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sunyuting1

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ADMINISTRATIVE RECONSIDERATION LAW OF THE PEOPLE'S REPUBLIC OF CHINA

(Adopted at the Ninth Meeting of the Standing Committee of the Ninth National People's Congress on April 29, 1999, promulgated by Order No.16 of the President of the People's Republic of China on April 29, 1999, and effective as of October 1, 1999.)

Contents

Chapter 1 General Provisions

Chapter 2 Scope of Administrative Reconsideration

Chapter 3 Application for Administrative Reconsideration

Chapter 4 Acceptance of Administrative Reconsideration

Chapter 5 Decision of Administrative Reconsideration

Chapter 6 Legal Responsibility

Chapter 7 Supplementary Provisions

Chapter 1 General Provisions
Article 1 This Law is enacted pursuant to the Constitution for the purpose of preventing and correcting any illegal or improper specific administrative acts, protecting the lawful rights and interests of citizens, legal persons and other organizations, safeguarding and supervising the exercise of functions and powers by administrative organs in accordance with law.

Article 2 This Law is applicable to a citizen, legal person or any other organization who considers that his or its lawful rights and interests have been infringed upon by a specific administrative act, and applies for administrative reconsideration to an administrative organ which accepts the application for administrative reconsideration, and makes a decision of administrative reconsideration.

Article 3 Administrative organs performing their duties of administrative reconsideration in accordance with this Law are administrative reconsideration organs. The offices responsible for legal affairs within administrative reconsideration organs shall handle concrete matters related to administrative reconsideration and perform the following duties:

(1) accepting applications for administrative reconsideration;

(2) taking of evidence from organizations and persons concerned, and consulting files and materials;

(3) reviewing the legality and appropriateness of any specific administrative acts being applied for administrative reconsideration, and drawing up decisions of administrative reconsideration;

(4) handling or forwarding applications for reviewing items listed in Article 7 of this Law;

(5) putting forward proposals, in accordance with statutory authorities and procedures, on disposing acts violating the provisions of this Law committed by administrative organs;

(6) handling affairs responding to action, if deciding to bring a suit in circumstances of refusing to accept the reconsideration decision;

(7) other duties prescribed by laws and regulations.

Article 4 Administrative reconsideration organs shall, when performing duties of administrative reconsideration, follow the principles of being lawful, fairness, openness, timely, and convenient to peoples, insist on correcting every wrong, and ensuring to implement laws and regulations correctly.

Article 5 If any citizen, legal person or any other organization refuses to accept an administrative reconsideration decision, he or it may, in accordance with the provisions of Administrative Procedure Law of the People's Republic of China, bring an administrative lawsuit before a people's court, except that the administrative decision is, as provided for by law, a final decision.

Chapter 2 Scope of Administrative Reconsideration
Article 6 A citizen, legal person, or any other organization may, in accordance with this Law, file an application for administrative reconsideration under any one of the following circumstances:

(1) an administrative sanction, such as warning, fine, confiscation of illegal gains or property, order to suspend production or business, suspension or rescission of license or permit, administrative attachment, which one refuses to accept;

(2) a compulsory administrative measure, such as restriction of personal freedom or the sealing up, seizing or freezing of property, which one refuses to accept;

(3) an administrative decision of altering, suspending or discharging certificates, such as a license, permit, credit certificate, credential, which one refuses to accept;

(4) an administrative decision of confirming ownership or right to use of natural resources, such as land, mineral resources, rivers, forests, mountains, grasslands, unreclaimed land, beaches, maritime waters, which one refuses to accept;

(5) infringement upon one's managerial decision-making power, which, one holds,has been perpetrated by an administrative organ;

(6) cases where an administrative organ, which has altered and nullified one's agricultural contract, is considered to have infringed upon one's rights and interests;

(7) cases where an administrative organ is considered to have illegally raised funds, levied property, apportioned charge, or demanded the performance of duties;

(8) cases where an administrative organ is considered to have illegally handled issuing a certificate, such as a permit, license, credit certificate, or credential, or examining and approving or registering relative items, which one considers oneself legally qualified to apply for;

(9) cases where an administrative organ is considered to have failed to perform its statutory duty, according to law, of protecting one's rights of the person and of property, and one's rights to receive education, as one has applied for;

(10) cases where an administrative organ is considered to have failed to issue a pension, social insurance money or minimum maintenance fee for living according to law; and

(11) cases in which other specific administrative acts of an administrative organ are considered to have infringed upon other lawful rights and interests.

Article 7 If a citizen, legal person or any other organization considers any of the following provisions, which is the basis of a specific administrative act of an administrative organ, to be illegal, he or it may, when filing an application for administrative reconsideration on a specific administrative act, file an application to the administrative reconsideration organ for reviewing the said provisions:

(1) provisions of departments under the State Council;

(2) provisions of local people's governments at or above the county level and their departments;

(3) provisions of people's governments of towns or townships.

The provisions set forth in the preceding paragraph do not include rules of departments and commissions under the State Council, and local people's governments. Review on rules shall be handled according to relevant laws and administrative regulations.

Article 8 If an administrative sanction or any other personnel disposition by an administrative organ is refused to accept, appeal may be made according to the relevant provisions of laws and administrative regulations.

If mediation or any other disposition on a civil dispute undertaken by an administrative organ is refused to accept, an application for arbitration may be made or a lawsuit may be brought before a people's court.

Chapter 3 Application of Administrative Reconsideration

Article 9 Any citizen, legal person or any other organization, who considers that a specific administrative act has infringed upon his or its lawful rights and interests, may file an application for administrative reconsideration within 60 days from the day when he or it knows the specific administrative act, except that the time limit prescribed in laws exceeds 60 days.

If the time limit prescribed by law is delayed due to force majeure or other special reasons, the time limit shall be accounted continuously from the day when the obstacle is removed.

Article 10 Any citizen, legal person or any other organization that files an application for administrative reconsideration in accordance with this Law is an applicant.

If a citizen who has the right to apply for administrative reconsideration is deceased, his near relatives may apply for administrative reconsideration. If a citizen who has the right to apply for administrative reconsideration is incompetent or with limited capacity for civil conduct, his statutory agent may apply for administrative reconsideration on behalf him. If legal person, or any other organization, that has the right to apply for administrative reconsideration terminates, the legal person or any other organization that succeeds to its rights may apply for administrative reconsideration.

Any other citizen, legal person or any other organization that has an interest in a specific administrative act, for the administrative reconsideration of which an application has already been filed may, file a request for participation in the administrative reconsideration as a third party.

If a citizen, legal person or any other organization refuses to accept a specific administrative act undertaken by an administrative organ and applies for administrative reconsideration, the said administrative organ that undertook the specific administrative act is the respondent of the application.

The applicant and the third party may delegate agent(s) to participate in the administrative reconsideration.

Article 11 An applicant may apply for administrative reconsideration in written or in oral. If an applicant apply for administrative reconsideration in oral, the administrative reconsideration organ shall transcribe fundamental facts of the applicant, claims of the administrative reconsideration, and main facts, grounds and time on which the application for administrative reconsideration is based.

Article 12 An applicant, who refuses to accept a specific administrative act of the departments under local people's governments at or above the county level may apply for administrative reconsideration to the people's government at the same level; an applicant may also apply for administrative reconsideration to the competent authority at the next higher level.

An applicant, who refuses to accept a specific administrative act of an administrative organ, who carries out vertical management system, such as Customs, banking, tax collection, foreign exchange control, or by a State security organ, shall apply for administrative reconsideration to the competent authority at the next higher level.

Article 13 A citizen, legal person, or any other organization that refuses to accept a specific administrative act of local people's governments at various levels shall apply for administrative reconsideration to the local people's government at the next higher level.

An applicant who refuses to accept a specific administrative act of a local people's government at the county level, which belongs to a dispatched organ legally established by a people's government of a province or an autonomous region, shall apply for administrative reconsideration to the dispatched organ.

Article 14 A citizen, legal person, or any other organization that refuses to accept a specific administrative act of a department under the State Council, or the people's government of a province, an autonomous region, or a municipality directly under the Central Government, shall apply for administrative reconsideration to the department under the State Council, or the people's government of the province, the autonomous region, or the municipality directly under the Central Government that undertook the specific administrative act. The applicant who refuses to accept the administrative reconsideration decision may bring a suit before a people's court; or apply to the State Council for a ruling, and the State Council shall make a final ruling according to the provisions of this Law.

Article 15 A citizen, legal person, or any other organization, who refuses to accept a specific administrative act of an administrative organ or an organization, except for the administrative organs prescribed in Articles 12, 13, and 14 of this Law, shall apply for administrative reconsideration in accordance with the following provisions:

(1) an applicant, who refuses to accept a specific administrative act of a dispatched organ established by a local people's government at or above the county level, may apply for administrative reconsideration to the people's government that established the dispatched organ;

(2) an applicant, who refuses to accept a specific administrative act of a dispatched organ, established by departments under governments in accordance with the provisions in laws, regulations or rules, in its own name, shall apply for administrative reconsideration to the department who established the dispatched organ, or the local people's government at the same level with the department;

(3) an applicant who refuses to accept a specific act of an organization authorized by laws or regulations shall respectively apply for administrative reconsideration to the local people's government, the department under a local people's government, or the department under the State Council, who is directly in charge of the organization;

(4) an applicant who refuses to accept a specific act of two or more than two administrative organs in their common name shall apply for administrative reconsideration to their common administrative organ at a higher level;

(5) an applicant who refuses to accept a specific act of an abolished administrative organ shall apply for administrative reconsideration to the administrative organ at the next higher level than the administrative organ that carries on the exercise of functions and powers of the abolished organ.

Under one of the circumstances listed in the preceding paragraphs, the applicant may also apply for administrative reconsideration to the local people's government, in the locality of the specific administration act, at county level, and the local people's government at county level accepting the application shall handle the administrative reconsideration in accordance with the provisions of Article 18 of this Law.

Article 16 If a citizen, legal person or any other organization applies for administrative reconsideration, and an administrative reconsideration organ accepts the application in accordance with laws, or if, in accordance with relevant provisions of laws or regulations, he or it shall first apply to an administrative reconsideration organ for administrative reconsideration and then bring an administrative suit before a people's court, if he or it refuses to accept the reconsideration decision, he or it shall not bring an administrative suit before a people's court within the statutory time limit for administrative reconsideration.

If a citizen, legal person, or any other organization brings a suit before a people's court, and the people's court, in accordance with law, accepts the suit, he or it shall not apply for administrative reconsideration.

Chapter 4 Acceptance of Administrative Reconsideration

Article 17 An administrative reconsideration organ shall, after receiving an application for administrative reconsideration, examine the application within five days, and it shall inform the applicant in written if it refuses to accept the application in circumstances where the application for administrative reconsideration does not comply with the provisions in this Law; it shall inform the applicant to apply to the relative administrative reconsideration organ if the application, not within the scope of administrative reconsideration applications acceptable to this organ, comply with the provisions in this Law.

Except for the provisions in the preceding paragraph, an administrative reconsideration organ shall be considered to accept the administrative reconsideration application from the day when the office responsible for legal affairs receives the application.

Article 18 The people's government that, according to the provisions prescribed in the second paragraph of Article 15 of this Law, receives an administrative reconsideration application shall transfer an administrative reconsideration application that, according to the first paragraph of Article 15 of this Law, shall be accepted by another administrative reconsideration organ to the relative administrative reconsideration organ and inform the applicant within seven days from the day when it receives the administrative application. The administrative reconsideration organ that receives the transferred application shall handle it in accordance with the provisions of Article 17 of this Law.

Article 19 If, in accordance with relevant laws or regulations, a citizen, legal person or any other organization shall first apply to an administrative reconsideration organ for administrative reconsideration and then bring a suit before a people's court, the administrative reconsideration organ refuses to accept the application or fails to make a decision on the expiration of the time limit, the applicant may, in accordance with law, bring a suit before a people's court from the day when he or it receives a written refusal-of-acceptance decision or within 15 days after the time limit for administrative reconsideration expires.

Article 20 If a citizen, legal person, or any other organization applies to an administrative reconsideration organ for administrative reconsideration according to law, and the administrative reconsideration organ refuses to accept the application without due reasons, administrative organs at the higher level shall order it to accept the application and may also, if necessary, accept the application directly.

Article 21 During the time of administrative reconsideration, execution of the specific administrative act shall not be suspended. Execution of the specific administrative act may be suspended under one of the following circumstances:

(1) where suspension of execution is deemed necessary by the applied;

(2) where suspension of execution is deemed necessary by the administrative reconsideration organ;

(3) where suspension of execution is decided by the administrative reconsideration organ at the request of the applicant because the administrative reconsideration organ considers the request to be reasonable;

(4) where suspensions of execution is required by the provisions of laws.

