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CIRCULAR OF THE MINISTRY OF FINANCE AND THE STATE ADMINISTRATION OF TAXATION CONCERNING THE TAX MATTERS ABOUT THE RESTRUCTURING OF FOREIGN BANK BRANCHES INTO SOLELY FOREIGN-INVESTED BANKS

Circular of the Ministry of Finance and the State Administration of Taxation Concerning the Tax Matters about the Restructuring of
Foreign Bank Branches into Solely Foreign-invested Banks

Cai Shui [2007] No. 45

The public finance departments (bureaus), state taxation bureaus and local taxation bureaus of each province, autonomous region, municipality
directly under the Central Government and city specifically designated in the state plan, and the Public Finance Bureau of Xinjiang
Production and Construction Corps.,

The Regulations of the People’s Republic of China on Administrating Foreign-invested Banks (Order No. 478 of the State Council) promulgated
by the State Council on November 11, 2006 and the detailed rules for the implementation thereof provided that: where the related
conditions are met, a foreign bank may set up a solely foreign-invested bank within China, and a foreign bank branch set up within
China may be restructured into a solely foreign-invested bank (or the subsidiary bank thereof). During the process of restructuring,
the solely foreign-invested bank (or the subsidiary bank thereof) shall inherit the creditor’s rights and debts of the former foreign
bank branch. As regards the related tax matters about the restructuring of foreign bank branches into solely foreign-funded banks
(or the subsidiary banks thereof), it is the principle that the business activities before and after the restructuring should be
taken as continuous business activities. The related specific tax treatments are hereby informed as follows:

1.

Business Tax and Value-added Tax

When the foreign bank branches are restructured, as regards the transfer of enterprise property rights or stock rights to the restructured
solely foreign-invested banks (or the subsidiary banks thereof), no business tax or value-added tax may be levied .

2.

Enterprise Income Tax

(1)

. As regards assets transfer

Where a foreign bank branch is restructured into a solely foreign-invested bank (or the subsidiary bank thereof), all assets thereof
shall be transferred in light of their respective book value and in accordance with the Circular of the State Administration of Taxation
Concerning the Tax upon the Incomes Generated from the Transfer of Stock Rights by Foreign-invested Enterprises and Foreign Enterprises
(Guo Shui Han [1999] No. 207).

(2)

. As regards making up losses

The business losses suffered by a foreign bank branch in the years before its restructuring may be made up continuously by the restructured
solely foreign-invested bank (or the subsidiary bank thereof), and the fixed number of years for making up losses shall be calculated
continuously after the year when the former foreign bank branch suffered the losses according to the fixed number of years as provided
for in Article 11 of the Income Tax Law of the People’s Republic of China on Foreign-invested Enterprises and Foreign Enterprises
(hereinafter referred to as the Foreign-invested Enterprise Income Tax Law).

(3)

As regards the item of tax preferences

If the preferential tax reduction and exemption treatments for a certain term have not been enjoyed by a foreign bank branch in accordance
with the provisions in the Foreign-invested Enterprise Income Tax Law before its restructuring, or if the term has not expired, the
corresponding restructured solely foreign-invested bank (or the subsidiary bank thereof) may enjoy them until the term expires. If
the term has expired, the restructured solely foreign-invested bank (or the subsidiary bank thereof) may not enjoy them again.

(4)

As regards consolidated payment of taxes

In accordance with Article 5 of the Detailed Rules for Implementing the Foreign-invested Enterprise Income Tax Law, after a foreign
bank branch is restructured into a subsidiary bank of a solely foreign-invested bank, the headquarters of the solely foreign-invested
bank shall pay enterprise income tax on a consolidated basis.

3.

Stamp Tax

In accordance with the Circular of the Ministry of Finance and the State Administration of Taxation Concerning Related Policies on
the Stamp Tax in the Process of Enterprise Restructuring (Cai Shui [2003] No.183), after the restructuring of a foreign bank branch
into a solely foreign-invested bank (or the subsidiary bank thereof), if the capital book accounts and taxable contracts, have been
affixed with the tax stamps in the foreign bank branch, tax stamps will not be affixed with in the restructured solely foreign-invested
bank (or the subsidiary bank thereof) again.

4.

Deed Tax

In accordance with the Circular of the Ministry of Finance and the State Administration of Taxation Concerning Related Policies on
the Deed Tax in the Process of Enterprise Restructuring (Cai Shui [2003] No.183), the deed tax may be exempted if the house property
rights a foreign bank branch owns before the restructuring are transferred to the solely foreign-invested bank (or the subsidiary
bank thereof) set up after the restructuring.

5.

Where a foreign bank branch is restructured into a solely foreign-invested bank (or the subsidiary bank thereof), in case the transfer
is not carried out on the basis of book value, tax shall be levied pursuant to the current related tax law.

The Ministry of Finance

The State Administration of Taxation

March 26, 2007



 
The Ministry of Finance, The State Administration of Taxation
2007-03-26

 






CIRCULAR OF THE FOREIGN FUND DEPARTMENT UNDER THE STATE ADMINISTRATION FOR INDUSTRY AND COMMERCE ON REPORTING LICENSE USE STATUS OF FOREIGN-FUNDED ENTERPRISES

Circular of the Foreign Fund Department under the State Administration for Industry and Commerce on Reporting license Use Status of
Foreign-funded Enterprises

All foreign fund offices under Administration for Industry and Commerce of each province, autonomous region and municipality directly
under the Central Government:

As annual examination and exchange of new-version business license for foreign-funded enterprises are ongoing all over the country
for now, you are required to report the following information to this Department in the unit of province immediately after receiving
this Circular so as to make a plan as a whole of the printing and distribution of licenses of foreign-funded enterprises and guarantee
license exchange can be done as usual during the annual examination period.

(1)

The actual number of foreign-funded enterprises with a status of legal person and branches thereof as well as the growth rate for
the last two years.

(2)

The actual number of enterprises from foreign countries (regions) and the permanent representative offices thereof that engage in
production and operation in China as well as the growth rate for the last two years.

(3)

The drawing methods for each kind of licenses of foreign-funded enterprises (drawing uniformly by each province, autonomous region
and municipality directly under the Central Government or self-drawing by an authorized administration).

(4)

Cancellation rate of each kind of license in the process of use.

(5)

Stock situation of the new-version business license.

You shall, prior to April 30, gather the aforesaid items and fill them in the Statistics of License Use of Foreign-funded Enterprises.
In the case of self-drawing by authorized administration, the above-mentioned Statistics shall be attached separately, and then reported
to the Foreign Fund Department under the State Administration for Industry and Commerce via electronic documents.

E-mail: wz@saic.gov.cn

Contact person: Wang Junfeng, Comprehensive Office under the Foreign Fund Department

Tel: 010-68057996 or 010-88650408

Appendix: Statistics of License Use of Foreign-funded Enterprises (omitted)

The Foreign Fund Department under the State Administration for Industry and Commerce

April 10, 2007



 
The State Administration for Industry and Commerce
2007-04-10

 






ANNOUNCEMENT NO. 43, 2007 OF MINISTRY OF COMMERCE AND GENERAL ADMINISTRATION OF CUSTOMS

Announcement No. 43, 2007 of Ministry of Commerce and General Administration of Customs

[2007] No. 43

In accordance with the Measures on the Administration of Automatic Import Licenses of Goods, Ministry of Commerce made the following
adjustment to the List of Administration of Automatic Import Licenses on Goods, 32 items of the Administration of Automatic Import
Licenses are eliminated. The list of the eliminated items is now promulgated and shall be put into effect as from June 10, 2007.

