. In order to carry out the tax refund policy on the domestic-made facilities purchased by foreign
funded projects better, specific adjusting scope of tax refund policy on domestically-made facilities purchased by foreign funded
projects shall be as follows:

1.

The scope of enterprise to enjoy the tax refund of domestically-made facility shall refer to the foreign funded enterprise that is
recognized as a general taxpayer of value added tax, the foreign funded enterprise that is recognized as a general taxpayer of non
value added tax engaged in the traffic transportation and the development of common dwelling house, and the Chinese-foreign contractual
joint venture engaged in prospecting, developing and producing of sea oil. The foreign funded enterprise shall include the Chinese-foreign
equity joint venture, Chinese-foreign contractual joint venture and solely foreign funded enterprise. When the foreign funded enterprise
purchase the domestically-made facility for self use as the name of its sub-company (factory), the tax refund shall be applied by
this sub-company (factory) to the competent organ that is responsible for handling the tax refund where the branch is located. For
the Chinese-foreign cooperative project of oil-gas field to co-explore the resource of sea oil, the tax refund shall be applied by
operator of oil-gas field of cooperation, operation institute or sub-company of operation. With regard to the foreign funded enterprise
that shall expand the deduct scope of value added tax according to the provision, the tax refund policy of value added tax shall
not be implemented when it purchases the domestically-made facilities within the total amount of investment.

2.

The encouraged class which falls within the Guidance Catalogue for Foreign Investment Industry and the foreign investment project
(hereinafter referred to as encouraged foreign investment project) which falls within the Catalogue of Priority Industries for Foreign
Investment in the Central-Western Region (above mentioned two Catalogues are hereinafter referred to as Encouraged Foreign Investment
Catalogue) shall enjoy the tax refund policy of value added tax for the purchased facility domestically made. When adjusting the
encouraged foreign investment catalogue, the project to enjoy the tax refund policy for purchasing the domestically-made facility
shall conform to the projects in the encouraged foreign investment catalogue implemented when approving the projects.

The tax refund policy shall not be applied, where the enterprises engaged in the Encouraged Foreign Investment Project purchase domestically-made
facilities within China that falls within the Catalogue of Imported Commodities Not Exempted from Taxes for Foreign-funded Projects
(hereinafter referred to the Catalogue of Commodities not Exempted from Taxes). When adjusting the Catalogue of Commodities not Exempted
from Taxes by state, the facility, whether or not it falls within the scope of Catalogue of Commodities not Exempted from Taxes,
shall be judged by the Catalogue of Commodities not Exempted from Taxes that was implementing when issuing the special invoice of
value added tax for purchasing domestically-made facility.

For the engineering project in the Encouraged Foreign Investment project, if it is constructed by other enterprise entrusted by the
foreign funded enterprise through the way of contract for construction and materials, the foreign funded enterprise may conclude
an entrusting agreement with the entrusted enterprise to purchase the domestically-made facility, the special invoice of value added
tax gotten by the entrusted enterprise for purchasing the domestically-made facility shall be given to the foreign funded enterprise
for applying the tax refund according to the provisions.

3.

The domestically-made facility mentioned in present Notice shall refer to the facility produced inside the territory of People’s Republic
of China, purchased by the encouraged foreign investment project and managed as the fixed assets, including the auxiliary parts,
spare parts and etc. purchased together with the facility according to the purchase contract.

4.

If any previous provision conflicts with the present Notice, the present Notice shall prevail

Ministry of Finance

State Administration of Taxation

May 10, 2006



 
Ministry of Finance, State Administration of Taxation
2006-05-10

 






ANNOUNCEMENT NO.33, 2006 OF MINISTRY OF COMMERCE ON PRELIMINARY ARBITRATION ON IMPORTED POLYURETHANE (SPANDEX OR ELASTANE)

Ministry of Commerce

Announcement No.33, 2006 of Ministry of Commerce on Preliminary Arbitration on Imported Polyurethane (Spandex or Elastane)

[2006] No. 33

Ministry of Commerce issued an announcement on April 13, 2005 to start an anti-dumping investigation on the imported Polyurethane
(Spandex or Elastane) originating from Japan, Singapore, ROK, Taiwan Region and the U.S. (hereinafter referred to as the investigated
products).