Chapter 5 Decision of Administrative Reconsideration

Article 22 Administrative reconsideration shall, in principle, examine the application in written. Except for the circumstances where the applicant makes a require or the office responsible for legal affairs of the administrative reconsideration organ deems it necessary, the administrative reconsideration organ may investigate facts among the organizations and citizens concerned and listen to the views of the applicant, the respondent of the application, and the third party.

Article 23 The office responsible for legal affairs of the administrative reconsideration organ shall send a duplicate of the application form for administrative reconsideration or a copy of the transcript of the administrative reconsideration application to the respondent of the application within 7 days from the day of acceptance of the application for administrative reconsideration. The respondent of the application shall reply in written within 10 days from the day of the receipt of the duplicate of the application form or the copy of the transcript of acceptance, and provides the evidence, grounds, and other relevant documents, on the basis of which the specific administrative act has been undertaken.

The applicant and the third party may consult the reply in written and the evidence, grounds, and other relevant materials, on the basis of which the specific administrative act has been undertaken, and the administrative reconsideration organ shall not refuse the requirement except that those involve State secrets, business secrets, or the private affairs of individuals.

Article 24 In the proceeding of administrative reconsideration, the respondent of the application shall not collect evidence from the applicant and other organizations or individuals concerned by himself.

Article 25 Before a decision of administrative reconsideration is made, the applicant who applies for the withdrawal of the application for administrative reconsideration may withdraw his application after stating grounds, and the administrative reconsideration ceased in case of the withdrawal of the administrative reconsideration application.

Article 26 If the applicant applies for reviewing the relevant provisions listed in Article 7 of this Law, along with the application for administrative reconsideration, and the administrative reconsideration organ has the authority to handle the provisions, the administrative reconsideration organ shall make a decision in accordance with law within 30 days; if the administrative reconsideration organ has no authority to handle the provisions, it shall transfer, in accordance with the legal procedures, to the administrative organ who has the authority to handle them within 7 days. During the period of handling, the specific administrative act shall be suspended to execute.

Article 27 In examining a specific administrative act undertaken by the respondent of the application, the administrative reconsideration organ considers the grounds, on the basis of which the specific administrative act has been undertaken, are illegal, if the administrative reconsideration organ has the authority to handle them, the organ shall, in accordance with law, handle them within 30 days; if the administrative reconsideration organ has not authority to handle them, the organ shall transfer the application to the State organ who has authority to handle them within 7 days according to the legal procedure. During the period of handling, the specific administrative act shall be suspended to execute.

Article 28 The office responsible for legal affairs of an administrative reconsideration organ shall examine the specific administrative act undertaken by the respondent of the application, put forward its opinions and make the decision of administrative reconsideration after the approval of the responsible persons of the administrative reconsideration organ or the assent after the group discussion, in accordance with the following provisions:

(1) if the facts are clearly ascertained by a specific administrative act, the evidence for the act is conclusive, the application of grounds is correct, the procedure is legal, and the content of the act is proper, the specific administrative reconsideration act shall be sustained by decision;

(2) the applied who fails to perform the statutory duties shall be required to perform the duties within a fixed time by decision;

(3) if a specific administrative act has been undertaken in one of the following circumstances, the act shall be annulled, altered, or confirmed as illegal by decision; if the specific administrative act is altered, or confirmed as illegal by decision, the applied may be ordered to undertake a specific administrative act anew within a fixed time:

a. ambiguity of essential facts, and inadequacy of evidence;

b. erroneous application of grounds;

c. violation of legal procedures;

d. excess of authority or abuse of powers;

e. obvious inappropriateness of the specific administrative act.

(4) if the respondent of the application fails to reply in written, or provide the evidence, grounds, and other relevant materials for a specific administrative act that has been undertaken, the specific administrative act shall be considered to have no evidence and grounds and be annulled by decision.

If an administrative reconsideration organ orders the respondent of the application to undertake a specific administrative act anew, the respondent of the application must not, based on the same fact and reason, undertake a specific administrative act identical or essentially identical with the original specific administrative act.

Article 29 An applicant may put forward the request for administrative compensation along with applying for administrative reconsideration, and in cases where damages shall be paid in accordance with the relevant provisions of the State Compensation Law, the administrative reconsideration organ shall make a decision to order the respondent of the application to pay the damages according to law, simultaneous with a decision to annul or alter the specific administrative act or to confirm the specific administrative act as illegal.

If in applying for administrative reconsideration, an applicant does not apply for administrative compensation, an administrative reconsideration organ shall order the respondent of the application to return the property, abolish the measures of sealing up, seizing, or freezing the property, or compensate the corresponding amount, simultaneous with making a decision to annul or alter a fine, or to annul a specific administrative act, such as illegally raising funds, confiscating property, levying property, apportioning charge, and sealing up, seizing, or freezing property.

Article 30 If a citizen, legal person, or any other organization considers that a specific administrative act of an administrative organ has infringed upon his or its ownership and right to use, which are acquired according to law, of natural resources, such as land, mineral resources, rivers, forests, mountains, grasslands, unreclaimed land, beaches, maritime waters, he or it shall first apply for administrative reconsideration and then bring a suit before a people's court according to laws if he or it refuses to accept the administrative reconsideration decision.

According to the decisions of the State Council or the people's governments of provinces, autonomous regions and municipalities directly under the Central Government to prospect and confirm or adjust administrative divisions into districts, or to requisition lands, an administrative reconsideration decision, which is made by the people's governments of provinces, autonomous regions and municipalities directly under the Central Government, to confirm ownership and right to use of natural resources, such as land, mineral resources, rivers, forests, mountains, grasslands, unreclaimed land, beaches, maritime waters, is a final riling.

Article 31 An administrative reconsideration organ shall make an administrative reconsideration decision within 60 days from the day of acceptance of application, except for the circumstances where the time of administrative reconsideration set in laws is shorter than 60 days. If circumstances are complex, and an administrative reconsideration organ fails to make a decision within the prescribed time limit, the responsible persons of the administrative reconsideration organ may approve an proper extension of the time limit within 30 days, and the extension of the time limit shall be informed to the applicant and the respondent of the application.

An administrative reconsideration organ that makes an administrative reconsideration decision shall draw up a written administrative reconsideration decision on which the organ shall stamp a seal.

Once thew written administrative reconsideration decision is served, the decision is instantly legally effective.

Article 32 The respondent of the application shall perform the administrative reconsideration decision. If the respondent of the application does not perform or delays performing the administrative reconsideration decision without due reasons, the administrative reconsideration organ or an relevant administrative organ at higher level shall order the respondent of the application to perform the decision within a fixed time.

Article 33 An applicant, who fails to bring a suit by the expiration of the time limit and does not perform an administrative reconsideration decision or an administrative reconsideration decision as final ruling, shall be disposed respectively according to the following provisions:

(1) an administrative reconsideration decision to sustain a specific administrative act shall be executed compulsorily, in accordance with law, by an administrative organ that has undertaken the specific administrative act, or be applied to a people's court for compulsory execution;

(2) an administrative reconsideration decision to alter a specific administrative act shall be executed compulsorily, in accordance with law, by the administrative reconsideration organ, or be applied to a people's court for compulsory execution.

Chapter 6 Legal Responsibility

Article 34 If an administrative reconsideration organ, in violation of the provisions of this Law, refuses to accept, without due reasons, an application for administrative reconsideration applied in accordance with law, or fails to transfer an application for administrative reconsideration according to the relevant provisions, or fails to make an administrative reconsideration decision within statutory time limit, the persons in charge directly responsible and the other directly responsible persons shall, according to law, be given administrative sanctions such as warning, demerit record, or heavy demerit record; if an administrative reconsideration organ still refuses to accept the administrative reconsideration application after being ordered to accept the application or transferring the application out in accordance with the relevant provisions causes serious consequences, they shall, according to law, be given administrative sanctions such as being demoted, being dismissed from post,or being discharged.

Article 35 If any staff member of an administrative reconsideration organ in administrative reconsideration activities, practices favoritism for personal interests or commits any other acts of jobbery and misfeasance, he shall, according to law, be given an administrative sanction such as warning, demerit record or heavy demerit record; if the circumstance is serious, he shall, according to law, be given an administrative sanction such as being demoted, being dismissed from post, or being discharged; if a crime is constituted, he shall be investigated for criminal responsibility according to law.

Article 36 If the respondent of the application, in violation the provisions of this Law, fails to reply in written or fails to provide evidence, grounds, and other relevant materials for a specific administrative act, or obstructs or disguised obstructs a citizen, legal person or any other organization to apply for administrative reconsideration, the persons in charge directly responsible and the other directly responsible persons shall, according to law, be given administrative sanctions such as warning, demerit record, heavy demerit record; anyone who conduct retaliation shall, according to law, be given an administrative sanction such as being demoted, or being dismissed from post, being discharged; anyone who commits a crime shall be investigated for criminal responsibility according to law.

Article 37 If the respondent of the application fails to perform or delays, without due reasons, performing an administrative reconsideration decision, the persons in charge directly responsible and the other directly responsible persons shall, according to law, be given administrative sanctions such as warning, demerit record, or heavy demerit record; if the respondent of the application still refuses to perform after being ordered to perform, they shall, according to law, be given administrative sanction such as being demoted, being dismissed from post, or being discharged.

Article 38 If an office responsible for legal affairs of an administrative reconsideration organ finds the circumstances, such as refusing to accept an application for administrative reconsideration without due reasons, failing to make an administrative reconsideration decision within a prescribe time limit, practicing favoritism for personal interests attacking an applicant in retaliation, or failing to perform an administrative reconsideration decision, the Institute shall put forward a proposal to a relevant administrative organ, and the relevant administrative organ shall deal with the circumstances in accordance with the provisions of this Law, the relevant laws and administrative regulations.

Chapter 8 Supplementary Provisions

Article 39 An administrative reconsideration organ shall not charge any fees for accepting an application for administrative reconsideration to an applicant. Fees for administrative reconsideration shall be absorbed into administrative fees of the administrative reconsideration organ and be guaranteed by the government budget at the same level.

Article 40 The count of administrative reconsideration period and the serving of administrative reconsideration documents shall be executed according to the provisions of the Civil Procedure Law concerning the time and the serving.

"5 days" and "7 days" in the provisions related to administrative reconsideration period prescribed in this Law refers to workdays, not including holidays.

Article 41 If foreigners, stateless persons, or foreign organizations are engaged in administrative reconsideration in the People's Republic of China, this Law shall be applied.

Article 42 If the provisions on administrative reconsideration in other laws promulgated before this Law comes into force do not conform with the provisions in this Law, the provisions in this Law shall prevail.

Article 43 This Law shall come into force on October 1, 1999.Regulations on Administrative Reconsideration promulgated by the State Council on December 24, 1990 and revised and re-promulgated by the State Council on October 9, 1994 shall simultaneously be annulled.

The China Securities Regulatory Commission

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Accounting Law of the People's Republic of China

(Adopted at the 9th Meeting of the Standing Committee of the sixth National People's Congress on January 21,1985, revised on "The Decision on Amending Accounting Law of the People's Republic of China" at the 5th Meeting of the Standing Committee of the eighth National People's Congress on December 29,1993, revised at the 12th Meeting of the Standing Committee of the Ninth National People's Congress on October 31,1999)

Promulgated by Decree No.24 of the President of the People's Republic of China on October 31, 1999

Accounting Law of the People's Republic of China

Table of Contents

Chapter I General Provisions

Chapter II Accounting Practice

Chapter III Special Provisions on the Accounting Practice of Companies and Enterprises

Chapter IV Accounting Supervision

Chapter V Accounting Bodies And Accounting Personnel

Chapter VI Legal Responsibility

Chapter VII Supplementary Provisions

Chapter I General Provisions
Article 1 This Law is enacted for the purposes of standardizing accounting practice, ensuring the authenticity and completeness of accounting data, strengthening economic and financial regulation, improving economic efficiency and maintaining the order of socialist market economy.

Article 2 State organs, associations, companies, enterprises, institutions and other organizations (hereinafter uniformly referred to as Units) must, in handling accounting affairs, abide by this Law.

Article 3 Every unit must set up account books in accordance with law and ensure that they are authentic and complete.

Article 4 The person in charge of a unit shall be responsible for the authenticity and completeness of the accounting work and accounting documents of his own unit

Article 5 Accounting offices and accounting personnel shall conduct accounting practice and exercise accounting supervision in accordance with this Law.

No unit or individual may, by any means, incite, instigate or forcibly order accounting offices or accounting personnel to forge or alter accounting vouchers, account books and other accounting documents or submit false financial and accounting reports.