Appendix: The Eliminated List of Administration of Automatic Import Licenses on Goods(omitted)

Ministry of Commerce

General Administration of Customs

May 20, 2007



 
Ministry of Commerce, General Administration of Customs
2007-05-20

 






ANNOUNCEMENT OF THE PEOPLE’S BANK OF CHINA ON IMPROVING THE INTER-BANK SPOT FOREIGN EXCHANGE MARKET

People’s Bank of China

Announcement of the People’s Bank of China on Improving the Inter-bank Spot Foreign Exchange Market

Announcement [2006] No.1 of the People’s Bank of China

For the purpose of improving the managed floating exchange rate system on the basis of market supply and demand with reference to
a basket of currencies to make adjustment, promoting the development of the foreign exchange market, diversifying the mode of foreign
exchange transactions, and enhancing the independent pricing capability of the financial institutions, the People’s Bank of China
determines to further perfect inter-bank spot foreign exchange market, and improve the formation mechanism of the central parity
of RMB exchange rate, and hereby make the announcement on relevant issues concerned as follows:

I.

Since January 4, 2006, over-the-counter transactions (hereinafter referred to as the OTC transactions) will be brought into the inter-bank
spot foreign exchange market , and the way of negotiation shall be kept down at the same time. Participants in the inter-bank foreign
exchange market may engage in foreign exchange transactions either based on centralized credit authorization and price bidding, or
engage in OTC transactions based on bilateral credit authorization and bilateral settlement. At the same time the system of market
makers shall be introduced into the inter-bank foreign exchange market for providing the liquidity for the market.

II.

Since January 4, 2006, the People’s Bank of China will authorize the China Foreign Exchange Trade System , at 9:15 AM on each workday,
to announce the central parity of exchange rate of the RMB against US dollar, euro, Japanese yen and Hong Kong dollar on the current
day, which shall be considered as the central parity of the exchange rate for the inter-bank spot foreign exchange market (including
OTC transactions and negotiation) and the OTC transactions of the banks on the current day.

III.

After OTC transactions is introduced, the formation mechanism of the central parity of exchange rate of RMB against US dollars, which
was confirmed based on the closing quotation of a bank in a negotiation mode in the inter-bank foreign exchange market before, will
now be confirmed by the means as follows: the China Foreign Exchange Trade System makes offers to all market markers in the inter-bank
foreign exchange market before the opening of the inter-bank foreign exchange market every day, and the quotations of all market
makers shall be taken as the samples for computation of the central parity of the exchange rate of RMB against US dollar, after excluding
the highest and lowest quotations, the central parity of the exchange rate of RMB against US dollar shall be confirmed for the current
day by the weighted average of quotations from all remained market makers, and the weight shall be determined comprehensively by
the China Foreign Exchange Trade System in the light of the volume of transactions of the party that quotes in the inter-bank foreign
exchange market and the quotation conditions and other indexes.

IV.

The central parity of exchange rate of RMB against euro, Japanese yen and Hong Kong dollar shall be calculated and confirmed by the
China Foreign Exchange Trade System in the light of the RMB-US dollar central parity of exchange rate on the current day and the
exchange rate of those currencies against US dollar in the international market at 9 o’clock AM.

V.

After this Announcement is promulgated, the existing provisions shall still be followed for the band of fluctuation of RMB against
US dollar and other currencies in the inter-bank spot foreign exchange market and the spread of US dollar exchange rate quotation
of the banks to their clients. Namely, the daily trading price of the US dollar against RMB in the inter-bank spot foreign exchange
market shall float within a range of 0.3% around the central parity of the US dollar transaction announced by the China Foreign Exchange
Trade System, while the trading price of such non-US dollar currencies as euro, Japanese yen and Hong Kong dollar against RMB shall
float within a range of 3% around the central parity of the non-US dollar currencies transaction announced by the China Foreign Exchange
Trade System. The maximum buying and selling spread of the US exchange rate quotation of a bank to its clients shall not exceed the
asymmetric management of 1% of the central parity of transaction announced by the China Foreign Exchange Trade System, that is the
difference between the selling price and the buying price of the currency exchange does not exceed 1% of the central parity of transaction
of the current day, and the band formed by the selling price and the buying price contains the central parity of transaction of the
current day. And the difference between the selling price and the buying price of the US dollar cash by a bank to its clients shall
not exceed 4% of the central parity transaction. Within the prescribed extent of price difference, the banks may adjust the listed
US dollar exchange rate of the current day by themselves.

In accordance with the economic and financial situations both home and abroad, the People’s Bank of China shall take charge of managing
and adjusting the RMB exchange rate based on the market supply and demand with reference to the fluctuation of exchange rate of a
basket of currencies, maintaining the normal fluctuation of the RMB exchange rate, and keeping the RMB exchange rate to be basically
stable on a reasonable and balance level, promoting the balance of international payment basically, and maintaining the stability
of macro economy and financial market.

People’s Bank of China

January 3, 2006



 
People’s Bank of China
2006-01-03

 






MEASURES OF CHINA BANKING REGULATORY COMMISSION FOR THE IMPLEMENTATION OF ADMINISTRATIVE LICENSING MATTERS CONCERNING COOPERATIVE FINANCIAL INSTITUTIONS






China Banking Regulatory Commission

Order of China Banking Regulatory Commission

No. 3

The “Measures of China Banking Regulatory Commission for the Implementation of Administrative Licensing Matters Concerning Cooperative
Financial Institutions”, which were adopted at the 40th chairman’s meeting of China Banking Regulatory Commission on November 10,
2005, are hereby promulgated, and shall come into force on February 1, 2006.

Chairman Liu Mingkang

January 12, 2006

Measures of China Banking Regulatory Commission for the Implementation of Administrative Licensing Matters Concerning Cooperative
Financial Institutions

Chapter I General Provisions

Article 1

The present measures are formulated in accordance with the “Law of the People’s Republic of China on the Regulation of the Banking
Industry”, the “Administrative License Law of the People’s Republic of China”, the “Law of the People’s Republic of China on Commercial
Banks” as well as other laws, administrative regulations, and the relevant decisions of the State Council for the purpose of regulating
China Banking Regulatory Commission (hereinafter referred to as CBRC) and its dispatched offices in their granting administrative
licenses to cooperative financial institutions, clarifying the administrative licensing matters, conditions, applicable operational
flows and term, and protecting the lawful rights and interests of the applicants.

Article 2

Cooperative financial institutions as mentioned in the present measures shall include: rural credit cooperatives, associate rural
credit cooperative unions of the counties (cities, districts), rural credit cooperative unions of the counties (cities, districts),
associate rural credit cooperative unions of the prefectures (cities), associate rural credit cooperative unions of the provinces
(autonomous regions, municipalities directly under the Central Government), rural cooperative banks, and rural commercial banks.

Article 3

CBRC and its dispatched offices shall comply with the present measures and the “Provisions of China Banking Regulatory Commission
on the Procedures for Granting Administrative Licenses” when granting administrative licenses to cooperative financial institutions.