In accordance with Article 24 of Anti-dumping Regulations of People’s Republic of China, Ministry of Commerce made the preliminary
arbitration that dumping of the investigated products had taken place, which had caused material injury to mainland China’s industry
and there was a casual relationship between the dumping and the injury.

The Polyurethane (Spandex or Elastane) is listed under No. 54024920, 54026920 in Import and Export Tariffs of General Administration
of Customs of PRC.

In accordance with Article 28 and 29 of Anti-dumping Regulations of People’s Republic of China, Ministry of Commerce decided to take
anti-dumping measures by deposit in security as from May 24, 2006.

Deposit in security rates are as follows:

1.

Companies of Japan:

OPELONTEX Co., Ltd. 13.87%

All Others 61.00%

2.

Companies of Singapore

INVISTA (Singapore) Fibres Pte. Ltd. 11.50%

All Others 61.00%

3.

Companies of ROK

Hyosung Corporation 0%

TongKook Corporation 0%

Taekwang Industrial Co.,Ltd. 0%

All Others 61.00%

4.

Companies of Taiwan Region.

FORMOSA ASAHI SPANDEX CO., LTD 5.09%

All Others 61.00%

5.

Companies of the U.S. 61.00%

The relevant interested parities could apply written comments, with related evidence, to Ministry of Commerce for consideration within
20 days as of the date this announcement is issued.

Appendix (omitted): Ministry of Commerce Preliminary Arbitration on Anti-dumping Investigation on Imported Polyurethane (Spandex or
Elastane) Originating from Japan, Singapore, ROK, Taiwan Region and the U.S.

Ministry of Commerce

May 24, 2006



 
Ministry of Commerce
2006-05-24

 






CIRCULAR OF THE PEOPLE’S BANK OF CHINA, MINISTRY OF FINANCE, CHINA BANKING REGULATORY COMMISSION, CHINA SECURITIES REGULATORY COMMISSION ON PROMULGATING THE SUPPLEMENTARY CIRCULAR ON THE ACQUISITION OF PERSONAL CREDITS

Circular of the People’s Bank of China, Ministry of Finance, China Banking Regulatory Commission, China Securities Regulatory Commission
on Promulgating the Supplementary Circular on the Acquisition of Personal Credits

Yin Fa [2006] No. 189

The people’s governments of each province, autonomous region, municipality directly under the Central Government, and city specifically
designated in the state plan, Shanghai Headquarters, all branches and business departments of the People’s Bank of China, central
sub-branches of the People’s Bank of China in provincial capital cities, central sub-branches of the People’s Bank of China in Dalian,
Qingdao, Ningbo, Xianmen and Shenzhen, the fiscal departments (bureaus) of each province, autonomous region, municipality directly
under the Central Government and city specifically designated in the state plan, the banking regulatory bureaus of each province,
autonomous region, municipality directly under the Central Government, and city specifically designated in the state plan, the securities
regulatory bureaus of each province, autonomous region, municipality directly under the Central Government, and city specifically
designated in the state plan,

On January 27, 2006, the People’s Bank of China, Ministry of Finance, China Banking Regulatory Commission, China Securities Regulatory
Commission printed and distributed the Supplementary Circular on Acquisition of Personal Credits (hereinafter referred to as the
Supplementary Circular ). You’re hereby informed of the following matters with regards to the release of the Supplementary Circular:

1.

The Supplementary Circular shall be declassified as of the date of promulgation. The contents released shall be based on the Annex
of this Circular. The local people’s governments at all levels and all related departments shall rigorously carry out the national
uniform policies in accordance with the Supplementary Circular.