No unit or individual may be allowed to persecute or retaliate against the accounting personnel who perform their functions and duties in accordance with law and oppose the acts in violation of this Law.

Article 6 The accounting personnel who make notable achievements in earnestly implementing this Law, devoting themselves to their duties and adhering to principles are to be given spiritual or material awards.

Article 7 The financial department of the State Council takes charge of the accounting work throughout the country.

The financial departments of the local people's governments at or above the county level administer the accounting work of their respective administrative areas.

Article 8 The State shall exercise a uniform accounting system. The uniform accounting system of the State shall be formulated and promulgated by the financial department of the State Council in accordance with this Law.

Relevant departments of the State Council may, in accordance with this law and the uniform accounting system of the State, formulate specific measures or supplementary provisions for the implementation of the uniform accounting system of the State applied in the sectors which have specific requirements for accounting practice and accounting supervision, and submit them to the financial department of the State Council for examination and approval.

The General Logistics Department of the Chinese People's liberation Army may, in accordance with this Law and the uniform accounting system of the State, formulate specific measures for the implementation in the Army of the uniform accounting system of the State, and submit them to the financial department of the State Council for the record.

Chapter II Accounting Practice

Article 9 Every unit must, according to the economic transaction and operational matters which actually occur, conduct accounting, draw up accounting documents, enter account books and prepare financial and accounting reports.

No unit may conduct accounting with false economic transaction and operational matters or data.

Article 10 Accounting procedures shall be undertaken and accounting practice conducted with respect to the following economic transaction and operational matters:

(1) receipts and disbursement of cash holdings and valuable securities;

(2) receipts, issuance, additions, reductions and use of money and articles of properties;

(3) creation and settlement of debts and claims;

(4) increases and decreases of capital and funds;

(5) computation of revenue, expenditures, expenses and costs;

(6) computation and arrangement of financial results;

(7) other matters that are subject to accounting procedures and accounting practice.

Article 11 A fiscal year starts on January 1 and ends on December 31 of the Gregorian calendar.

Article 12 Renminbi is used as the base currency for bookkeeping in accounting practice.

The units whose receipts and expenditures are conducted chiefly in currencies other than Renminbi may select one of them as the base currency for bookkeeping, but the financial and accounting reports prepared shall be reflected in Renminbi converted from the foreign currency.

Article 13 Accounting vouchers, account books, financial and accounting reports and other accounting documents must conform to the provisions of the uniform accounting system of the state.

Where the accounting practice is conducted with computers, the software thereof and the accounting vouchers, account books, financial and accounting reports and other accounting documents produced therefrom, must also conform to the provisions of the uniform accounting system of the State.

No unit or individual may forge or alter accounting vouchers, account books and other accounting documents, nor submit false financial and accounting reports.

Article 14 Accounting vouchers shall include original vouchers and recording vouchers.

In handling the economic transaction and operational matters stipulated in Article 10 of this Law, original vouchers must be drawn up or obtained, and then promptly filed with the accounting offices.

Accounting offices and accounting personnel must examine the original vouchers in accordance with the uniform accounting system of the State, have power to refuse inauthentic or illegal original vouchers and make reports to the person in charge of the units; return the inaccurate or incomplete original vouchers and require to make corrections or supplements in accordance with the provisions of the uniform accounting system of the State.

The items entered into original vouchers may not be altered; where there are errors in the original vouchers, the drawing units shall draw up new vouchers or make corrections, the seals of drawing units shall be stamped in the place of corrections. Where there are errors with respect to amount, the drawing units shall draw up new vouchers, and may not make any corrections on the original vouchers.

Recording vouchers shall be prepared on the basis of the examined original vouchers and other related materials.

Article 15 Account book entries must be conducted on the basis of the examined accounting vouchers and conform to the provisions of relevant laws, administrative regulations and the uniform accounting system of the State. Account books include general ledgers, detail ledgers, daily books and other auxiliary account books.

Account books shall be entered in accordance with the order of pages consecutively numbered.

Where there are errors or page partition, number shortage or line skip, corrections shall be made in

accordance with the methods stipulated in the uniform accounting system of the State, and sealed by the accounting personnel, the person in charge of the accounting office (the accountant in charge) in the place of corrections.

Where accounting practice is conducted with computers, entries and corrections of account books thereof shall be in conformity with the provisions of the uniform accounting system of the State.

Article 16 The economic transaction and operational matters conducted by every unit shall be entered and calculated uniformly in the account books set up according to law and may not be entered or calculated in the account books set up secretly in violation of the provisions of this Law and the uniform accounting system of the State.

Article 17 Every unit shall regularly check the accounting records with physical assets, cash holdings and relevant information and ensure that accounting records conform to the actual amount of the physical assets and cash holdings, accounting records conform to the relevant contents of the accounting vouchers, accounting records conform to one another and accounting records conform to the relevant contents of the accounting statements.

Article 18 Accounting arrangement methods adopted by every unit shall remain consistent from one

period to another and may not be arbitrarily changed. Where changes are absolutely necessary, the changes shall be made in accordance with the provisions of the uniform accounting system of the State, and the reasons circumstances and effects of the changes shall be explained in the financial and accounting reports.

Article 19 Probable matters such as guaranty provided by the units or pending lawsuit of the units, etc. shall be explained in the financial and accounting reports in accordance with the provisions of the uniform accounting system of the State.

Article 20 Financial and accounting reports shall be prepared on the basis of the examined accounting book records and relevant documents. They must be in conformity with the provisions of this Law and the uniform accounting system of the State on matters relating to the requirements for the preparation thereof, to whom they are required to be submitted, and the time limit within which they must be submitted to. Where other laws or administrative regulations stipulated otherwise, such provisions shall be applied.

Financial and accounting reports are composed of accounting statements, the affiliated notes to the accounting statements and the explanatory statements on financial conditions. The basis for the preparation of financial documents and accounting reports provided for different users of accounting shall be consistent. Where the relevant laws or administrative regulations stipulate that the accounting statements, the affiliated notes thereto and the explanatory statements on financial conditions are subject to audit by certified public accountants, the auditing reports issued by the certified public accountants and the accounting firms which the certified public accountants belong to shall be submitted together with the financial and accounting reports.

Article 21 Financial and accounting reports shall be signed and sealed by the person in charge of the unit, the person in charge of accounting work, and the person in charge of the accounting office (accountant in charge).For a unit having an accountant-general, the accountant-general shall also sign and seal the financial and accounting reports.

The person in charge of the unit shall ensure the authenticity and the completeness of the financial and accounting reports.

Article 22 The language used in accounting records shall be Chinese. In an autonomous area of minority nationalities, one minority language commonly used in the locality may be used concurrently with the Chinese language in the accounting records. The accounting records of foreign-invested enterprises, foreign enterprises and other foreign organizations within the territory of the People's Republic of China may also use one foreign language concurrently.

Article 23 Every unit shall establish archives for accounting vouchers, account books, financial and accounting reports and other accounting documents, and properly keep them. The time limit for keeping the accounting archives and the procedures for their destruction shall be formulated by the financial department of the State Council jointly with relevant departments.

Chapter III Special Provisions on the Accounting Practice of Companies and Enterprises

Article 24 The accounting practice of a company or an enterprise shall be in conformity with the provisions of this Chapter, in addition to the provisions of Chapter II of this Law.

Article 25 Companies and enterprises must confirm, calculate and record assets, debts, owners' equities, revenues, expenses, costs, and profits in accordance with the provisions of the uniform accounting system of the State on the basis of the economic transaction and operational matters which actually occur.

Article 26 In handling accounting practice, companies and enterprises may not conduct the following acts:

(1) arbitrarily changing the criteria for the confirmation of assets, debts and owners' equities or changing methods of their calculation, fraudulently listing the assets, debts or owners' equities, listing more or less than their actual amounts, or omitting such items;

(2) fraudulently listing or concealing revenues, delaying to confirm revenues or confirming revenues in advance;

(3) arbitrarily changing the criteria for the confirmation of expenses or costs, or changing the methods of their calculation, listing the expenses and costs fraudulently, listing more or less than the actual amounts of expenses or costs, or omitting such items;

(4) making arbitrary adjustment on the methods of calculation or distribution of profits, fabricating false profits or concealing profits;

(5) other acts violating the provisions of the uniform accounting system of the State. Chapter IV Accounting Supervision

Article 27 Every unit shall set up and improve its internal accounting supervision system. The internal accounting supervision of a unit shall meet the following requirements:

(1) The staff making accounting records, the persons responsible for approval of economic transaction and operational matters and that responsible for accounting matters, the staff handling accounting matters and the staff handling matters for the safe-keeping of properties shall all have clear, separate responsibilities, powers and functions, and they shall check mutually;

(2) The procedures for mutual supervision and mutual checks on the decision-making and its implementation on important economic transaction and operational matters, such as important external investment, the disposal of assets, the operation of funds etc., shall be explicit and clear;

(3) The scope, time limit and organizational procedures for checking of properties shall be explicit and clear;

(4) The measures and procedures for regular internal auditing of accounting documents shall be explicit and clear.

Article 28 The person in charge of a unit shall ensure that the accounting office and the accounting personnel perform their functions legally. He may not incite, instigate or forcibly order the accounting office or the accounting personnel of the unit to handle the accounting matters illegally.

The accounting offices and the accounting personnel have the right to refuse to handle it or to correct within their authorities the accounting matters in violation of the provisions of the uniform accounting system of the State.

Article 29 When accounting offices or accounting personnel find that the accounting book records are inconsistent with the physical assets, cash holdings or the relevant documents, and where they have the authorities to handle it on their own according to the provisions of the uniform accounting system of the State, they shall handle it timely. Where they do not have the authorities, they shall report immediately to the person in charge of the unit and request to make investigation on the causes and to handle it accordingly.

Article 30 Any unit or individual have the right to report on violations of the provisions of this Law or of the uniform accounting system of the State. Upon receiving such a report, the department having the power to deal with the violation shall, within their functions and duties, deal with it timely according to law. Where the department does not have such authority, it shall transfer the report to the competent departments to dispose. The department having received such report and the department responsible for dealing with it shall keep confidentiality for the reporting person and may not disclose the name of the reporting person, nor transfer the reporting material to the unit or the individual being reported.

Article 31 Where a unit is subject to audit by certified public accountant in accordance with the provisions of the relevant laws and administrative regulations, the unit shall provide truthfully accounting vouchers, account books, financial and accounting reports and other accounting documents as well as the relevant information to the delegated accounting firm.

Any unit or individual may not, by any means, ask or express implicitly their intention to the certified public accountant and the accounting firm to which the certified accountant belongs to issue false or inappropriate auditing report .

The financial departments shall have the authorities to supervise on the procedures of the preparation of and on the contents of the auditing report submitted by the accounting firm.

Article 32 The financial departments shall supervise on the following matters of every unit:

(1) Whether accounting books are set up according to law;

(2) Whether accounting vouchers, account books, financial and accounting reports and other accounting documents are authentic and complete;

(3) Whether its accounting practice is in conformity with the provisions of this Law and the uniform accounting system of the state;

(4) Whether the accounting personnel have acquired the qualification for accountant's practice.

Where serious suspicion of violation of law is found in the process of supervision on matters listed in item (2) of the preceding paragraph, the financial department of the State Council and its agencies may inquire into the relevant facts from units that have economic transaction with the supervised unit and from financial institutions with which the supervised unit maintains accounts. Such relevant units and financial institutions shall render their assistance.

Article 33 Financial department, auditing department, tax administration, people's bank, department for securities administration and department for insurance administration etc., shall conduct supervision and inspection on the accounting documents of the relevant units in accordance with the provisions of the relevant laws and administrative regulations on their functions and duties.

The supervision and inspection departments listed in the preceding paragraph shall provide conclusions after the supervision and inspection on the accounting documents of the relevant units have been conducted according to law. Where the conclusions made by the relevant supervision and inspection departments are sufficient to satisfy the needs of other supervision and inspection departments in performing their functions and duties, such other supervision and inspection departments shall make use of those conclusions so as to avoid repeated auditing.

Article 34 The departments and personnel thereof conducting supervision and inspection on the accounting documents of the relevant units according to law shall have the obligation of keeping confidentiality of the State secret and commercial secret obtained in the process of supervision and inspection.

Article 35 Every unit shall, in accordance with the provisions of the relevant laws and administrative regulations, accept supervision and inspection conducted according to law by the relevant supervision and inspection departments, provide truthfully accounting vouchers, account books, financial and accounting reports as well as other accounting documents and the relevant information.

It may not refuse to provide, conceal or fraudulently report those documents and the relevant information.