Article 4

The following matters of a cooperative financial institution shall be subject to administrative license of CBRC or its dispatched
office: establishment, modification or termination of the institution, adjustment of the business scope, addition of new varieties
of business, qualifications for holding the positions of council members (directors) and senior managers, and so on.

Article 5

An applicant shall submit the application materials in accordance with the “Catalogue of China Banking Regulatory Commission on Application
Materials for Administrative Licensing Matters and the Format Requirements”.

Chapter II Establishment of Legal Person Institutions

Section 1 Establishment of Rural Credit Cooperatives

Article 6

For the establishment of a rural credit cooperative, the applicant shall meet the following conditions:

(1)

It has the articles of association conforming to the provisions of CBRC;

(2)

It is established by means of initiation and there shall be no less than 500 initiators;

(3)

The minimum amount of registered capital shall be RMB 1 million Yuan, which shall be paid-in capital;

(4)

It has council members and senior managers who meet the qualification conditions for holding their respective positions;

(5)

There are no less than 2 persons who hold the positions of director general and vice director general(s);

(6)

No less than 80% of practitioners have engaged in financial work for at least 1 year or have the technical secondary school diploma
or above majoring in finance or similar field;

(7)

It has a sound organizational structure and management rules; and

(8)

It has qualified business place, safety protection measures and other relevant facilities for its business.

Article 7

For the establishment of a rural credit cooperative, the applicant shall meet the following conditions on prudence in addition:

(1)

It has a sound risk management system, and is capable of effectively controlling the risks in associated transactions;

(2)

It has scientific and effective human resources management rules, and has professional talents with high qualities;

(3)

It has an effective capital restraint and supplement mechanism;

(4)

It contain no shares held by the local people’s government in the form of fiscal funds; and

(5)

Other conditions on prudence as prescribed by CBRC.

Article 8

For the establishment of a rural credit cooperative, there shall be qualified initiators. Such initiators may include: natural persons,
domestic non-financial institutions, domestic financial institutions, overseas financial institutions and other initiators acknowledged
by CBRC.

The expression “overseas financial institutions” as mentioned in the preceding paragraph shall include the financial institutions
from Hong Kong, Macao and Taiwan regions.

Article 9

A natural person initiator shall meet the following conditions:

(1)

He has full capacity for civil conduct;

(2)

He has good social prestige as well as honesty and credibility records;

(3)

His share funds are owned by himself and the sources are lawful, and he shall not hold shares by contributing loans or contributing
funds commissioned by others;

(4)

He is a resident of the locality of the rural credit cooperative to be established, or a non-local resident who has a fixed domicile
at the said locality and has resided for at least 3 years; and

(5)

Other conditions on prudence as prescribed by CBRC.

Article 10

The proportion of the shares of a single natural person shall not exceed 2%, and the proportion of the total shares of employees shall
not exceed 25%.

Article 11

As an initiator, a domestic non-financial institution shall meet the following conditions:

(1)

It has been registered in the administrative department for industry and commerce, and has the status as a legal person;

(2)

It has good social prestige, honesty and credibility records, as well as tax payment records;

(3)

It is in good financial situation, and made profits continuously in the latest 2 accounting years;

(4)

It has strong management capabilities and fund strength;

(5)

After the year-end distribution of profits, its net assets reach 30% of the total assets or even higher (by standard of consolidated
accounting statements);

(6)

The balance of its equity investments shall generally not exceed 50% of its net assets (including the amount of current investments,
by standard of consolidated accounting statements);

(7)

His share funds are owned by himself and the sources are lawful, and he shall not hold shares by contributing loans or contributing
funds commissioned by others;

(8)

Its place of registration is within the jurisdiction of the rural credit cooperative to be established; and

(9)

Other conditions on prudence as prescribed by CBRC.

Article 12

The proportion of the total shares of a single domestic non-financial institution and its associated parties shall not exceed 10%.

Article 13

As an initiator, a domestic financial institution shall meet the following conditions:

(1)

Its capital adequacy ratio shall not be lower than 8% if it is a bank, and the total amount of its capital shall not be lower than
10% of the total amount of its risk-weighted assets if it is a non-bank financial institution;

(2)

The balance of its equity investments shall not exceed 50% of its net assets (including the amount of current investments, by standard
of consolidated accounting statements);

(3)

It made profits continuously in the latest 2 accounting years;

(4)

It has good corporate governance, as well as sound and effective internal control rules;

(5)

Its main prudent regulatory indices meet the regulatory requirements; and

(6)

Other conditions on prudence as prescribed by CBRC.

None of the associate rural credit cooperative unions of the provinces (autonomous regions, municipalities directly under the Central
Government), associate rural credit cooperative unions of the prefectures (cities), or associate rural credit cooperative unions
of the counties (cities, districts) may hold shares of a rural credit cooperative.

Article 14

The proportion of the total shares of a single domestic financial institution and its associated parties shall not exceed 20%.

Article 15

As an initiator, an overseas financial institution shall meet the following conditions:

(1)

Its total year-end assets in the latest year shall generally be no less than 1,000 million USD;

(2)

If it is an international rating institution acknowledged by CBRC, its long-term credit was rated by CBRC as good in the latest 2
years;

(3)

It has been keeping a favorable balance in the latest 2 accounting years;

(4)

Its capital adequacy ratio shall reach the average level of capital adequacy ratio for the banking sector at the place of its registration
and shall not be lower than 8% if it is a bank, or the total amount of its capital shall not be lower than 10% of the total amount
of risk-weighted assets if it is a non-bank financial institution;

(5)

It has sound internal control rules;

(6)

The financial institution at the place of registration has sound supervision and management rules;

(7)

Its home country (region) is in good economic situation; and

(8)

Other conditions on prudence as prescribed by CBRC.

CBRC may, when required by the risk situation of the financial industry and the supervision thereof, adjust the conditions for overseas
financial institutions to hold the shares.

Article 16

The proportion of the shares held by a single overseas financial institution in a single rural credit cooperative shall not exceed
20%. The proportion of the total shares of more than one overseas financial institution shall not exceed 25%.

The expression “proportion of the shares” as mentioned in the preceding paragraph shall refer to the proportion of the total shares
held by an overseas financial institution in a rural credit cooperative. The proportion of shares held by an associated party of
the overseas financial institution shall be counted into that of the overseas financial institution.

Article 17

The establishment of a rural credit cooperative shall include two stages, namely, preparatory establishment and initiation of the
business.

For the establishment of a rural credit cooperative, a preparatory establishment team shall be formed, and the initiators of the rural
credit cooperative shall entrust the preparatory establishment team as the applicant.

Article 18

The application for preparatory establishment of a rural credit cooperative within the jurisdiction of a banking regulatory branch
office of China Banking Regulatory Commission (hereinafter referred to as banking regulatory branch office) shall be subject to the
acceptance and preliminary examination of the banking regulatory branch office, and be subject to the examination of the supervisory
office of China Banking Regulatory Commission (hereinafter referred to as banking regulatory office) for decision. The banking regulatory
office shall, within 4 months as of receipt of the entire application materials, make a written decision on approval or disapproval.

The application for the preparatory establishment of a rural credit cooperative within the jurisdiction of the city where the banking
regulatory office is located shall be subject to the acceptance and examination of the banking regulatory office for decision. The
banking regulatory office shall, within 4 months as of the acceptance, make a written decision on approval or disapproval.