2.

The publicity of the Supplementary Circular shall be subject to the principle that “it shall be posted in the institution which is
guilty of wrongdoing” and that “no putting on the Internet or on any newspaper”. Under the direction concerning the real conditions
of the local people’s governments and regulatory departments, it shall be put up in the business spots of the financial institution
by the liquidation group (trust group or work team) of the financial institution to be settled.

3.

The local people’s governments at all levels and all related departments shall perform well in the propaganda and interpretation of
the Supplementary Circular, make the detailed and planned working scheme and strive to maintain the financial stability and social
stability. All identification and confirmation groups shall carefully implement their functions, strictly control the quality, and
fulfill the related tasks.

Appendix: Supplementary Circular on the Acquisition of Personal Credits

The People’s Bank of China

The Ministry of Finance of the People’s Republic of China

The China Banking Regulatory Commission

The China Securities Regulatory Commission

June 2, 2006
Appendix:
Supplementary Circular on the Acquisition of Personal Credits

You’re hereby informed of the related issues referring to the acquisition of personal credits to the financial institutions under
disposal during the period from September 30, 2004 to January 31, 2006 (including January 31, 2006, below the same):

The personal credits newly occurred after September 30, 2004 shall on the basis of the policies on the acquisition of personal credits
which are depicted in the Advice on the Purchase of Personal Credits and the Settlement Funds of Clients’ Securities (hereinafter
referred to as the Purchase Advice) and the Measures for the Implementation of the Purchase of the Personal Credits and the Settlement
Funds of Clients’ Securities (hereinafter referred to as the Implementation Measures), be gradually reinforced and treated in view
of different conditions.

1.

Principle of Acquisition

(1)

The determination of personal credits, the standards on the calculation of credits, the raising and repayment of acquisition funds,
as well as the policies on the acquisition of personal savings deposits and the principal and interests of the settlement Funds of
clients’ securities shall be conducted in accordance with the Purchase Advice and the implementation Measures.

(2)

The legal contracts, which were concluded before or on September 30, 2004 and were updated after September 30, 2004 owing to their
expiration (in which the creditors were not changed and the original contract amounts were not exceeded, the same below) and which
were examined and verified by the regulatory department, shall be still subject to the standards which is presented in the Purchase
Advice and the Implementation Measures. As regards any contract updated without being examined or verified by the regulatory department,
it shall be subject to the standards for the acquisition of personal credits as decided in this Circular.

(3)

Where any new fund was transfused into the credit when an aforesaid original credit contract was updated, the new fund shall be subject
to the standards for the acquisition of personal credits as decided in this Circular.

(4)

The new personal credit concluded during the period from September 30, 2004 (excluding September 30, 2004, the same below) to January
31, 2006 shall be subject to the standards for the acquisition of personal credits as determined in this Circular.

2.

Acquisition Standards

The acquisition of the personal credits which took place during the period from September 30, 2004 to January 31, 2006 and which fell
in the range of acquisition shall accord with the following standards:

(1)

Where the accumulative amount of credits of a same person (an individual with the same identity card number) is 100, 000 Yuan or less,
the aforesaid credits shall be totally purchased;

(2)

Where the accumulative amount of credits of a same person is over 100, 000 Yuan (excluding 100, 000 Yuan) but less than 200, 000 Yuan,
90 % of the aforesaid credits shall be purchased;

(3)

Where the accumulative amount of credits of a same person is over 200, 000 Yuan (excluding 200, 000 Yuan) but less than 500, 000 Yuan,
80 % of the aforesaid credits shall be purchased;

(4)

Where the accumulative amount of credits of a same person is over 500, 000 Yuan (excluding 500, 000 Yuan) but less than 1, 000, 000
Yuan, 70 % of the aforesaid credits shall be purchased;

(5)

Where the accumulative amount of credits of a same person is over 1, 000, 000 Yuan (excluding 1, 000, 000 Yuan) but less than 2, 000,
000 Yuan, 60 % of the aforesaid credits shall be purchased;

(6)

Where the accumulative amount of credits of a same person is over 2, 000, 000 Yuan (excluding 2, 000, 000 Yuan) but less than 3, 000,
000 Yuan, 50 % of the aforesaid credits shall be purchased; and

(7)

Where the accumulative amount of credits of a same person is over 3, 000, 000 Yuan (excluding 3, 000, 000 Yuan), the aforesaid credits
shall not be purchased.