Chapter V Accounting Offices and Accounting Personnel

Article 36 Every unit shall, according to the needs of its accounting work, set up an accounting office, or staff a relevant office with accounting personnel and designate an accountant in charge.

Where conditions do not permit, the unit shall delegate its bookkeeping to an intermediary organization which is established upon approval to engage in agency operation of accounting bookkeeping.

A Large or medium-sized enterprise owned by the State or in which the State-owned assets occupy a holding or leading position must have an accountant-general. The qualifications, appointment or removal procedures as well as functions and powers of the accountant-general are to be stipulated by the State Council.

Article 37 An accounting office shall establish an internal auditing system. A cashier shall not be concurrently in charge of auditing, taking custody of accounting archives or entering the receipts, expenditure, expense or claims and debts accounts.

Article 38 A person who is engaged in accounting work must acquire an accountant's practice qualification certificate. Anyone who is to be the person in charge of the accounting office of a unit (accountant in charge) in addition to acquiring an accountant's practice qualification certificate, shall have professional and technical title of accountant or above or have been engaged in accounting work for more than 3 years. Measures on the administration of accounting personnel's practice qualifications shall be stipulated by the financial department of the State Council.

Article 39 Accounting personnel shall abide by professional ethics and improve their professional qualities. The work of education and training of accounting personnel shall be enhanced.

Article 40 Persons who are investigated for criminal liabilities according to law for providing untruthful financial and accounting reports, making false accounts, concealing or intentionally destroying accounting vouchers, account books as well as financial and accounting reports, embezzlement, misappropriating public funds, taking possession of properties by taking advantages of positions or for other illegal acts relating to their accounting positions may not acquire or acquire again accountant's practice qualification certificates. Besides the persons as stipulated in the preceding paragraph, persons who have their accountant's practice qualification certificates revoked for violating laws and disciplines may not acquire the accountant's practice qualification certificates again within 5 years as of the date of the revocation of such certificates.

Article 41 Accounting personnel who are being transferred to other work or leaving their posts must finalize the handing-over procedures with the persons who are taking over. The person in charge of the accounting office (accountant in charge) shall supervise handingover procedures for ordinary accounting personnel. The person in charge of a unit shall supervise handing-over procedures for the person in charge of the accounting office (accountant in charge); when necessary the superior administrative unit may send personnel to participate in the supervision of the handing-over.

Chapter VI Legal Liability

Article 42 Where the provisions of this Law are violated by committing one of the following acts, the financial department of the people's government at or above the county level shall order to make corrections within a specified time limit, may simultaneously impose a fine of not less than 3,000 yuan but not more than 50,000 yuan upon the unit, and may impose a fine of not less than 2,000 yuan but not more than 20,000 yuan upon the persons directly in charge and other persons directly responsible. The persons who are State functionaries shall also be imposed upon administrative sanctions according to law by the unit to which they belong or the unit concerned:

(1) No account books are set up according to law;

(2) Account books are set up secretly;

(3) Original vouchers are drawn up or obtained not conforming to the provisions or original vouchers drawn up or obtained are not in conformity with the provisions;

(4) Account books are recorded on the basis of accounting vouchers which are not examined and verified or account books are recorded not conforming to the provisions;

(5) The measures for accounting arrangement are arbitrarily changed;

(6) The basis for preparing financial and accounting reports provided to different users of accounting documents is inconsistent;

(7) Failure to use in accordance with the provisions the account recording language or the base currency for bookkeeping;

(8) Failure to keep in accordance with the provisions the accounting documents, and thus resulting in destruction and loss of such accounting documents;

(9) Failure to establish and implement in accordance with the provisions the internal accounting supervision system of the unit, or refusing supervision conducted according to law or untruthfully providing the relevant accounting documents as well as relevant information;

(10) The appointment of accounting personnel is not in conformity with the provisions of this

Law. Where one of the acts as stipulated in the preceding paragraph is committed and therefore a crime is constituted, criminal liabilities shall be investigated according to law. Where accounting personnel commit one of the acts as stipulated in paragraph 1 and the circumstances are serious, the financial department of the people's government at or above the county level shall revoke their accountant's practice qualification certificates. Where punishments against the acts as stipulated in paragraph 1 are otherwise provided in the relevant laws, the matter shall be handled in accordance with such provisions.

Article 43 Where accounting vouchers or account books are forged or altered, or false financial and accounting reports are prepared, and therefore an crime is constituted, criminal liability shall be investigated in accordance with law. Where the acts as stipulated in the preceding paragraph are committed but no crime is constituted, the financial department of the people's government at or above the county level shall circulate a notice, may simultaneously impose a fine of not less than 5,000yuan but not more than 100,000 yuan upon the unit, and may impose a fine of not less than 3,000 yuan but not more than 50,000 yuan upon the persons directly in charge and other persons directly responsible. The persons who are State functionaries shall also be imposed upon administrative sanctions according to law from removing from post up to expelling from the units by the unit to which they belong or the unit concerned; for the accounting personnel among them, the financial department of the people's government at or above the county level shall additionally revoke their accountant's practice qualification certificates.

Article 44 Where accounting vouchers, account books or financial and accounting reports that should be kept according to law are concealed or intentionally destroyed, and therefore a crime is constituted, criminal liability shall be investigated in accordance with law. Where the acts as stipulated in the preceding paragraph are committed but no crime is constituted, the financial department of the people's government at or above the county level shall circulate a notice, may simultaneously impose a fine of not less than 5,000 yuan but not more than 100,000 yuan upon the unit, and may impose a fine of not less than 3,000 yuan but not more than 50,000 yuan upon the persons directly in charge and other persons directly responsible. The persons who are State functionaries shall also be imposed upon administrative sanctions according to law from removing from post up to expelling from the units by the unit to which they belong or the unit concerned; for the accounting personnel among them, the financial department of the people's government at or above the county level shall additionally revoke their accountant's practice qualification certificates.

Article 45 Whoever incites, instigates or forcibly orders accounting offices, accounting personnel and other persons to forge or alter accounting vouchers or account books, to prepare false financial and accounting reports, or to conceal or intentionally destroy accounting vouchers, account books as well as financial and accounting reports that should be kept according to law, and therefore constitutes a crime, shall be investigated for criminal liability in accordance with law; a fine of not less than 5,000 yuan but not more than 50,000 yuan may be imposed if no crime is constituted, and the persons who are State functionaries shall also be imposed upon administrative sanctions of demoting to a lower rank, removing from post or expelling from the units according to law by the unit to which they belong or the unit concerned.

Article 46 Where the person in charge of a unit persecutes or retaliates against the accounting personnel, who perform their duties according to law and oppose acts violating the provisions of this Law, by means of demoting to a lower rank, removing from post, transferring working post, dismissing from employment or expelling from the units, etc., and therefore constitute a crime, criminal responsibility shall be investigated in accordance with law; if no crime is constituted, administrative sanctions shall be imposed according to law by the units to which they belong or the unit concerned. For the accounting personnel who are persecuted or retaliated against, their reputation, original positions and ranks shall be resumed.

Article 47 Functionaries in financial departments and relevant administrative departments who abuse their powers, neglect their duties, commit illegalities for personal interests or by fraudulent means, or disclose State secrets or commercial secrets, and therefore constitute crimes, shall be investigated for criminal liabilities in accordance with law; administrative sanctions shall be imposed if no crime is constituted.

Article 48 Whoever, in violation of the provisions in Article 38 of this Law, transfers the name of the reporting person and reporting materials to the unit reported and the person reported shall be imposed upon administrative sanctions according to law by the unit to which he belongs or the unit concerned.

Article 49 Where the provisions of both this Law and other laws are violated simultaneously, sanctions shall be imposed according to law by the relevant departments within their respective functions and powers.

Chapter VII Supplementary Provisions

Article 50 For the purpose of this Law, the meanings of the following terms are: The person in charge of a unit refers to the legal representative of a unit or the person in charge stipulated by laws or administrative regulations who performs functions and powers on behalf of the unit.

The uniform accounting system of the State refers to the system concerning accounting practice, accounting supervision, accounting offices and accounting personnel as well as administration of accounting work which are formulated by the financial department of the State Council in accordance with This law.

Article 51 The specific measures governing the accounting of individual industrial and commercial business operators shall be formulated separately by the financial department of the State Council in accordance with the principles of this Law.

Article 52 This Law shall enter into force as of the date of July 1,2000.

The China Securities Regulatory Commission

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Negotiable Instruments Law of the People's Republic of China

(Adopted by 13th Session of the Standing Committee of the Eighth National People's Congress on May 10, 1995, promulgated by the Order No.49 of the president of the People's Republic of China on May 10, 1995, and effective on January 1, 1996)

Contents

Chapter I General Provisions
Chapter II Bills of Exchange

Section 1 Drawing
Section 2 Endorsement
Section 3 Acceptance
Section 4 Guarantee
Section 5 Payment
Section 6 Recourse

Chapter III Promissory Notes
Chapter IV Checks
Chapter V Legal Application on Foreign-related Negotiable Instruments
Chapter VI Legal Responsibility
Chapter VII Supplementary Provisions

Chapter I General Provisions

Article 1
For the purposes of regulating negotiable instruments transactions, protecting the legitimate rights and interests of the parties concerned in negotiable instruments activities, maintaining social and economic order and promoting the development of the socialist market economy, this Law is enacted.

Article 2
This Law shall apply to all negotiable instruments activities in the territory of the People's Republic of China.

"Negotiable instruments" as the term is used in this Law means bills of exchange, promissory notes and checks.

Article 3
Negotiable instruments activities shall be in compliance with laws and administrative regulations and may not prejudice the interests of the social public.

Article 4
A drawer shall, in issuing a negotiable instrument, sign and seal on it according to the legal requirements and assume the liability for the negotiable instrument in accordance with the items stated thereon.

A holder shall, in exercising the rights arising out of a negotiable instrument, sign and seal on it according to the legal procedures and produce the instrument.

Any other debtor of a negotiable instrument who signed and sealed on it shall assume the liability for the negotiable instrument according to the items stated thereon.

"Rights arising out of a negotiable instrument" as the term is used in this Law means the right of the holder to demand a debtor of the instrument to pay the amount stated thereon, including rights of claim for payment and recourse.

"Liability for the negotiable instrument" as the term is used in this Law means the obligation of a debtor of a negotiable instrument to pay the holder the amount stated thereon.

Article 5
A party to a negotiable instrument may authorize its agent to sign and seal on the instrument, and the agency shall be stated on it.

Whoever, without the power of attorney, signs and seals on a negotiable instrument in the name of agent shall assume the liability for the negotiable instrument; an agent who goes beyond the limit of the power of attorney shall assume the liability in excess of the limit of power of attorney.

Article 6
Where a person without civil conduct capacity or a person with a limited civil capacity of conduct signs and seals on a negotiable instrument, such signature or seal shall be deemed to be invalid, however, it does not affect the authenticity of other signatures or seals.

Article 7
"Signature and seal on negotiable instruments" means signature, seal or signature with seal.

The signature and seal on a negotiable instrument of a legal entity or any other unit using the instrument shall be the stamp of the said legal entity or the unit, together with the signature and seal of its legal representative or its authorized agent.

The signature on a negotiable instrument shall be the real name of the party to the signature.

Article 8
The amount of a negotiable instrument shall be written both in Chinese characters and figures which must be consistent; if they fail to be consistent, the instrument shall be invalid.

Article 9
The items stated on a negotiable instrument must be in compliance with the provisions of this Law.

The amount, date and the payee's designation on a negotiable instrument may not be changed or altered. Changed or altered instruments shall be invalid.

The original issuer may make change or alteration on any of other items contained in the instrument; and if any, the original issuer shall sign and seal to certify the change or alteration.

Article 10
The issuance, acquisition and transfer of a negotiable instrument shall follow the principle of trustworthiness, and have genuine transaction relation and debtee-debtor relationship.

The acquisition of a negotiable instrument must pay valuable consideration, i.e. paying an corresponding price agreed upon by both parties to the instrument.

Article 11
Those negotiable instruments acquired gratis according to law by taxation, inheritance and gift shall not be restricted by the payment of valuable consideration. However, the rights on the negotiable instruments may not be more favorable than the rights enjoyed by the prior endorsers.

"The prior endorser" means other debtors of a negotiable instrument, who signed and sealed prior to the signing and sealing party or the holder of the instrument.

Article 12
Whoever acquires a negotiable instrument by means of fraud, theft or coercion, or out of vicious intention with knowing the above-mentioned circumstances, may not enjoy the rights arising out of the instrument.

If a holder, due to serious error, acquires a negotiable instrument not in conformity with the provisions of this Law, the said holder may not enjoy the rights arising out of the instrument.