Article 19

The term of preparatory establishment of a rural credit cooperative shall be 6 months as of the day when the decision on approval
is made. In the case of any particular circumstance, the applicant shall, within 1 month prior to expiry of the time limit for preparatory
establishment, submit the application for postponing the preparatory establishment to the banking regulatory office. The banking
regulatory office shall, within 20 days as of receipt of the written application, make a decision on whether to approve the postponement
or not, and the maximum period postponed for preparatory establishment shall be 3 months.

The applicant shall, prior to the expiry of the time limit prescribed in the preceding paragraph, submit the application for the initiation
of business. If it fails to submit the application within the time limit, the deciding organ shall nullify the license for preparatory
establishment, and take back the approval document for preparatory establishment.

Article 20

The application of a rural credit cooperative within the jurisdiction of a banking regulatory branch office for the initiation of
business, shall be subject to the acceptance and preliminary examination of the banking regulatory branch office, and be subject
to the examination of the banking regulatory office for decision. The banking regulatory office shall, within 2 months as of receipt
of the entire application materials, make a written decision on ratification or refusal.

The application of a rural credit cooperative within the jurisdiction of the city where the banking regulatory office is located for
the initiation of business, shall be subject to the acceptance and examination of the banking regulatory office for decision. The
banking regulatory office shall, within 2 months as of the acceptance, make a written decision on ratification or refusal.

Article 21

A rural credit cooperative shall, after receiving the ratification document for the initiation of business and obtaining a financial
business permit, go to the administrative department for industry and commerce to apply for a business license.

A rural credit cooperative shall initiate the business within 6 months as of obtaining the business license. In the case of any particular
circumstance, the applicant shall, within 1 month prior to the expiry of the time limit for the initiation of business, submit the
application for postponing the initiation of business to the banking regulatory office. The banking regulatory office shall, within
20 days as of receipt of the written application, make a decision on whether to approve the postponement or not, and the maximum
period postponed for the initiation of business shall be 3 months.

Where a rural credit cooperative fails to initiate the business within the time limit as prescribed in the preceding paragraph, the
deciding organ shall nullify the license for the initiation of business, take back the ratification document for the initiation of
business and the financial business permit, and make an announcement.

Section 2 Establishment of Rural Associate Credit Cooperative Unions of Counties (Cities, Districts)

Article 22

For the establishment of an associate rural credit cooperative union of a county (city, district), the applicant shall meet the following
conditions:

(1)

It has the articles of association conforming to the provisions of CBRC;

(2)

The associate union is established by means of initiation and there are no less than 8 rural credit cooperatives within the jurisdiction;

(3)

The minimum amount of its registered capital is RMB 1 million Yuan, which shall be paid-in capital;

(4)

It has council members and senior managers who meet the qualification conditions for holding their respective positions;

(5)

There are no less than 2 persons who hold the positions of director general and vice director general(s);

(6)

No less than 80% of practitioners have engaged in financial work for at least 1 year or have the technical secondary school diploma
or above majoring in finance or similar field;

(7)

It has a sound organizational structure and management rules; and

(8)

It has qualified business place, safety protection measures and other relevant facilities for its business.

Article 23

For the establishment of an associate rural credit cooperative union of a county (city, district), the applicant shall meet the following
conditions on prudence in addition:

(1)

It has a good corporate governance structure;

(2)

It has a sound risk management system, and is capable of effectively controlling the risks in associated transactions;

(3)

It has scientific and effective human resources management rules, and has professional talents with high qualities;

(4)

It has an effective capital restraint and supplement mechanism;

(5)

It contains no shares held by the local people’s government in the form of fiscal funds; and

(6)

Other conditions on prudence as prescribed by CBRC.

Article 24

For the establishment of an associate rural credit cooperative union of a county (city, district), there shall be qualified initiators,
and the initiators shall be rural credit cooperatives within the jurisdiction.

The employees of an associate rural credit cooperative union of a county (city, district) may hold shares by centralizing their funds.

None of the associate rural credit cooperative unions of the provinces (autonomous regions, municipalities directly under the Central
Government), or associate rural credit cooperative unions of the prefectures (cities) shall hold shares of an associate rural credit
cooperative union of a county (city, district).

Article 25

As an initiator, a rural credit cooperative shall meet the following conditions:

(1)

The place of registration is located within the jurisdiction of the associate rural credit cooperative union of the county (city,
district) to be established;

(2)

The balance of its equity investments shall not exceed 50% of its net assets (including the amount of current investments); and

(3)

Other conditions on prudence as prescribed by CBRC.

Article 26

A single rural credit cooperative shall hold no less than 50,000 shares, and the proportion of its shares shall not exceed 20%.

Article 27

Any of the employees of a shareholding associate rural credit cooperative union of a county (city, district) shall meet the following
conditions:

(1)

He has full capacity for civil conduct;

(2)

His share funds are owned by himself and the sources are lawful, and he shall not hold shares by contributing loans or contributing
funds commissioned by others; and

(3)

Other conditions on prudence as prescribed by CBRC.

Article 28

The proportion of the shares of a single employee shall not exceed 2%, and the proportion of the total shares of all employees shall
not exceed 25%.

Article 29

The establishment of an associate rural credit cooperative union of a county (city, district) shall include two stages, namely, preparatory
establishment and initiation of the business.

For the establishment of an associate rural credit cooperative union of a county (city, district), a preparatory establishment team
shall be formed, and the initiators of the associate rural credit cooperative union of the county (city, district) shall entrust
the preparatory establishment team as the applicant.

Article 30

The application of an associate rural credit cooperative union of a county (city, district) within the jurisdiction of a banking regulatory
branch office for preparatory establishment shall be subject to the acceptance and preliminary examination of the banking regulatory
branch office, and shall be subject to the examination of the banking regulatory office for decision. The banking regulatory office
shall, within 4 months as of receipt of the entire application materials, make a written decision on approval or disapproval.

The application for preparatory establishment of an associate rural credit cooperative union of a county (city, district) within the
jurisdiction of the city where the banking regulatory office is located, shall be subject to the acceptance and examination of the
banking regulatory office for decision. The banking regulatory office shall, within 4 months as of the acceptance, make a written
decision on approval or disapproval.

Article 31

The term of preparatory establishment of an associate rural credit cooperative union of a county (city, district) shall be 6 months
as of the day when the decision on approval is made. In the case of any particular circumstance, the applicant shall, within 1 month
prior to expiry of the time limit for preparatory establishment, submit to the banking regulatory office the application for postponing
the preparatory establishment. The banking regulatory office shall, within 20 days as of receipt of the written application, make
a decision on whether to approve the postponement or not, and the maximum period postponed for preparatory establishment shall be
3 months.

The applicant shall, prior to the expiry of the time limit prescribed in the preceding paragraph, submit the application for the initiation
of business. If it fails to submit the application within the time limit, the deciding organ shall nullify the license for preparatory
establishment, and take back the approval document for the preparatory establishment.

Article 32

The application of an associate rural credit cooperative union of a county (city, district) within the jurisdiction of a banking regulatory
branch office for the initiation of business shall be subject to the acceptance and preliminary examination of the banking regulatory
branch office, and be subject to the examination of the banking regulatory office for decision. The banking regulatory office shall,
within 2 months as of receipt of the entire application materials, make a written decision on ratification or refusal.