3.

Where any personal credit which took place after September 30, 2004 is in violation of the related provisions, the related department
shall hold the related persons responsible, and shall timely convey them to the judicial department if they are involved in any crime.

4.

For any matter not included in this Circular, it shall be subject to the Purchase Advice, Implementation Measures and other provisions.



 

2006-06-02

 






ANNOUNCEMENT NO. 47, 2006 OF MINISTRY OF COMMERCE, ON COMPETITIVE BIDDING OF NATIONAL RESERVE OF SUGAR PROCESSING

Announcement No. 47, 2006 of Ministry of Commerce, on Competitive Bidding of National Reserve of Sugar Processing

[2006] No. 47

In accordance with the requirement of Announcement 26, 2006 of National Development and Reform Commission, Ministry of Commerce and
Ministry of Finance, part of national reserve of sugar shall be processed through competitive bidding. Matters of Concern are listed
as follows:

1.

Organization and Management:

Assessment Group shall be established so as to confirm the processing enterprises, processing amount and expenses. Assessment Group
shall also be in charge of the competitive bidding and the management of processing.

China Merchandise Reserve Management Center shall in charge of the tasks of organization and implementation.

2.

Processing Amount, Location out of Warehouse and Project Phases Division of Raw Sugar:

The processing total is 200,000 tons, which were put into storage from 2004 to 2005. See Appendix 1 for details.

Processing of raw sugar shall be conducted with competitive bidding after being divided into shares and coded. Each share is 5000
tons.

3.

Processing sort and Sugar Recovery:

The raw sugar is white granulated sugar. Sugar recovery shall be more than 92%.

4.

Product Sugar Quality, Package and Specification Requirement:

The quality of white granulated sugar shall be Grade one or above of National Standard GB317-1998. The Package quality of white granulated
sugar shall meet the national standard. Net Content of each bag is 50 kg.

5.

Requirement on Allocate and Transport, Processing Schedule and Putting Product Sugar in Storage:

After being chosen, the processing enterprises shall be prepared promptly. Then, after receiving the notice on starting operation,
the processing work shall be started in accordance with the required time. The product sugar shall be reserved in time into the warehousing
storage. Taking delivery of goods shall be conducted directly at the product sugar depot of the processing enterprise.

6.

Competitive bidding of processing price is between 240-280 yuan per ton. Vicious competitive bidding on price shall be prohibited.

7.

Earnest Money for Bidding

Earnest money shall be submitted before 17: 00 pm of June 18, 2006.

8.

Qualification Requirements on Processing Enterprises:

The daily processing capacity of processing enterprises shall be no less than 500 tons and the storage capacity shall be no less than
20,000 tons. The processing enterprises shall be close to the storage location. The enterprises shall be creditworthy, with high
credit grade and no negative records. (See Appendix for details)

Specific competitive bidding measures and points for attention shall be notified later.

Ministry of Commerce

June 15, 2006



 
Ministry of Commerce
2006-06-15

 






GUIDELINES ON INTERNAL AUDIT FOR BANKING FINANCIAL INSTITUTIONS

Guidelines on Internal Audit for Banking Financial Institutions

Yin Jian Fa [2006] No. 51
June 27, 2006
Chapter I General Provisions

Article 1

In order to advance banking financial institutions to improve corporate governance, strengthen internal control and perfect the internal
audit system, these Guidelines are formulated according to the Banking Supervision Law of the People’s Republic of China, the Law
of the People’s Republic of China on Commercial Banks, the Company Law of the People’s Republic of China, the Audit Law of the People’s
Republic of China, the Regulations for the Implementation of the Audit Law of the People’s Republic of China and other relevant laws
and regulations.