Article 13
A negotiable instrument debtor may not resort to the demurrer between itself and the prior endorser of the drawer or of the holder to challenge the holder of the negotiable instrument; however, those negotiable instruments acquired by the holder who is aware of the existence of such demurrer shall be excluded.

A negotiable instrument debtor may demur to the holder who failed to honor the obligations agreed upon and with whom it has direct debtee-debtor relationship.

"Demurrer" as the term is used in this Law means the act of a negotiable instrument debtor who, in accordance with the provisions of this Law, refuses to honor the obligations to the debtee of the instrument.

Article 14
The items stated on negotiable instruments shall be true to fact and may not be forged or altered. Whoever forges or alters the signature and seal or other items stated on an instrument shall assume legal responsibility.

Any forged or altered signature and seal on a negotiable instrument does not affect the authenticity of other truthful signatures and seals on it.

If other items stated on a negotiable instrument were altered, the person(s) who signed and sealed prior to such alternation shall hold responsibility to the originally stated items; the person(s) who signed and sealed after such alternation shall be responsible for the items stated after the alternation; if the signature and seal could not be identified as being made prior to or after such alternation on the instrument, the signature and seal shall be deemed to be made prior to the alternation.

Article 15
If a negotiable instrument is lost, the party which lost it may promptly notify the payer of the instrument to suspend payment, with the exception of those negotiable instruments on which no payer is stated or for which the payer or its authorized payer could not be determined.

The payer notified to suspend payment shall suspend payment thereto temporarily.

The party which lost the instrument shall, within three days after the lost registration and suspension of payment, and also may, after the it was lost, directly apply to a people's court for a public summon exhortation or initiate legal proceedings to a people's court.

Article 16
The holder of a negotiable instrument shall exercise its right over the instrument debtor or keep such right at the place of business operation and within business hours of the party to the instrument, where the party does not have a place of business operation, the right shall be exercised at its domicile.

Article 17
The rights arising out of a negotiable instrument shall cease to exist if being not exercised within the following time limits:

1. with regard to the rights of the holder of an instrument over the drawer and acceptor, the time limit is two years, beginning from the maturity date of the instrument, in the cases of bills of exchange at sight or promissory notes at sight, the limit is two years from the date of draft;

2. with regard to the rights of the check holder over the drawer, the time limit is six months from the date of draft;

3. with regard to the recourse of the holder to the prior endorser, the time limit is six months from the date on which acceptance or payment was refused to be made; and

4. with regard to the re-recourse of the holder to the prior endorser, the time limit is three months from the date of acquittal or of legal action.

The date of draft and maturity date of negotiable instruments shall be determined by the parties to them according to law.

Article 18
A holder who loses the rights arising out of a negotiable instrument due to the outrun of validity of the instrument rights or due to the incompleteness of items stated on it shall still enjoy the civil rights and may require the drawer or acceptor to refund the equity equivalent to the amount of the instrument not paid yet.

Chapter II Bills of Exchange
Section 1 Drawing
Article 19
"The bill of exchange" means the negotiable instrument which is signed and issued by the drawer and for which the authorized payer pays, without any terms, the amount of money stated to the payee or holder at sight of the bill or on the stated date.

Bills of exchange are divided into banker's bills and commercial bills.

Article 20
"Drawing" means the act in which a drawer signs and issues a negotiable instrument and hands it to the payee.

Article 21
The drawer of a bill of exchange must have a genuine relationship of payment on commission with the payer and must have a reliable source of capital to pay the amount of the bill.

No bill of exchange without valuable consideration may be signed and issued for the purpose of defrauding banks or other parties to the instrument of money.

Article 22
A bill of exchange must contain the following items:

1. showing the word "bill" on it;

2. commission of unconditional payment;

3. the amount stated;

4. designation of the payer;

5. designation of the payee;

6. date of draft; and

7. signature and seal of the drawer.

A bill of exchange without one of the items provided for in the preceding paragraph shall be invalid.

Article 23
Such items as date of payment, place of payment and place of drawing, if stated on a bill, shall be clear and precise.

A bill of exchange shall, if no date of payment is stated on it, be a bill at sight.

In case a bill of exchange fails to state the place of payment, the payer's place of business operation, domicile or habitual residence shall be deemed as the place of payment.

In case a bill of exchange fails to state the place of issuance, the drawer's place of business operation, domicile or habitual residence shall be deemed as the place of issuance.

Article 24
Other drawing items other than those provided for in this Law may be stated on bills of exchange, however, such items stated shall not have the validity in terms of the bill.

Article 25
The date of payment may be stated in one of the following forms:

1. payment at sight;

2. payment on a stated date;

3. payment at a fixed period after date; or

4. payment at a fixed period after sight.

The date of payment provided for in the preceding paragraph is the maturity date of the bill of exchange.

Article 26
A drawer shall, immediately after signing and issuing a bill, bear the responsibility to guarantee the acceptance and payment of it. A drawer shall, under the circumstance that the bill could not be accepted or honored, clear the amount and expenses to the bill holder as provided for in Articles 70 and 71 of this Law.

Section 2 Endorsement
Article 27
A bill holder may transfer the rights arising out of the bill to others or assign certain rights arising out of the bill to others to exercise.

If a drawer states words "no transfer permitted" on a bill of exchange, it may not be transferred.

When the bill holder exercises the rights provided for in the first paragraph, the holder shall endorse and deliver it.

"Endorsement" means such activities in which relevant items shall be stated and signed and sealed on the back of an instrument or on an attached sheet.

Article 28
If a bill certificate is insufficient to meet the need of the endorser for items, a sheet may be attached on the certificate.

The first person who states on the attached sheet shall sign and seal on the splice of the bill and the attached sheet.

Article 29
Endorsement shall be signed and sealed by the endorser and be stated the date of endorsement.

If an endorsement does not state the date, it shall be deemed to be made prior to the maturity date of the bill.

Article 30
If a bill of exchange is transferred by endorsement or a certain rights arising out of a bill is assigned to others to exercise by endorsement, the designation of the endorsee must be stated.

Article 31
If a bill of exchange is transferred by endorsement, the endorsement shall be continuing. The bill holder shall, on the strength of the continuity of the endorsement, certify its rights over the bill; those who acquire bills through other lawful means other than endorsement may, through putting to proof according to law, justify its rights over the bill.

"The continuity of the endorsement" as the term is used in the preceding paragraph means the dovetail of the signatures and seals on the bill made by the endorser who transfers it and the endorsee who takes the transfer during the process of bill transfer.

Article 32
Where a bill of exchange is transferred by endorsement, the subsequent endorser shall be responsible for the truthfulness of its immediate prior endorser.

"Subsequent endorser" means other negotiable instrument debtors who sign and seal after the drawer signed and sealed.

Article 33
No endorsement may be accompanied with terms. If an endorsement is accompanied with terms, the terms shall not have the validity in terms of the bill.

An endorsement on part of the amount of the bill or on transfer the amount of the bill to two or more persons respectively shall be invalid.

Article 34
If an endorser stated the words "no transfer permitted" on a bill which the subsequent endorser backs again to transfer, the original endorser shall not bear guarantee responsibility for the endorsee of the subsequent endorser.

Article 35
Where an endorsement has the words "endorsement for collections", the endorsee has the right to exercise the rights arising out of the endorsed bill on behalf of the endorser; however, the endorsee may not transfer the rights arising out of the bill by re-endorsement.

A bill of exchange may be used as pledge; when placing under encumbrance, the word "pledge" shall be marked in the endorsement. An endorsee may, after acquiring the pledge according to law, exercise the right arising out of the bill.

Article 36
Where a bill of exchange is refused to be accepted or paid or goes beyond the presentation term for payment, it may not be endorsed to be transferred; if being transferred by endorsement, the endorser shall bear the responsibility arising out of the bill.

Article 37
When an endorser transfers a bill by endorsement, it means that the endorser shall bear the responsibility in guaranteeing the bill of its subsequent holder to be accepted and paid. When the bill could not be accepted or paid, the endorser shall pay in full the amount and expenses provided for in Articles 70 and 71 of this Law to the holder.

Section 3 Acceptance
Article 38
"Acceptance" means the act that the payer of a bill of exchange promises to pay the amount of the bill on the maturity date of it.

Article 39
With regard to a bill payable on a stated date or at a fixed period after date, the holder shall present for acceptance to the payer prior to the maturity date of it.

"Presentment for acceptance" means the act that the holder presents the bill to the payer and demand the payer to promise for payment.

Article 40
In regard to a bill payable at a fixed period after sight, the holder shall present for acceptance to the payer within one month from the date of draft.

Where a bill of exchange is not presented for acceptance within the stated time limit, the holder would lose its recourse to its prior party.

Presentment for acceptance is not required for a bill payable at sight.

Article 41
To a bill of exchange presented for acceptance, the payer shall, within three days from receiving the bill presented for acceptance, accept or refuse to accept it.

A payer shall, at the time of receiving a bill presented for acceptance from the holder, sign and issue a voucher certifying the receipt of the bill. The voucher shall contain the date of presentment for acceptance, signature and seal.

Article 42
A payer who accepts a bill shall state the word "accepted" on the obverse side of the bill as well as the date of acceptance, signature and seal; for the bill payable at a fixed period after sight, the date of payment shall be stated at the time of accepting it.

Where the date of acceptance is not stated on a bill of exchange, the last day of the time limit provided for in the first paragraph of the preceding article shall be deemed as the date of acceptance.

Article 43
A payer may not add any terms in accepting a bill; if an acceptance accompanied with any terms, it shall be deemed as a refusal to acceptance.

Article 44
A payer shall, after accepting a bill, bear the responsibility of making payment on the maturity date.

Section 4 Guarantee
Article 45
A guarantor may bear the guarantee responsibility on the debts arising from the bill.

A guarantor shall be served as by parties other than the bill debtor.

Article 46
A guarantor must state the following items on the bill of exchange or on the attached sheet:

1. showing the word "guarantee;"

2. the designation and domicile of the guarantor;

3. the designation of the warrantee;

4. date of guarantee; and

5. signature and seal of the guarantor.

Article 47
Where a guarantor fails to state Item 3 of the preceding article on the bill or the attached sheet, the acceptor shall be the warrantee for the bill has already accepted; if it is not yet accepted, the drawer shall be the warrantee.

Where a guarantor fails to state Item 4 of the preceding article on the bill or on the attached sheet, the date of draft shall be the date of guarantee.

Article 48
A guarantee may not be accompanied with any terms; if the terms are accompanied, it should not affect the guarantee responsibility over the bill of exchange.

Article 49
A guarantor shall bear the guarantee responsibility for the rights of a holder which acquired a bill of exchange by lawful means; however, those bills which become invalid due to the incomplete items stated on them on the liabilities of the warrantee shall be excluded.

Article 50
In regard to a guaranteed bill, the guarantor, together with the warrantee, shall bear the joint and several liability to the holder. If a bill of exchange could not be honored on the maturity date, the holder is entitled to require the guarantor for payment, and the guarantor shall make full payment thereto.

Article 51
Where two or more persons serve as the guarantors, they, among themselves, shall bear the joint and several liability.

Article 52
A guarantor may, after settlement of the bill debts, exercise the recourse of the holder over the warrantee and its prior party.

Section 5 Payment
Article 53
A holder shall present for payment according to the following time limits:

1. in the case of a bill payable at sight, presentment for payment to the payer shall be made within one month from the date of draft; and

2. in the cases of a bill payable on a stated date, payable at a fixed period after date or payable at a fixed period after sight, presentment for payment to the acceptor shall be made within 10 days from the maturity date.

If a bill holder failed to present for payment according to the time limit provided for in the preceding paragraph and after the holder made explanations therefor, the acceptor or the payer shall still bear the payment responsibility to the holder.

If a presentment for payment is made to the payer through the authorized bank for collections or through an instrument exchange system, it shall be deemed as a presentment for payment by the holder.

Article 54
Where a bill holder presents for payment in accordance with the provisions of the preceding paragraph, the payer must make full payment thereto on the same date.

Article 55
A bill holder shall, at the time of getting payment, sign on the bill to certify its receipts and hand it to the payer. Where a holder authorizes a bank for collections and when the authorized bank transfers the amount of the bill into the holder's account, it shall be deemed as having signed and accepted.

Article 56
The responsibility of a collecting bank authorized by a holder for collections is restricted only to transfer the amount of the bill into the holder's account according to the items stated on the bill.

The responsibility of a paying bank authorized by a payer is restricted only to pay the amount of the bill out of the payer's account according to the items stated on the bill.

Article 57
A payer or its authorized payer shall, in making payment, examine and check the continuity of bill endorsement and examine the lawful identification status or valid certificate of the person who presents for payment.