The application of an associate rural credit cooperative union of a county (city, district) within the jurisdiction of the city where
the banking regulatory office is located for the initiation of business, shall be subject to the acceptance and examination of the
banking regulatory office for decision. The banking regulatory office shall, within 2 months as of the acceptance, make a written
decision on ratification or refusal.

Article 33

An associate rural credit cooperative union of a county (city, district) shall, after receiving the ratification document for the
initiation of business and obtaining a financial business permit, go to the administrative department for industry and commerce to
obtain a business license.

An associate rural credit cooperative union of a county (city, district) shall initiate the business within 6 months as of obtaining
a business license. In the case of any particular circumstance, the applicant shall, within 1 month prior to the expiry of the time
limit for the initiation of business, submit an application for postponing the initiation of business to the banking regulatory office.
The banking regulatory office shall, within 20 days as of receipt of the written application, make a decision on whether to approve
the postponement or not, and the maximum period postponed for the initiation of business shall be 3 months.

Where the associate rural credit cooperative union of the county (city, district) fails to initiate the business within the time limit
as prescribed in the preceding paragraph, the deciding organ shall nullify the license for the initiation of business, take back
the ratification document for the initiation of the business and the financial business permit, and make an announcement.

Section 3 Establishment of Rural Credit Cooperatives of Counties (Cities, Districts)

Article 34

For the establishment of a rural credit cooperative of a county (city, district), the applicant shall meet the following conditions:

(1)

It has the articles of association conforming to the provisions of CBRC;

(2)

It is established by means of initiation and there shall be no less than 1,000 initiators;

(3)

Its registered capital shall be RMB 10 million Yuan or more;

(4)

It has council members and senior managers who meet the qualification conditions for holding their respective positions;

(5)

There are no less than 2 persons who hold the positions of director general and vice director general(s);

(6)

No less than 80% of practitioners have engaged in financial work for at least 1 year or have the technical secondary school diploma
or above majoring in finance or similar field;

(7)

It has a sound organizational structure and management rules; and

(8)

It has qualified business place, safety protection measures and other relevant facilities for its business.

The banking regulatory office may, in light of the actual situation of the locality of the rural credit cooperative union of the county
(city, district) to be established, make a proper adjustment to the registered capital in Item (3) of the preceding paragraph, provided
that the amount of registered capital shall not be less than RMB 5 million Yuan.

Article 35

For the establishment of a rural credit cooperative union of a county (city, district), the applicant shall meet the following conditions
on prudence in addition:

(1)

It has a good corporate governance structure;

(2)

It has a sound risk management system, and is capable of effectively controlling the risks in associated transactions;

(3)

It has scientific and effective human resources management rules, and has professional talents with high qualities;

(4)

It has an effective capital restraint and supplement mechanism;

(5)

It contains no shares held by the local people’s government in the form of fiscal funds; and

(6)

Other conditions on prudence as prescribed by CBRC.

For the establishment of a rural credit cooperative union of a county (city, district) by means of consolidation, the applicant shall
meanwhile meet the following conditions in addition:

(1)

Both the rural credit cooperative and the associate rural credit cooperative union of the county (city, district) participate in the
establishment voluntarily;

(2)

The associate rural credit cooperative union of the a county (city, district) has strong management capabilities;

(3)

The rural credit cooperative and the associate rural credit cooperative union of the county (city, district) make an estimation according
to consolidated financial statements, which shows that it is solvent;

(4)

Its core capital adequacy ratio shall be no lower than 2%, and may continue to be raised after establishment.

Article 36

For the establishment of a rural credit cooperative union of a county (city, district), there shall be qualified initiators. The initiators
may include: natural persons, domestic non-financial institutions, domestic financial institutions, overseas financial institutions,
and other initiators acknowledged by CBRC.

Article 37

The initiators shall conform to the provisions in Article 9 and Articles 11 through 16 of the present measures.

The proportion of the shares of a single natural person shall not exceed 5￿￿the proportion of the total shares of the employees
shall not exceed 25%, and the proportion of the total shares of all natural persons shall be no less than 50%.

None of the associate rural credit cooperative unions of the provinces (autonomous regions, municipalities directly under the Central
Government), or of the associate rural credit cooperative unions of the prefectures (cities) shall hold shares of a rural credit
cooperative union of a county (city, district).

Article 38

The establishment of a rural credit cooperative union of a county (city, district) shall include two stages, namely, preparatory establishment
and initiation of the business.

For the establishment of a rural credit cooperative union of a county (city, district), a preparatory establishment team shall be
formed, and the initiators of the rural credit cooperative union shall entrust the preparatory establishment team as the applicant.

Article 39

The application of a rural credit cooperative union of a county (city, district) within the jurisdiction of a banking regulatory branch
office for preparatory establishment shall be subject to the acceptance and preliminary examination of the banking regulatory branch
office, and shall be subject to the examination of the banking regulatory office for decision. The banking regulatory office shall,
within 4 months as of receipt of the entire application materials, make a written decision on approval or disapproval.

The application for preparatory establishment of a rural credit cooperative union of a county (city, district) within the jurisdiction
of the city where the banking regulatory office is located, shall be subject to the acceptance and examination of the banking regulatory
office for decision. The banking regulatory office shall, within 4 months as of the acceptance, make a written decision on approval
or disapproval.

Article 40

The term of preparatory establishment of a rural credit cooperative union of a county (city, district) shall be 6 months as of the
day when the decision on approval is made. In the case of any particular circumstance, the applicant shall, within 1 month prior
to expiry of the time limit for preparatory establishment, submit to the banking regulatory office the application for postponing
the preparatory establishment. The banking regulatory office shall, within 20 days as of receipt of the written application, make
a decision on whether to approve the postponement or not, and the maximum period postponed for preparatory establishment shall be
3 months.

The applicant shall, prior to the expiry of the time limit prescribed in the preceding paragraph, submit an application for the initiation
of business. If it fails to submit the application within the time limit, the deciding organ shall nullify th

NOTICE OF THE MINISTRY OF COMMERCE ON ENTRUSTING THE COMPETENT DEPARTMENTS OF COMMERCE AT PROVINCIALLEVEL TO EXAMINE AND MANAGE PART OF FOREIGN-FUNDED ROAD TRANSPORTATION ENTERPRISES

Ministry of Commerce

Notice of the Ministry of Commerce on Entrusting the Competent Departments of Commerce at ProvincialLevel to Examine and Manage Part
of Foreign-funded Road Transportation Enterprises

Shang Zi Han [2005] No. 93

January 22, 2006

The competent departments of commerce of all the provinces, autonomous regions, municipalities directly under the Central Government,
and cities under separate state planning, as well as that of the Xinjiang Production and Construction Corp.,

According to the request of the State Council for simplifying the system of administrative examination and approval, and for the
purpose of simplifying the procedures for the examination of the contracts and the articles of association of foreign-funded enterprises,
improving efficiency, and speeding up the work for absorbing foreign investment in service trade fields, we hereby make the following
notice on relevant issues concerning entrusting the competent departments of commerce at all the provinces, autonomous regions, municipalities
directly under the Central Government, and cities under separate state planning, as well as that of Xinjiang Production and Construction
Corp. (hereinafter referred to as the provincial competent departments of commerce) and the state level management commissions of
economic and technological development zones to make examination and management on part of foreign-funded road transportation enterprises:

I.