Article 2

The term “banking financial institutions” as mentioned in these Guidelines shall refer to the policy banks and commercial banks that
are established within the territory of the People’s Republic of China.

As for other financial institutions established upon approval of the China Banking Regulatory Commission (hereinafter referred to
as the CBRC), these Guidelines may be implemented by reference.

Article 3

The term “internal audit” as mentioned in these Guidelines refer to a kind of independent and objective supervision, appraisal or
consulting activity, and is an important part of the internal control of banking financial institutions, under which systematic and
regularized methods are adopted to examine, appraise and improve the business activities, risk conditions, internal control and corporate
governance effects of banking financial institutions, so as to promote the healthy development of banking financial institutions.

Article 4

The internal audit of banking financial institutions aims to guarantee the implementation of related economic and financial laws
and regulations, guidelines and policies as well as the rules of supervisory departments of the state, control the risks at an acceptable
level within the risk framework of banking financial institutions, improve the operation of banking financial institutions and increase
the value.

Article 5

The internal audit work of banking financial institutions shall be independent of the business operation and management, be guided
by risks and be guaranteed to be objective and impartial.

Article 6

The CBRC shall examine and appraise the internal audit work of banking financial institutions according to these Guidelines.

Chapter II Framework and Staff

Article 7

The board of directors of a banking financial institution shall be responsible for establishing and maintaining a sound and effective
internal audit system. Where there is no independent board of directors, the senior managers shall be responsible for fulfilling
the relevant duties.

An audit committee shall be set up under the board of directors, which shall contain at least 3 members and a majority of the members
shall be non-executive directors. The chairman of the audit committee shall be an independent director. Where there is no independent
board of directors, the organizational structure of the audit committee and the person-in-charge thereof shall be subject to the
determination of the senior managers.

Article 8

The banking financial institution shall set up an internal audit department to audit the business operation and management acts of
all institutions of the same banking group, and may staff a chief auditor to be responsible for the audit work of all institutions
of the same banking group.

The chief auditor shall be appointed by the board of directors, which shall be included into the scope of ratification of the position-holding
qualification of senior managers of banking financial institutions. And alteration of the position of the chief auditor shall be
reported to the CBRC in advance.

Article 9

Banking financial institutions shall establish an independent and vertical internal audit management system. The audit budget, the
remunerations of employees, the appointment and dismissal of major persons-in-charge shall be decided on by the board of directors
or its special committee. The remuneration of internal auditors may not be lower than the average level of employees of the same
grade in other departments of the institution.

Article 10

The internal auditors of banking financial institutions shall generally be staffed at 1% of the total number of employees, and an
internal position-shift system shall be set up.

Article 11

Internal auditors shall be of corresponding professional practicing qualifications:

(1)

Professional level. Internal auditors shall have a diploma of junior college or above, grasp professional knowledge related to internal
audit of banking financial institutions, and be familiar with related financial laws and regulations and internal control rules.

(2)

Practicing experience. Internal auditors shall have experienced in practicing finance for at least two years; the person-in-charge
of an audit project shall have at least experienced in audit for at least three years, or at least six years in practicing finance.

(3)

Morality criteria. Internal auditors shall have upright, objective, clean-fingered and impartial occupational ethics, and have no
bad records since he engaged in financial work.

Chapter III Duties

Article 12

Banking financial institutions shall make rules to clarify the duties of the board of directors, the audit committee, the chief auditor,
the internal audit department and the staff thereof.

Article 13

The board of directors shall bear the final liabilities for the suitability and validity of internal audit, be responsible for approving
articles of association of internal audit, medium and long-term audit plan and annual work plan, etc., provide necessary to guarantee
the internal audit work be carried out independently and objectively, and examine and supervise the audit work.