A payer or its authorized payer who makes payment out of vicious intention or serious mistake shall bear responsibility on its own.

Article 58
If a payer makes payment prior to the maturity date for a bill payable on a stated date, payable at a fixed period after date or payable at a fixed period after sight, the payer shall bear the responsibility arising therefrom on its own.

Article 59
If the amount of a bill of exchange is in a foreign currency, the payment shall be made in Renminbi according to the market exchange rate quoted on the date on which it is made.

If the parties to a bill have a separate agreement on the type of currency, such agreement shall apply.

Article 60
After the payer makes full payment according to law, the responsibility of all bill debtors shall be relieved.

Section 6 Recourse

Article 61
If a matured bill of exchange is refused to be paid, the holder may exercise the recourse to the endorser, drawer as well as other debtors.

Under one of the following circumstances, the bill holder may also exercise the recourse prior to the maturity date of it:

1. if the bill is refused to be accepted;

2. if the acceptor or payer died or went into hiding; or

3. if the acceptor or payer is declared bankruptcy according to law or is ordered to terminate business activities due to law-violation.

Article 62
A bill holder shall, in exercising the recourse, provide relevant evidence on the refusal of acceptance or refusal of payment.

Where the presentment for acceptance or presentment for payment made by a bill holder is refused, the acceptor or payer must issue a statement on the refusal or a letter explaining why the bill is rejected. If no such statement or letter is issued, the acceptor or payer shall bear civil responsibility arising therefrom.

Article 63
A bill holder who could not obtain a statement on the refusal due to the death or escape of the acceptor or payer or other reasons may obtain other relevant statement according to law.

Article 64
Where an acceptor or a payer is declared bankruptcy by a people's court according to law, relevant judicial documents of the people's court shall have the binding force as a statement on the refusal.

Where an acceptor or a payer is ordered to terminate its business activities due to law-violation, the penalty decision taken by the relevant competent administrative department shall have the binding force as a statement on the refusal.

Article 65
A bill holder who fails both to produce a statement on the refusal or a letter on the rejection or to submit other lawful evidence within the stated time limit would lose its recourse to its prior party; however, the acceptor or the payer shall still bear responsibility to the holder.

Article 66
A bill holder shall, within three days from the date of receiving relevant evidence on acceptance refusal or payment refusal, inform its prior party in writing on the reasons of being refused; its prior party shall, within three days from the date of receiving the notice, inform its prior party in writing. The holder may also notify all debtors in writing separately.

If no notification is made within the time limit provided for in the preceding paragraph, the bill holder may still exercise its recourse. If losses are resulted due to the delay in notifying its prior party or the drawer, the party to the bill which failed to make notification within the stated time limit shall bear the responsibility for compensation to such losses; however, the amount of compensation shall be limited within the amount of the bill.

Where such notification is made within the stated time limit according to legal address or the agreed address, it shall be deemed as having made the notification.

Article 67
A written notice made pursuant to the first paragraph of the preceding article shall state the major items contained in the bill and state clearly that the bill has been rejected.

Article 68
A bill's drawer, endorser, acceptor and guarantor shall bear joint and several liability to the holder.

The holder may, not necessarily according to precedence of the bill debtors, exercise its recourse to one, several or all of them.

The holder who has already exercised its recourse to one or several of the bill debtors may also exercise its recourse to other debtors. A claimee who settles its debts shall enjoy the same claim as the holder.

Article 69
A bill holder who is the drawer of it shall have no recourse to its prior party. A bill holder who is the endorser of it shall have no recourse to its subsequent party.

Article 70
A bill holder may, in exercising its recourse, demand the claimee to pay the following amount and expenses:

1. the amount of the bill that is refused to be paid;

2. the interests accruing from the amount of the bill, calculated according to the interest rate fixed by the People's Bank of China, from the date of maturity or date of presentment for payment to the date on which the amount is paid completely; and

3. expenses inflicted by obtaining relevant evidences on the refusal and sending of notice.

At the time that a claimee settles debts, the holder shall hand over the bill and relevant evidences on the refusal and issue an acknowledgment of receipt of the interests and expenses.

Article 71
A claimee who settled debts pursuant to the provisions of the preceding article may exercise re-recourse to other debtors of the bill and demand them to pay the following amount and expenses:

1. complete amount already paid;

2. interests accruing from the above-mentioned amount, calculated according to the interest rate fixed by the People's Bank of China, from the date on which the above-said amount was paid to the date of the re-recourse; and

3. expenses for sending the notice.

A claimee who is paid completely by exercising the re-recourse shall hand over the bill and relevant evidences on the refusal and issue an acknowledgment of receipt of the interests and expenses.

Article 72
After a claimee settled completely its debts pursuant to the provisions of the preceding two articles, its responsibility shall be relieved.

Chapter III Promissory Notes

Article 73
"The promissory note" means the negotiable instrument signed and issued by the drawer who promises, at sight of the note, unconditional payment of the stated amount to the payee or the holder.

"The promissory note" as the term is used in this Law means cashier's check.

Article 74
The drawer of a promissory note must have reliable sources of capital to pay the amount of the note and guarantee the payment therefor.

Article 75
The People's Bank of China shall examine and approve the qualification of the drawer of promissory notes and provide the concrete measures for control.

Article 76
A promissory note must contain the following items:

1. showing the words "promissory note;"

2. the warranty of unconditional payment;

3. the stated amount;

4. the designation of the payee;

5. the date of draft; and

6. signature and seal of the drawer.

A promissory note which fails to contain any of the items provided for in the preceding paragraph shall be invalid.

Article 77
Such items as place of payment and place of issuance on a promissory note shall be clear and precise.

If a promissory note fails to contain the place of payment, the place of business operation of the drawer shall be deemed as the place of payment.

If a promissory note fails to contain the place of issuance, the place of business operation of the drawer shall be deemed as the place of issuance.

Article 78
The drawer of a promissory note must bear the responsibility for payment at sight when the holder presents the note.

Article 79
The term for payment may not exceed two months at large from the date of draft for a promissory note.

Article 80
The holder of a promissory note fails to present it within the stated time limit shall lose its recourse to other prior parties other than the drawer.

Article 81
In addition to the provisions of this Chapter, the provisions on bills of exchange in Chapter II of this Law shall apply to the execution of endorsement, guarantee, payment and recourse of promissory notes.

In regard to the issuance of the promissory notes, the provisions on bills of exchange in Article 24 of this Law shall apply, in addition to the provisions of this Chapter.

Chapter IV Checks
Article 82
"The check" means the negotiable instrument signed and issued by the drawer, for which the authorized bank or any other financial institution, which conducts check deposits, pays unconditionally the stated amount of money to the payee or the check holder at sight of the instrument.

Article 83
In opening a check deposits account, the applicant must use its real name and submit lawful certificates to certify its identification status.

Those desiring to open check deposits accounts and to requisition checks for use shall have a reliable credit trustworthiness and deposit a certain amount of money.

The applicant shall leave a sample of its signature and seal in advance in opening a check deposits account.

Article 84
Checks may be used to draw cash and also for account transfer. If being used for account transfer, it shall be stated on the obverse side of the checks.

When checks are to be used only for drawing cash, it may be made separately into cash check which could be used only to draw cash.

Those checks used specially for account transfer may be made into checks for transfer separately which could be used only for account transfer and may not be used to draw cash.

Article 85
A check must contain the following items:

1. showing the word "check";

2. commission of unconditional payment;

3. amount of money stated;

4. the designation of the payer;

5. the date of draft; and

6. signature and seal of the drawer.

A check which fails to contain any of the items provided for in the preceding paragraph shall be invalid.

Article 86
The amount of the check may be stated in complementary as authorized by the drawer, and a check may not be used before the complementary entry is made.

Article 87
Where a check does not have the designation of the payee, it may be stated in addition with the authorization of the drawer.

If a check fails to carry the place of payment, the place of business operation of the payer shall be deemed as the place of payment.

If a check fails to carry the place of issuance, the place of business operation, domicile or habitual residence of the drawer shall be deemed as the place of issuance.

The drawer of a check may state itself as the payee on the check.

Article 88
The amount of a check signed and issued by the drawer of the check may not exceed the actual amount of its deposits at the payer at the time of the payment.

If the amount of a check signed and issued by the drawer of the check exceeds the actual amount of its deposits at the payer at the time of the payment, the check shall be deemed as a rubber check. It is forbidden to sign and issue rubber cheque.

Article 89
The drawer of a check may not sign and issue the check inconsistent with the sample of signature or seal left in advance.

Article 90
The drawer of a check must, according to the amount of the check signed and issued, bear the responsibility in guaranteeing payment to the check holder.

When the drawer has sufficient deposits at the payer to pay the amount of the check, the payer shall make full payment on the same date.

Article 91
Checks are restricted only to pay at sight and may not contain separate date of payment. If a separate date of payment is stated on a check, such an entry shall be invalid.

Article 92
A check holder shall present for payment within 10 days from the date of draft. For checks to be used in other places other than of the place of issuance, the time limit for presentment for payment shall be stipulated separately by the People's Bank of China.

After the time limit for presentment for payment expires, the payer may refuse to make payment; if the payer refuses to make payment therefor, the drawer shall still bear the negotiable instrument responsibility to the check holder.

Article 93
A payer who has paid the amount of the check according to law will no longer bear the responsibility for payment on commission to the drawer, and will no longer bear the responsibility for making payment to the check holder; however, payment made out of vicious intention or serious mistake shall be excluded.

Article 94
In addition to the provisions of this Chapter, the provisions on bills of exchange in Chapter II of this Law shall also apply to the execution of endorsement, payment and recourse of checks.

In regard to the issuance of checks, the provisions concerning bills of exchange of Articles 24 and 26 of this Law shall also apply, in addition to the provisions of this Chapter.

Chapter V Legal Application on Foreign-related Negotiable Instruments

Article 95
The application of laws concerning foreign-related negotiable instruments shall be determined in accordance with the provisions of this Chapter.

"Foreign-related negotiable instruments" as the term is used in the preceding paragraph means such negotiable instruments for which the activities as issuance, endorsement, acceptance, guarantee and payment occur both within and outside the territory of the People's Republic of China.

Article 96
Where an international treaty concluded or joined by the People's Republic of China has different or contradictory provisions, the provisions of the said international treaty shall apply; however, those clauses on which the People's Republic of China has declared reservation shall be excluded.

In absence of the provisions both in this Law and in international treaties concluded or joined by the People's Republic of China, international usage may apply thereto.

Article 97
With regard to the civil capacity of conduct of a negotiable instrument debtor, the laws of the country to which the debtor belongs shall apply.

If the civil capacity of conduct of a negotiable instrument debtor is naught or restricted under the laws of the country to which the debtor belongs, but the debtor has full civil capacity of conduct according to the laws of the country or region where the act occurs, the laws of the country or region where the act occurs shall apply thereto.

Article 98
The laws at the place of drawing shall apply to the items stated on a bill of exchange and a promissory note at the drawing time.

With regard to the items stated on a check at the issuing time, the laws of the place of issuance shall apply, and with agreement by the parties concerned, the laws of the place of payment may also apply.

Article 99
The laws of the place in which the act occurs shall apply to the activities of endorsement, acceptance, payment and guarantee for negotiable instruments.

Article 100
The laws of the place in which the instrument is issued shall apply to the time limit for execution of recourse of the negotiable instrument.

Article 101
The laws of the place of payment shall apply to the time limit of presentment for the negotiable instrument, forms on evidence of refusal and the time limit for producing statements of refusal.

Article 102
When a negotiable instrument is lost, the laws of the place of payment shall apply to the procedures for asking for negotiable instrument preservative rights.

Chapter VI Legal Responsibility
Article 103
Whoever is under one of the following fraudulent acts on negotiable instruments shall be investigated for criminal responsibility according to law:

1. counterfeiting or altering the negotiable instrument;

2. using intentionally the counterfeit or altered negotiable instrument;

3. signing and issuing the rubber check or intentionally signing and issuing the check inconsistent with the sample of signature and seal left in advance for the purpose of defrauding money or property;

4. signing and issuing the bill of exchange or promissory note without reliable sources of capital for the purpose of defrauding money;

5. where the drawer makes false entries when preparing the bill of exchange or promissory note for the purpose of defrauding money or property;

6. using without authorization the negotiable instrument of others, or using intentionally overdue or invalid negotiable instrument for the purpose of defrauding money or property; or

7. where the payer colludes viciously with the drawer or the holder to commit any act listed in the preceding six items.

Article 104
Whoever is under one of the acts listed in the preceding paragraph, if the case is of a minor nature and no crime is constituted, shall be given the administrative penalty according to relevant regulations of the State.