The provincial competent departments of commerce and the state level management commissions of economic and technological development
zones shall be entrusted to responsible for the work of examination and management of foreign-funded road transportation enterprises
(excluding road passenger transportation enterprises).

II.

Each entrusted department and institution shall, in accordance with the Provisions on the Administration of Foreign Investment in
the Road Transport Sector (No.9 [2001] of the Ministry of Communications and the Ministry of Foreign Trade and Economic Cooperation)
and other laws and regulations on foreign investment, strictly control the qualifications of foreign funded road transportation enterprises,
make careful examination on the applications of foreign-funded road transportation enterprises for their establishment and alteration,
and handle the applications after requesting the applicants to make report to the competent departments of communications for approval
according to the procedures and conditions as prescribed in the aforesaid provisions. The entrusted departments and institutions
shall report any problem arising from the examination process to the Ministry of Commerce in a timely manner. If there is any act
of examination and approval that is in violation of regulations during the entrustment period, the Ministry of Commerce shall circulate
a notice on it in light of the circumstances or even takes back the entrustment.

III.

Each entrusted department and institution shall have the conditions for issuing the documents of approval for foreign-funded enterprises
by networking with the Ministry of Commerce and for online annual joint inspection, and do a good job for putting the examination
and approval on archives and making statistics by making use of the network license issuing system for foreign-funded enterprises.
The relevant statistical data shall comply with the requirements, so that it may be convenient for the Ministry of Commerce to know
the information and strengthen supervision. The Ministry of Commerce will carry out training on the local competent departments of
commerce and the state level management commissions of economic and technological development zones, so as to clarify the concrete
issues in the process of examination.

IV.

The entrusted state level management commissions of economic and technological development zones shall, in accordance with the Notice
of the General Office of the State Council on Transferring the Several Opinions of the Ministry of Commerce and Other Departments
concerning Promoting the State Level Economic and Technological Development Zones to Improve Development Level (No.15 [2005] of the
General Office of the State Council), implement the management system of simplification and high efficiency. After the state level
economic and technological development zones have put the management systems on archives, carried out personnel training, and passed
checking and acceptance for networking, the Ministry of Commerce shall handle the corresponding entrustment formalities by batch
separately.

V.

The present entrustment shall take effect as of March 31, 2006.

 
Ministry of Commerce
2006-01-22

 



ANNOUNCEMENT NO.5, 2006 OF THE GENERAL ADMINISTRATION OF CUSTOMS OF THE PEOPLE’S REPUBLIC OF CHINA

General Administration of Customs

Announcement No.5, 2006 of the General Administration of Customs of the People’s Republic of China

[2006] No.5

In accordance with regulations of Anti-dumping Regulations of People’s Republic of China, Tariff Committee of the State Council decided
to impose anti-dumping duties on cyclic dimethyl siloxane originating from Japan, the United States, Britain and Germany as form
Jan 16, 2006. Ministry of Commerce released Ministry of Commerce Announcement No.123, 2005 (hereinafter referred to as Ministry of
Commerce Announcement No.123) exactly on the day of Jan 16, 2006. In accordance with regulations of Anti-dumping Regulations of People’s
Republic of China, General Administration of Customs released General Administration of Customs Announcement No.3, 2006 (hereinafter
referred to as General Administration of Customs Announcement No.3) on implementation of Ministry of Commerce Announcement No.123
subsequently.

Since General Administration of Customs adjusted the 10-digit commodity codes of related cargoes of Ministry of Commerce Announcement
No.123, related matters on anti-dumping measures on cyclic dimethyl siloxane are now announced as follows for complementary:

1.

As form release of this announcement, when going through declaration formalities of cyclic dimethyl siloxane under tariff items of
29310000 and 38249090, consignees of imported cargoes should substitute 2931000050 for 2931000022 in case of any compound of D3,
D4, D5 and D6 described in Ministry of Commerce Announcement No.123.

2.

Besides above adjustments on commodity codes declaration, please follow General Administration of Customs No.3 for implementation
of other affairs related to anti-dumping duties of cyclic dimethyl siloxane originating from Japan, the United States, Britain and
Germany.

General Administration of Customs

Jan 27, 2006



 
General Administration of Customs
2006-01-27

 






ANNOUNCEMENT NO.5, 2006 OF MINISTRY OF COMMERCE, ON STARTING ANTI-DUMPING INTERIM REVIEW ON IMPORTED ETHANOLAMINE

Ministry of Commerce

Announcement No.5, 2006 of Ministry of Commerce, on Starting Anti-dumping Interim Review on Imported Ethanolamine

[2006] No.5

The Ministry of Commerce issued Announce No.57 of 2004 on November 14, 2004 to start levying anti-dumping duties on imported Ethanolamine
(hereinafter referred to as investigated product) originating in Japan, the U.S., Iran, Malaysia, Taiwan Region and Mexico. Among
the related enterprises, the anti-dumping duties rate on Ethanolamine from Optimal Chemicals (Malaysia) Sdn. Bhd. was 9%.

The above-mentioned enterprise applied to Ministry of Commerce for a dumping and dumping margins judicial review on the anti-dumping
measures implemented to the enterprise and raised petition for amending the anti-dumping duty rate correspondingly.

In respond to the application, Ministry of Commerce made an examination on related issues and decided to start a judicial review,
as of the date when this announcement is issued, on the anti-dumping measures implemented on the investigated product from the above-mentioned
enterprise during a period from January 1, 2005 to December 31, 2005.

The investigated product is listed under No. 29221100, 29221200 in Import and Export Tariffs of the General Administration of Customs
of the People’s Republic of China.

Interested parties can apply in written forms to respond to charges in the interim review within 20 days as of the date the Announcement
is issued.

To get the necessary information for the investigation, Ministry of Commerce will send out questionnaire to the interested parties
accordingly, the answer sheet of which shall be submitted within 37 days as of the date of issuance of the questionnaire.

The interested parties could raise written petition for holding a hearing, which could also be held initiatively by Ministry of Commerce
when necessary.

Ministry of Commerce could, when necessary, send out staff to relate countries for field examination and verification, before which
the countries and enterprises will get notice in advance.

Any form of obstruction against the investigation may result in an arbitration based on the available fact and information.

Address: No. 2, DongChangAn St., Beijing

Postcode: 100731

Bureau of Fair Trade for Imports and Exports, Ministry of Commerce

Tel: 86-10-65198924;65198915

Fax: 86-10-65198915;65198172

Ministry of Commerce

February 10, 2006



 
Ministry of Commerce
2006-02-10

 






ACCOUNTING STANDARDS FOR ENTERPRISES NO. 11 – SHARE-BASED PAYMENTS

The Ministry of Finance

Accounting Standards for Enterprises No. 11 – Share-based Payments

Cai Kuai [2006] No.3

February 15, 2006

Chapter I General Provisions

Article 1

These Standards are formulated in accordance with the Accounting Standards for Enterprises – Basic Standards for the purpose of regulating
the recognition, and measurement of share-based payments, and the disclosure of relevant information. .

Article 2

The term “share-based payment” refers to a transaction in which an enterprise grants equity instruments or undertakes equity-instrument-based
liabilities in return for services from employee or other parties.

The share-based payments shall consist of equity-settled share-based payments and cash-settled share-based payments.

The term “equity-settled share-based payment” refers to a transaction in which an enterprise grants shares or other equity instruments
as a consideration in return for services.