Article 14

The audit committee shall be responsible to the board of directors, and, upon authorization of the board of directors, organize and
guide the internal audit work. The audit committee shall convene meetings regularly, and may, if necessary, invite senior managers
to attend the meeting.

Article 15

The chief auditor shall be responsible for organizing the implementation of internal audit articles of association, medium and long-term
audit plan and annual work plan, do well in the coordination work, timely report the audit work to the board of directors and the
major persons-in-charge of the senior management staff, and take charge of the overall quality of internal audit.

Article 16

The internal audit department shall be responsible to the board of directors and the audit committee, formulate internal audit procedures,
appraise the risk conditions and management status, implement the annual audit work plan, carry out follow-up audit, supervise the
rectification, be responsible for the quality of the audit project, and well manage archival.

Article 17

The internal audit items shall mainly include:

(1)

the regularity of business management and the work condition of the related department;

(2)

soundness and validity of the internal control;

(3)

risk conditions, and the applicability and validity of the procedures for risk identification, computation and control;

(4)

information on programming and design, development and operation, management and maintenance of the information system;

(5)

accuracy and reliability of the accounting records and the financial reports;

(6)

information on the asset valuation system related to risks; and

(7)

operational performance of the institution and fulfillment of duties by managers.

Chapter IV Scope of Powers

Article 18

Banking financial institutions shall make rules to clarify powers necessary for the internal audit department to fulfill its duties.

Article 19

The internal audit department can be present at or take part in meetings related to the duties of the internal audit department.

Article 20

The internal audit department shall be enpost_titled to timely and fully know about the management information, investigate and inquire
of the entity subject to audit and the related persons involved in the relevant issues, as well as collect evidence from them.

Article 21

The internal audit department may, when deeming it necessary, report audit findings directly to the board of directors.

Article 22

The internal audit department shall have the power to propose suggestion on punishment and power to impose penalties.

Article 23

In case anyone refuses to accept or cooperate in internal audit, refuses to provide true information or provides false information,
retaliates or frames up the auditors, the internal audit department shall have the power to report this to the superior department,
and request the superior department to timely stop the act and make relevant punishment.

Chapter V Quality Control

Article 24

The internal audit department may provide consultation services regarding risk management, internal control and other related matters,
but may not directly participate in or take charge of making decisions on internal control design or management, or implementing
such decisions.

Article 25

The internal audit department shall, based on the annual risk evaluation, determine audit focuses. The audit frequency and extent
shall accord with the business nature, complexity, risk conditions and management level of banking financial institutions.

Every business office shall be subject to risk evaluation at least once every year, and be audited at least once every two years.

Article 26

The internal audit department and the auditors thereof shall, strictly according to the audit procedures and audit methods, implement
the audit project, and make self-evaluation at regular intervals.

Article 27

The internal audit department shall set up an audit withdrawal system for internal auditors, and guarantee the objectivity of internal
audit.

Article 28

The internal audit department shall set up a follow-up training system for internal auditors, encourage them to obtain the practicing
qualifications of certified public accountant, certified internal auditor, certified information system auditor and etc., so as to
guarantee the professional competency of the internal auditors.

Article 29

The internal audit department shall enhance the application of technological means and information technology in audit work, establish
and improve the non-on-spot internal audit monitoring system as well as the internal audit operation system and the information management
system.

Article 30

The internal audit department may, in light of the need of work, outsource partial internal audit project upon approval of the board
of directors, but shall in advance evaluate the independence, objectivity and professional competency of the undertaking institution.

Article 31

The internal audit department shall set up an audit reconsideration system. The audit conclusion to which the entity under audit
objects shall be subject to reconsideration of the superior institution of the audit institution that has made the audit conclusion.