Article 105
An employee of a financial institution neglects his or her duty in the negotiable instrument practices and provides acceptance, payment or guarantee in violation of the provisions of this Law, shall be given penalty; if serious loss (es) is resulted and a crime is constituted, criminal responsibility shall be investigated according to law.

Where the loss (es) is caused to the party due to the act listed in the preceding paragraph by any employee of a financial institution, the said financial institution and the person(s) held directly responsible shall bear the responsibility for compensation according to law.

Article 106
Where the payer intentionally shelves the instrument or delays payment on the negotiable instrument payable at sight or the matured negotiable instrument, the administrative management department of finance shall impose fines, and give penalty to the person(s) held directly responsible.

Where the intentional shelving of the instrument or delaying in payment by the payer causes loss (es) to the holder of the negotiable instrument, the said payer shall bear the responsibility for compensation according to law.

Article 107
Where other acts committed in violation of the provisions of this Law, apart from those liable to compensation responsibility as provided by this Law, cause loss(es) to others, civil responsibility shall be borne according to law.

Chapter VII Supplementary Provisions

Article 108
The provisions of General Principles of Civil Law on the calculation of time terms shall apply to the calculation of various time limit provided for in this Law.

Where a time limit is calculated on a monthly basis, it shall be calculated according to the corresponding date of the maturity month; in absence of such a corresponding date, the last day of the month shall be the day of maturity.

Article 109
Bills of exchange, promissory notes and checks shall follow a unified pattern.

The People's Bank of China shall lay out the pattern of the instrument certificates and the measures for control of the printing of them.

Article 110
The People's Bank of China shall formulate the concrete measures for implementation of control of negotiable instruments in accordance with this Law and submit them to the State Council for approval before enforcement.

Article 111
This Law shall enter into force on January 1, 1996.

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Guarantee Law of the People's Republic of China

(Adopted at the 14th Meeting of the Standing Committee of the Eighth National People's Congress on June 30, 1995, and effective as of October 1, 1995)

Chapter I - General Provisions

Chapter II - Guarantee

Section 1 - Guarantee and Guarantor

Section 2 - Guarantee Contract and Guarantee Mode

Section 3 - Guarantee Responsibility

Chapter III - Mortgage

Section 1 - Mortgage and Things Mortgaged

Section 2 - Mortgage Contract and Registration of Things Mortgaged

Section 3 - The Effect of Mortgage

Section 4 - Realization of Mortgage

Section 5 - Mortgage of Maximum Amount

Chapter IV - Pledge

Section 1 - Pledge of Movables

Section 2 - Pledge of Rights

Chapter V - Lien

Chapter VI - Earnest

Chapter VII - Supplementary Provisions

Chapter I

General Provisions

Article 1

This Law is enacted for purposes of promoting capital accommodation and commodity circulation, ensuring the realization of creditors' rights and developing socialist market economy.

Article 2

In such economic activities as debit and credit, buying and selling, carriage of goods and contracting for processing, a creditor who needs to ensure the realization of his rights in the form of guarantee may establish guarantee subject to the provisions of this Law. The forms of guarantee provided in this law include guarantee, mortgage, pledge, lien and earnest.

Article 3

Guarantee activities shall be in conformity to the principle of equality, voluntariness, fairness, honesty and trustworthiness. This law also applies to counter-guarantee.

Article 4

A third person, at the time of tendering guarantee to a creditor for a debtor, may require the debtor to tender counter guarantee.

Article 5

A guarantee contract is an accessory contract to a principal contract. If the principal contract is invalid, the guarantee contract shall be invalid. Where the guarantee contract stipulates otherwise, such stipulations shall apply. Where a guarantee contract is confirmed as invalid and void, the debtor, the guarantor or the creditor, who commits some mistake, shall, based on his respective mistake, bear corresponding civil liability.

Chapter II

Guarantee

Section 1 Guarantee and Guarantor

Article 6

"Guarantee" as the term is used in this Law means an act under which, according to an agreement between a guarantor and a creditor, the guarantor shall perform a bebt or bear responsibility as contracted if the debtor fails to pay the debt.

Article 7

A legal person, any other organization or a citizen, which has the ability of discharge of a debt may act as a guarantor.

Article 8

Any state organ may not act as a guarantor, however, upon approval by the State Council, those that conduct sub-loans for the purpose of using loans from foreign governments or international economic organizations shall be excluded.

Article 9

Any institution or social organization of public interests, such as schools, kindergartens and hospitals, may not act as a guarantor.

Article 10

Any branch or functionary department of an enterprise as legal person may not act as a guarantor. A branch of an enterprise as legal person, which has the power of attorney in writing from the legal person, may tender guarantee within the authorized limits.

Article 11

No unit or individual may force financial institutions such as banks or enterprises to tender guarantee for others. Financial institutions such as banks or enterprises have the right to refuse any acts forcing them to tender guarantee for others.

Article 12

In the case of two or more guarantors to a debt, each guarantor shall bear guarantee responsibility in proportion to his proper share of the guarantee as contracted. If no share of guarantee is agreed upon, the guarantor shall bear joint and several liability; the creditor may require any of the guarantors to bear full guarantee responsibility, and each guarantor shall be liable to guarantee the full realization of creditor's rights. The guarantor who has already borne guarantee responsibility shall have the right to recover compensation from the debtor, or require other guarantors who bear joint and several liabilities to pay the shares they ought to bear.

Section 2 Guarantee Contract and Guarantee Mode
Article 13

A guarantor and a creditor shall conclude a guarantee contract in the form of writing.

Article 14

A guarantor and a creditor may conclude a separate guarantee contract relating to a specific principal contract, and also may, within the maximum amount of claim and through negotiation, conclude one guarantee contract relating to loan contracts or trade contracts of a particular commodity, which occur consecutively in a certain period of time.

Article 15

A guarantee contract shall include the following particulars:

1. the category and amount of the principal creditor's right to be guaranteed;

2. time limit for the debtor to perform his debt;

3. mode of guarantee;

4. scope of guarantee;

5. duration of guarantee; and

6. other matters deemed as necessary to be agreed upon by both parties.

A guarantee contract which does not completely include the particulars provided in the preceding paragraph, may be added and amended.

Article 16

The modes of guarantee include:

1. general guarantee; and

2. joint and several liability guarantee.

Article 17

A general guarantee means that, as agreed upon in guarantee contract by the parties concerned, the guarantor shall bear guarantee responsibility if the debtor fails to perform his debt.

The guarantor of a general guarantee may, prior to court proceedings or arbitration over a dispute concerning the principal contract and a failure again to pay a debt after a compulsory enforcement over the debtor's property according to law, refuse to bear guarantee responsibility to a creditor.

A guarantor may not execute the right provided in the preceding paragraph under any of the following circumstances:

1. in a case of which the change of debtor's address has caused serious difficulty to the creditor in requiring the debtor to pay his debt;

2. in a case of which a people's court accepts the debtor's bankruptcy case and the execution procedures are abated; or

3. in a case of which the guarantor waives, in written form, his right provided in the preceding paragraph.

Article 18

A joint and several liability guarantee means that, as agreed upon in a guarantee contract by the parties concerned, the guarantor and the debtor shall bear joint and several liability over a debt. If the debtor of a joint and several liability guarantee fails to pay his debt at the expiry of term for execution as stipulated by the principal contract, the creditor may require the debtor to pay his debt and also may require the guarantor to bear guarantee responsibility within the limit of his guarantee.

Article 19

The parties concerned who make no agreement on the mode of guarantee or make an ambiguous agreement thereon shall bear guarantee responsibility in accordance with the mode of a joint and several liability guarantee.

Article 20

Guarantors of general guarantee or joint and several liability guarantee enjoy the right of demur of the debtors. If a debtor waives his right of demur over a debt, the guarantor still has the right to demur. The right of demur means such right under which the debtor may, according to legal causes, challenge the claim by the creditor when the creditor executes his rights.

Section 3 Guarantee Responsibility

Article 21

The scope of guarantee includes the principal creditor's right as well as interests, fines for breach of agreement, compensation for loss and damage and expenses for the realization of creditor's rights. Where a guarantee contract has otherwise stipulations, such stipulations shall apply. If the parties make no agreement on the scope of guarantee or make an ambiguous agreement thereon, the guarantor shall bear responsibility for all the debts.

Article 22

If, within the duration of guarantee, a creditor transfers his principal right to third person according to law, the guarantor shall continue to bear guarantee responsibility within the original scope of guarantee. Where a guarantee contract has otherwise stipulations, such stipulations shall apply.

Article 23

If, within the duration of guarantee, a creditor allows his debtor to transfer his debt, the guarantor's consent in writing shall be obtained, and the guarantor will no longer bear the guarantee responsibility over those debts transferred without his consent.

Article 24

A creditor and debtor who agree to modify a principal contract shall obtain the guarantor's consent in writing. Without his consent in writing, the guarantor will no longer bear the guarantee responsibility. If the guarantee contract has otherwise stipulations, such stipulations shall apply.

Article 25

In case the guarantor and the creditor of a general guarantee fails to stipulate the duration of guarantee, the duration of guarantee shall be six months from the date on which the term for performance of the principal debt expires. Where, within the duration of guarantee as contracted and the duration of guarantee as provided in the preceding paragraph, a creditor did not initiate legal proceedings against the debtor or apply for arbitration, the guarantor shall be exemption from his guarantee responsibility; if the creditor has initiated legal proceedings or applied for arbitration, the provisions concerning the discontinuance of the limitation of action shall apply to the duration of guarantee.

Article 26

In case the guarantor and the creditor of a joint and several liability guarantee fails to stipulate the duration of guarantee, the creditor shall have the right to require the guarantor to bear guarantee responsibility within six months from the date on which the term for performance of the principal debt expires. Where, within the duration of guarantee as contracted and the duration of guarantee as provided in the preceding paragraph, a creditor did not require the guarantor to bear guarantee responsibility, the guarantor shall be exemption from his guarantee responsibility.

Article 27

In the absence of the duration of guarantee, a guarantor who, subject to the provisions of Article 14 of this Law, tenders guarantee over creditor's rights occurring consecutively may, at any time, notify in writing the creditor to terminate the guarantee contract, however, the guarantor shall bear guarantee responsibility over those rights occurred prior to the time at which the notification in writing is delivered to the creditor.

Article 28

Where there are both guarantee and things guaranteed over one creditor's right, the guarantor shall bear guarantee responsibility over those rights beyond the things guaranteed. If the creditor surrenders the guarantee by things, the guarantor shall be exemption from his guarantee responsibility within the scope of the creditor's surrender.

Article 29

Where, without authorization in writhing by the legal person or beyond the authorized scope, a branch of an enterprise as legal person concludes a guarantee contract with a creditor, such a contract shall not be binding or that part beyond the authorized scope shall not be binding, if the creditor and the enterprise as legal person have some mistake, they shall bear their corresponding civil liability according to their respective mistake; if the creditor has no mistake, the enterprise as legal person shall bear civil liability.

Article 30

Under one of the following circumstances, the guarantor shall not bear civil liability: 1. in a case of which the parties to a principal contract maliciously collude so as to cheat the guarantor to tender guarantee; or 2. in a case of which the creditor of a principal contract resorts to such means as deceit and compulsion in making the guarantor to tender guarantee under the condition against his true intention.

Article 31

A guarantor, after bearing his guarantee responsibility, shall have the right to recover compensation from the debtor.

Article 32

If, after a people's court takes cognizance of a bankruptcy case filed by a debtor, a creditor fails to declare his rights, the guarantor may participate the distribution of bankruptcy property and execute the right of recourse in priority.

Chapter III

Mortgage

Section 1 Mortgage and Things Mortgaged

Article 33

"Mortgage" as the term is used in this Law means guarantee under which a debtor or a third person, without transferring the possession over the property listed in Article 34 of this Law, places such property as creditor's rights. When the debtor fails to pay his debt, the creditor shall have the right, in accordance with the provisions of this law, to get in priority compensation from the money received from converting or auctioning and selling of the property. In the preceding paragraph, the debtor or the third person is the mortgager, the creditor is the mortgagee and the property served as guarantee is the things mortgaged.

Article 34

The following property may be mortgaged:

1. buildings and other objects fixed on land, which are owned by the mortgager;

2. machines, means of transport and other property, which are owned by the mortgager;

3. use-right of state -owned land, buildings and other objects fixed on land, which the mortgager has the right to dispose according to law;

4. state-owned machines, means of transport and other property, which the mortgager has the right to dispose according to law;

5. the land use-rights of barren mountains, barren valleys, waste hills and waste sands, which the mortgager has contracted according to law and the contract offering party agrees on the mortgage;

6. other property which may be mortgaged according to law.