The term “cash-settled share-based payment” refers to a transaction of payment of cash or any other asset obligation calculated and
determined on the basis of shares or other equity instruments undertaken by the enterprise in return for services.

The term “equity instrument” as mentioned in these Standards refers to the equity instruments of the enterprise’s own.

Article 3

The following items shall be governed by other accounting standards:

(1)

The Accounting Standards for Enterprises No. 20 – Business Combination shall apply to a transaction in which an enterprise issue the
equity instrument and obtains the net assets of another enterprise in a business combination.

(2)

The Accounting Standards for Enterprises No. 22 – Recognition and Measurement of Financial Instruments, shall apply to a transaction
in which equity instruments are granted as a consideration for other financial instruments.

Chapter II The Equity-settled Share-based Payments

Article 4

The equity-settled share-based payment in return for employee services shall be measured at the fair value of the equity instruments
granted to the employees.

The fair value of the equity instruments shall be confirmed in accordance with Accounting Standards for Enterprises No. 22 – Recognition
and Measurement of Financial Instruments.

Article 5

As to an equity-settled share-based payment in return for services of employees, if the right may be exercised immediately after the
grant, the fair value of the equity instruments shall, on the date of the grant, be included in the relevant cost or expense and
the capital reserves shall be increased accordingly.

The “grant date” refers to the date on which the share-based payment agreement is approved.

Article 6

As to a equity-settled share-based payment in return for employee services, if the right cannot be exercised until the vesting period
comes to an end or until the prescribed performance conditions are met, then on each balance sheet date within the vesting period,
the services obtained in the current period shall, based on the best estimate of the number of vested equity instruments, be included
in the relevant costs or expenses and the capital reserves at the fair value of the equities instruments on the date of the grant.

If, on the balance sheet date, the subsequent information indicates that the number of vested equity instruments is different from
the previous estimate, an adjustment shall be made and on the vesting date, the estimate shall be adjusted to equal the number of
the actually vested equity instruments.

The ” vesting period” refers to the period during which the specified vesting conditions are to be satisfied.

As to a share-based payment with a specified service period as the vesting condition, the vesting period shall be from the grant date
to the vesting date. As to a share-based payment with specified performances as the vesting condition, the length of the vesting
period shall be estimated in accordance with the most likely performance outcome.

The “vesting date” refers to the date on which the vesting conditions are met and the employees and other parties have the right to
obtain the equity instruments or cash from an enterprise.

Article 7

An enterprise shall, after the vesting date, make no adjustment to the relevant costs or expenses as well as the total amount of the
owner’s equities which have been confirmed.

Article 8

An equity-settled share-based payment in return for the service of any other party shall be conducted in accordance with the following
circumstances, respectively:

(1)

If the fair value of the service of any other party can be measured in a reliable way, the fair value of the service on the acquisition
date by any other service party shall be included in the relevant costs or expenses, and the owner’s equities shall be increased
accordingly.

(2)

If the fair value of the service of any other party can not be measured in a reliable way, but the fair value of the equity instruments
can be measured in a reliable way, the fair value of the equity instruments on date of the service acquisition shall be included
in the relevant costs or expenses, and the owner’s equities shall be increased accordingly.

Article 9

On the vesting date, an enterprise shall, based on the number of the equity instruments of which the right is actually exercised,
calculate and confirm the amount of the paid-in capital or capital stock to be transferred in, and transfer it in the paid-in capital
or stock capital.

The “vesting date” refers to the date on which the employees and other parties exercise the right, acquire cash or equity instruments.

Chapter III The Cash-settled Share-based Payments

Article 10

A cash-settled share-based payment shall be measured in accordance with the fair value of liability calculated and confirmed based
on the shares or other equity instruments undertaken by an enterprise. .

Article 11

As to a cash-settled share-based payment instruments, if the right may be exercised immediately after the grant, the fair value of
the liability undertaken by the enterprise shall, on the date of the grant, be included in the relevant costs or expenses, and the
liabilities shall be increased accordingly.

Article 12

As to a cash-settled share-based payment, if the right may not be exercised until the vesting period comes to an end or until the
specified performance conditions are met, on each balance sheet date within the vesting period, the services obtained in the current
period shall, based on the best estimate of the information about the exercisable right, be included in the relevant costs or expenses
and the corresponding liabilities at the fair value of the liability undertaken by the enterprise.

If, on the balance sheet date, the subsequent information indicates that fair value of the current liability undertaken by the enterprise
are different from the previous estimates, an adjustment shall be made and on the vesting date the estimate shall be adjusted to
equal the actually exercisable right.

Article 13

An enterprise shall, on each balance sheet date and on each account date prior to the settlement of the relevant liabilities, re-measure
the fair values of the liabilities and include the changes in the current profits and losses.

Chapter IV Disclosure

Article 14

An enterprise shall, in the notes, disclose the information related to the cash-settled share-based payments as follows:

(1)

The total amounts of the equity instruments that are granted, exercised and invalidated in the current period;

(2)

The range of the vesting prices for the share options or other equity instruments issued outward at the end of period, and the remainder
of the contractual period;

(3)

The weighted average prices of the share options or other equity instruments exercised in the current period which are calculated
based on the vesting date prices; and

(4)

The measures for the confirmation of the fair value of the equity instruments.

The enterprise may disclose the information of homogeneous share-based payments on a consolidated basis.

Article 15

An enterprise shall, in its notes, disclose the effects of the share-based payment transactions on the current financial status and
operating outcomes, which shall at least include the information as follows:

(1)

The total amount of the expenses as result of equity-settled share-based payments, which is recognized in the current period;

(2)

The total amount of the expenses as a result of cash-settled share-based payments, which is recognized in the current period; and

(3)

The total amount of the employee services and other party services as a result of the share-based payments in the current period
.



 
The Ministry of Finance
2006-02-15

 






ACCOUNTING STANDARDS FOR ENTERPRISES NO. 26 – REINSURANCE CONTRACTS

the Ministry of Finance

Accounting Standards for Enterprises No. 26 – Reinsurance Contracts

No. 3 [2006] of the Ministry of Finance

February 15, 2006

Chapter I General Principles

Article 1

With a view to regulating the recognition and measurement of reinsurance contracts, and the presentation of relevant information,
the present Standards is formulated according to the Accounting Standards for Enterprises – Basic Standards .

Article 2

The term “reinsurance contract” refers to an insurance contract under which the insurer (reinsurance cedant) cedes a certain portion
of a premium to another insurer (reinsurance acceptor) and the reinsurance acceptor makes compensation to the cedant for the compensation
cost and other relevant expenses arising from the original insurance contract.

Article 3

The present Standards shall apply to the reinsurance contracts issued and held by insurers.

A sub-reinsurance contract under which an insurer cedes a reinsurance business which is ceded to it to another insurer shall be subject
to the present Standards .

Article 4

The original insurance contracts issued by insurers shall be subject to the Accounting Standards for Enterprises No. 25 – Original
Insurance Contracts.

Chapter II Accounting Treatment of Ceded-out Business

Article 5

No cedant may countervail the liabilities formed by relevant original insurance contracts with the assets formed by reinsurance contracts
against.

No cedant may countervail the expenses or incomes formed by the relevant original insurance contracts with the incomes or expenses
formed by the reinsurance contracts.