Article 32

The board of directors may hire an institution outside to appraise the due diligence of the internal audit department, and guarantee
that the external inspectors are independent of the entity subject to appraisal, have the professional competency and are in no interest
and conflict with the entity subject to appraisal.

Chapter VI Report System

Article 33

The banking financial institution shall set up an internal audit report system and a report avenue, which are suitable for the vertical
management system.

Article 34

The audit committee shall report its audit work to the board of directors on a quarterly basis, and notify the senior management
staff and the board of supervisors of it.

Article 35

The chief auditor and the internal audit department shall report the audit work to the board of directors and the main principal
of the senior management staff on a quarterly basis, and shall, at least once every year, submit to the board of directors the audit
work reports containing contents such as fulfillment of the duties, audit findings and suggestion and etc.

Article 36

The chief auditor and the internal audit department shall, after finishing a matter subject to audit, timely submit to the board
of directors and the main principals of the senior management staff the project audit report containing contents such as the survey
of audit, audit basis, audit conclusion, audit decision, audit suggestion, feedback opinions of the entity subject to audit and etc.

Article 37

The banking financial institution shall set up and improve the system for communicating with and making reports to the CBRC.

The board of directors and the senior management staff shall timely report to the CBRC the major audit findings.

The internal audit department shall report the following items to the CBRC or the dispatched office thereof:

(1)

The all-round audit work report submitted to the board of directors;

(2)

Where the internal audit department conducts audit at a different place, it shall meanwhile make a copy of the audit report to the
dispatched office by the CBRC at the locality of the entity subject to audit;

(3)

After finding any major problem and reporting it to the board of directors, the internal audit department shall directly report the
related information to the CBRC, under the circumstance that the problem has not been carefully investigated, no punishment has been
imposed and no rectification has been made.

(4)

The audit report of the external intermediary institution on the banking financial institution. And

(5)

Other matters as required by the CBRC or its dispatched office to be reported.

Chapter VII Assessment and Accountability

Article 38

The board of directors and the senior management staff shall take effective measures to guarantee the sufficient utilization of the
internal audit achievements.

As for issues not rectified in light of the rectification requirements, the senior management staff shall supervise and urge to make
rectification, investigate the liabilities of related persons, and bear the liabilities and risks for not taking timely rectifying
measures against the audit findings.

Article 39

The board of directors shall set up an incentive and restrictive mechanism, assess and appraise the due diligence and fulfillment
of duties of all related parties to the internal audit, set up an accountability system for internal audit, and clarify the standards
and procedures for investigating the internal audit liabilities and the exemption thereof.

Article 40

The board of directors shall investigate the liabilities of the person in charge of the internal audit department or any other person
directly liable under any of the following circumstances:

(1)

failing to implement the audit plan, procedures or methods and thus caused major problems unable to be found;

(2)

concealing any problem found from the audit or failing to truthfully report it;

(3)

the audit conclusion violating the facts seriously;

(4)

doing a poor job in following up the investigation and rectification of the problems found from the audit;

(5)

failing to implement the confidentiality system in light of the requirements; or

(6)

committing other acts injuring the interests or fame of banking financial institutions.

Article 41

Where, upon inspection, supervision and affirmation of liabilities, a banking financial institution has sufficient evidence to prove
that the internal audit department and the auditors have performed the duties in due diligence according to related laws, regulations,
rules, these Guidelines and its internal audit rules, and have timely reported the problems found from the examination, it may, when
the related problems of the entity subject to audit are exposed, exempt or partially exempt the liabilities of the internal audit
department and the related auditors by considering the conditions.

Chapter VIII Supplementary Provisions

Article 42

Banking financial institutions shall, according to these Guidelines, formulate their respective detailed implementation rules, and
make reports to the CBRC for archival filing.

Article 43

The power to interpret these Guidelines shall remain with the CBRC.

Article 44

These Guidelines shall enter into effect as of July 1, 2006.



 
The China Banking Regulatory Commission
2006-06-27

 






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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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