Article 6

A cedant shall, in the current period of recognition of the premium income of an original insurance contract, calculate and determine
the ceded premium in light of the reinsurance contract and record it into the profits and losses of the current period. Meanwhile,
if the original insurance contract is a non-life original insurance contract, the cedant shall, according to relevant provisions
of the reinsurance contract, calculate and recognize the receivable reinsurance unearned premium reserve as an asset and countervail
with it the undue premium reserve.

When the cedant adjusts the balance of the unearned premium reserve of the original insurance contract on the balance sheet date,
it shall adjust the amount of the receivable reinsurance unearned premium reserve accordingly.

Article 7

A cedant shall, in the current period of recognition of the premium income of the original insurance contract, calculate and determine
the reinsurance expenses which shall be recovered from the reinsurance acceptor and record them into the profits and losses of the
current period.

Article 8

A cedant shall, in the current period of drawing the reserve for unearned premium, reserve for life insurance liabilities or reserve
for long-term health insurance liabilities of an original insurance contract, calculate and determine the corresponding reserves
that shall be recovered from the reinsurance acceptor according to the provisions of the relevant reinsurance contract, and shall
recognize the corresponding reinsurance reserve receivable as an asset.

Article 9

A cedant shall, in the current period of determining and offsetting the amount of an indemnity payment or the expenses actually incurred
for the settlement of a claim against the balance of the corresponding reserve on the original insurance contract, offset it against
the balance of the corresponding receivable reinsurance reserve. Meanwhile, it shall, according to the provisions of the re-insurance
contracts, calculate and determine the compensation cost that shall be recovered from the reinsurance acceptor, and record it into
the profits and losses of the current period.

Article 10

A cedant shall, in the current period of the canceling of an original insurance contract ahead of schedule, calculate and determine
the amount of adjustment to the ceded premium or the recovered reinsurance expenses according to the provisions of the relevant reinsurance
contract, and record it into the profits and losses of the current period. Meanwhile, it shall write off the amount of the relevant
reinsurance reserves receivable.

Article 11

A cedant shall, in the current period of making an adjustment to the compensation cost of an original insurance contract because of
the obtainment or disposal of any post-loss goods, or recognition and receipt of any subrogation recourse fee, calculate and determine
the amount of adjustment to the to-be-recovered compensation cost according to the provisions of the relevant reinsurance contract,
and record it into the profits and losses of the current period.

Article 12

When a cedant issues a reinsurance bill, it shall recognize the reinsurance guarantee deposited in the current period as described
in the bill as the deposited-in reinsurance guarantee. Meanwhile, it shall write off the relevant deposited-in reinsurance guarantee
in light of the refund of the deposited-in reinsurance guarantee of the previous period as described in the bill.

The cedant shall, according to the relevant reinsurance contract, calculate the interest on the deposited-in reinsurance guarantee
of each period and record it into the profits and losses of the current period.

Article 13

A cedant shall, when being able to calculate and determine the net profit commissions which it shall charge from the reinsurance acceptor,
treat the profit commission as a recovered reinsurance expense according to the provisions of the relevant reinsurance contracts,
and record it into the profits and losses of the current period.

Article 14

As for a excess of loss reinsurance or any other non-proportional reinsurance contract, the cedant shall, according to the provisions
of the reinsurance contract, calculate and determine the premium to be ceded out, and record it into the profits and losses of the
current period.

A cedant shall, when making an adjustment to the premium, record the amount of adjustment into the profits and losses of the current
period.

A cedant shall, when being able to calculate and determine the compensation cost that shall be recovered from the reinsurance acceptor,
record the to-be-recovered compensation cost into the profits and losses of the current period.

Chapter III Accounting Treatment of Ceded-in Business

Article 15

No reinsurance premium income may be recognized unless it can simultaneously satisfy the following conditions:

(1)

The reinsurance contract is established and assumes relevant insurance liabilities;

(2)

The economic benefits related to the reinsurance contract are likely to flow in;

(3)

The economic benefits related to the reinsurance contract can be measured reliably.

The reinsurance acceptor shall, according to the provisions of the relevant reinsurance contracts, calculate and determine the amount
of reinsurance premium income.

Article 16

The reinsurance acceptor shall, in the current period of recognizing a reinsurance premium income, calculate and determine the reinsurance
expenses according to the provisions of the relevant reinsurance contracts, and record them into the profits and losses of the current
period.

Article 17

The reinsurance acceptor shall, when being able to calculate and determine the net profit commissions that it shall pay to the cedant,
treat the profit commissions as a reinsurance expense according to the provisions of the relevant reinsurance contracts, and record
it into the profits and losses of the current period.

Article 18

The reinsurance acceptor shall, when receiving a reinsurance bill, make an adjustment to the relevant premium income and premium expenses
in light of the amount as specified in the bill, and record the amount of adjustment into the profits and losses of the current period.

Article 19

The reinsurance acceptor shall accord with the relevant provisions of the Accounting Standards for Enterprises No. 25 – Original Insurance
Contracts when it draws reserves for unearned reinsurance premiums, outstanding reinsurance claims, reinsurance life insurance liabilities
and the reinsurance of long-term health care insurance liabilities, and tests the adequacy of the relevant reserves.

Article 20

The reinsurance acceptor shall, in the current period of receipt of a reinsurance bill, treat the amount of the reinsurance indemnity
payment as described in the said bill as the reinsurance compensation cost and record it into the profits and losses of the current
period.

Meanwhile, it shall offset it against the balance of the reinsurance reserve.

Article 21

The reinsurance acceptor shall, when receiving a reinsurance bill, shall recognize the reinsurance guarantee to be deposited in the
current period as stated in the bill as the deposited-out reinsurance guarantee. Meanwhile, it shall write off the relevant deposited
reinsurance guarantee in light of the refund of the deposit-out reinsurance guarantee of the previous period as stated in the bill.

The reinsurance acceptor shall, according to the provisions of the reinsurance contract, calculate the interest on the deposit-out
reinsurance guarantee of each period and record it into the profits and losses of the current period.

Chapter IV Presentation

Article 22

An insurer shall, in its balance sheets, separately present the following items related to the reinsurance contract:

(1)

the receivable reinsurance;

(2)

the receivable unearned reinsurance premium reserve;

(3)

the receivable reserve for outstanding reinsurance claims;

(4)

the receivable reserve for reinsurance life insurance liabilities;

(5)

the receivable reserve for the reinsurance of long-term health insurance liabilities; and

(6)

the payable reinsurance.

Article 23

An insurer shall, in its profit statements, separately present the following items related to the reinsurance contract:

(1)

the reinsurance premium income;

(2)

the ceded-out premium;

(3)

the recovered reinsurance expense;

(4)

the reinsurance expense;

(5)

the recovered compensation cost;

(6)

the reinsurance compensation cost;

(7)

the recovered reinsurance compensation cost;

(8)

the recovered reserve for life insurance liabilities; and

(9)

the recovered reserve for long-term health insurance liabilities.

Article 24

An insurer shall, in its notes, discover the following information related to the reinsurance contract:

(1)

the information on the increase and decrease of reinsurance reserves for the ceded-in business.

(2)

the main actuarial assumptions and methods for making reinsurance reserves and testing the adequacy of the reinsurance reserves for
the ceded-in business.



 
the Ministry of Finance
2006-02-15

 






1...686970...83Page 69 of 83

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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