A mortgager may mortgage the properties listed in the preceding paragraph concurrently.

Article 35

The creditor's rights guaranteed by a mortgager may not exceed the value of the things mortgaged. If the value of a piece of property, after being mortgaged, is higher than the creditor's rights guaranteed, the remaining part may be mortgaged again, however, the remaining part may not be exceeded.

Article 36

If a building on the state-owned land acquired according to law is mortgaged, the use-right of the state-owned land occupied by the said building shall be mortgaged together. If the use-right of the state-owned land acquired in the form of leasing is mortgaged, the buildings on the said state-owned land shall be mortgaged together. The Land-use right of town (township) and village enterprises may not be mortgaged individually. If the construction structures such as workshops of town (township) and village enterprises are mortgaged, the use-right for the land occupied by such structures shall be mortgaged together.

Article 37

The following property may not be mortgaged;

1. land ownership;

2. use-rights of such collectively-owned land as farmland, homestead, land allotted for personal needs and hilly land allotted for private use, however, those provided in Item 5 of Article 34 and Paragraph 3 of Article 36 of this Law shall be excluded;

3. education facilities, medical and public health facilities and other facilities for public interests of such institutions and social organizations as schools, kindergartens and hospitals;

4. property with unclear ownership and use-right or dispute;

5. property which is attached, arrested or supervised and controlled according to law; or

6. other property which may not be mortgaged according to law.

Section 2 Mortgage Contract and Registration of Things Mortgaged

Article 38

A mortgager and a mortgagee shall conclude a mortgage contract in the form of writing.

Article 39

A mortgage contract shall include the following particulars:

1. the category and amount of the principal creditor's right to be guaranteed;

2. the term for the debtor to pay his debt;

3. designation, amount, quality condition, location, status of ownership and status of use-rights of the things mortgaged;

4. scope of guarantee; and

5. other matters and items which the parties deem as necessary to be included.

A mortgage contract which fails to include completely the particulars provided in the preceding paragraph may be added and amended.

Article 40

In making a mortgage contract, the mortgagee and mortgager may not stipulate in the contract that the ownership over the things mortgaged would be transferred to be owned by the creditor if the mortgagee was not paid after the expiry of the term for performance of the debt.

Article 41

A party which uses the property listed in Article 42 of this Law as mortgage shall complete registration of things mortgaged, the mortgage contract shall enter into force from the date of registration.

Article 42

The departments which handle registration of things mortgaged are as follows:

1. where the use-right of land on which there is no immovable object is mortgaged, it is the land administration department which issues the land use-right certificate;

2. where urban real estate or construction structures such as workshops of town (township) and village enterprises are mortgaged, it is the department designated by the local people's government at or above the county level;

3. where forest and trees are mortgaged, it is the competent forestry administrative department at or above the county level;

4. where aircraft, ship or transport vehicle is mortgaged, it is the registration department of such means of transport; and

5. where equipment or other movables of enterprises is mortgaged, it is the administrative department for industry and commerce in the place where such property is located.

Article 43

Where the parties concerned use other property as mortgage, registration of things mortgaged may voluntarily be completed, and in this case, the mortgage contract shall come into force on the date of signing. Parties concerned who fail to complete registration of things mortgaged may not challenge the third person. Where the parties apply for registration of things mortgaged, the registration department is the notary department in the place where the mortgagor is located.

Article 44

At the time of applying for registration of things mortgaged, the following documents or their photocopies shall be submitted to the registration department; 1. The principal contract and mortgage contract; and 2. certificate of ownership or use-right over the things to be mortgaged.

Article 45

The materials registered by the registration departments shall be allowed to be consulted, taken note of or photocopied.

Section 3 The Effect of Mortgage

Article 46

The scope of a guarantee by mortgage includes the principal creditor's right as well as interests, fines for breach of agreement, compensations for loss and damage and expenses for the realization of mortgage. Where a mortgage contract has otherwise stipulations, such stipulations shall apply.

Article 47

Where, upon the expiration of the term for performance of the debt, the things mortgaged are arrested by a people's court according to law due to the failure of the debtor in performing his debt, the mortgagee shall have the right, from the date of arrest, to collect naturally accrued yields arising from the things mortgaged as well as the statutory accrued interests which the mortgager may collect from the things mortgaged. If the mortgagee fails to notify the genuine facts of arresting the things mortgaged to the liable person who shall pay the statutory accrued interests, the force of mortgage shall not be extended to such naturally accrued yields. The naturally accrued yields mentioned in the preceding paragraph shall be used to write off the expenses for collecting such naturally accrued yields in priority.

Article 48

A mortgager who gives his property already leased out as mortgages shall advise the leasee thereof in writing, and the original leasing contract shall continue to be valid.

Article 49

A mortgager who, in the course of mortgage, assigns the things mortgaged which are registered shall advise the mortgagee and inform the assignee on the condition that the assigned things have already been mortgaged; if the mortgager fails to advise the mortgagee or fails to inform the assignee, the act of assignment shall be invalid and void. Where the price money of things mortgaged assigned is apparently lower than their value, the mortgagee may require the mortgager to tender corresponding guarantee; If the mortgager fails to tender, the things mortgaged may not be assigned. The money received by the mortgager from assignment of the things mortgaged shall compensate in priority the creditor's rights guaranteed to the mortgagee or be deposited at the third person agreed with the mortgagee, that part in excess of the creditor's rights is owned by the mortgager, and the part in shortage shall be paid by the debtor.

Article 50

A mortgage may not be separated from the creditor's rights and transferred individually, or act as guarantee for other creditor's rights.

Article 51

Where the act of a mortgager is sufficient to make the value of the things mortgaged decrease, the mortgagee has the right to require the mortgager to stop his act. When the value of things mortgaged decreases, the mortgagee has the right to require the mortgager to restore the value of the things mortgaged, or to tender guarantee which matches the decreased value. If the mortgager is not to blame for the value decrease of things mortgaged, the mortgagee could require the mortgager to tender guarantee only within the scope of the compensation obtained for loss and damage. The part of value not decreased shall continue to act as the guarantee for the creditor's rights.

Article 52

A mortgage exists concurrently with the creditor's rights so guaranteed, and if the creditor's rights cease to exist, so cease to exist the mortgage.

Section 4 Realization of Mortgage

Article 53

A mortgagee who is not compensated upon the expiration of the term for performance of the debt may, through agreement with the mortgager, be compensated from the money received from converting the things mortgaged into cash or from auctioning and selling of the things mortgaged, and if no agreement is reached, the mortgagee may file a suit in a people's court. After the things mortgaged are converted into cash or auctioned or sold the money in excess of the amount of creditor's rights shall be owned by the mortgager, and the part in shortage shall be paid by the debtor.

Article 54

Where one piece of property is mortgaged to two or more creditors, the money received from auction or sale of the things mortgaged shall be used for compensation according to the following provisions:

1. where the mortgage contracts come into force through registration, it shall be distributed according to the registration order of the things mortgaged; if the order is the same, it shall be distributed according to the percentage of creditor's rights; and

2. where the mortgage contracts come into force on the date of signing, if the things mortgaged have been registered, it shall be distributed according to the provisions of Item 1 of this Article; if such things are not registered, it shall be distributed according to the time order of the entry into force of these contracts, if the order is the same, it shall be distributed according to the percentage of creditor's rights. Those that the things mortgaged are already registered shall have the priority in getting compensation than those not registered.

Article 55

After a mortgage contract of urban real estate is signed, the newly constructed buildings on this land do not fall within the things mortgaged. When the mortgaged real estate needs to be auctioned, such newly constructed buildings may be auctioned together with the things mortgaged, however, the mortgagee shall not have the priority in getting compensation from the money received from auction of such newly constructed buildings. If the use-right of a contracted waste land is mortgaged according to the provisions of this Law or the use-right of the land occupied by construction structures such as workshops of town (township) and village enterprises are mortgaged, after the realization of mortgage, the collective ownership and usage purpose of the land may not be changed without going through legal procedures.

Article 56

The mortgagee shall have the right of priority for compensation from the money received from auctioning of the use-right of allotted state-owned land after payment equivalent to the amount payable as the transfer of land use-right according to law.

Article 57

A third person who guarantees by mortgage for a debtor shall have the right over the debtor for compensation after the realization of mortgage.

Article 58

A mortgage shall cease to exist with the disappearance of the things mortgaged, however, compensation received from the disappearance thereof shall be served as mortgaged property.

Section 5 Mortgage of Maximum Amount

Article 59

Mortgage of maximum amount as the term is used in this Law means that, as agreed upon by a mortgager and a mortgagee and within the maximum amount of creditor's rights, the things mortgaged are served as guarantee to creditor's rights occurring consecutively within a certain period of time.

Article 60

A borrowing contract may be accompanied by a mortgage contract of maximum amount. A contract signed by a creditor and a debtor on a particular commodity occurring transactions consecutively in a certain period of time may be accompanied by a mortgage contract of maximum amount.

Article 61

Creditor's rights of a principal contract with mortgage of maximum amount may not be transferred.

Article 62

Apart from the provisions of this section, other provisions of this Chapter shall also apply to mortgage of maximum amount.

Chapter IV

Pledge

Section 1 Pledge of Movables

Article 63

Pledge of movables as the term is used in this Law means guarantee under which the debtor or a third person transfers his movables to be possessed by the creditor, and uses such movables as creditor's rights. If the debtor fails to pay the debt, the creditor has the right, in accordance with the provisions of this Law, to get compensation in priority from the money received from converting such movables into cash or from auctioning and selling such movables. Subject to the provisions in the preceding paragraph, the debtor or the third person is a pledger, the creditor is a pledger, and the movables so transferred are the things pledged.

Article 64

A pledger and a pledgee shall conclude a pledge contract in a written form. A pledge contract shall enter into force from the time when the things pledged are transferred to be possessed by the pledgee.

Article 65

A pledge contract shall include the following particulars:

1. category and amount of the principal creditor's right to be guaranteed;

2. time limit for the debtor to pay his debt;

3. name, quantity, quality and descriptions of the things pledged;

4. scope of the guarantee;

5. time for the transfer and delivery of the things pledged; and

6. other matters and items deemed by the parties as necessary to be included.

A pledge contract which fails to completely include the particulars provided in the preceding paragraph may be added and amended.

Article 66

A pledger and a pledgee may not stipulate in their contract that the ownership over the things pledged would be transferred to the pledgee if the pledgee is not fully compensated and paid upon the expiration of the term for performance of the debt.

Article 67

The scope of guarantee by pledge includes the principal creditor's right as well as interests, fine for breach of agreement, compensation for loss and damage, maintenance costs of the things pledged and expenses for the realization of the pledge. Where a pledge contract has otherwise stipulations, such stipulations shall apply.

Article 68

A pledgee has the right to collect the derivatives of the hypothecated assets. Should there be other arrangements in the hypothecation contract, those arrangements shall be followed instead. The derivative referred to in the preceding paragraph shall first be used to write off the expenses for collecting the derivatives.

Article 69

A pledgee shall be liable to properly keep and maintain the things pledged. If the things pledged are lost or damaged due to improper maintenance, the pledgee shall bear civil liability. If a pledgee can not properly keep and maintain the things pledged, which might cause disappearance of or damage to them, the pledger may require the pledgee to deposit the things pledged, or require to clear off the creditor's rights in advance and to return the things pledged.

Article 70

Where the things pledged exist the probability of loss, damage or apparent decrease in value, which is sufficient to harm the rights of the pledgee, the pledgee may require the pledger to tender corresponding guarantee. If the pledger fails to tender, the pledgee may auction or sell the things pledged, and make a agreement with the pledger that the money received from auction or sale shall be used to pay in advance the creditor's rights so guarantee or deposit at the third person agreed upon with the pledger.

Article 71

Where the debtor performs his debt at the expiration of the term for performance of the debt or the pledger pays in advance the creditor's rights so guaranteed, the pledgee, shall return the things pledged. A pledgee who is not paid at the expiration of the term for performance of the debt may, by agreement with the pledger, convert the things pledged into cash or auction or sell the things pledged. After the things pledged are converted into cash or auctioned off or sold, the proportion of the money in excess of the amount of creditor's rights shall be owned by the pledger, and the proportion in shortage shall be paid by the debtor.

Article 72

A third person who tenders guarantee by pledge for the debtor shall, after the pledgee has realized his rights of pledge, have the right to get compensation from the debtor.

Article 73

A pledge shall cease to exist along with the disappearance of the things pledged. The compensation received from such disappearance shall be served as pledged property.

Article 74

A pledge exists together with creditor's rights guaranteed. At the time the creditor's rights cease to exist, the pledge shall also cease to exist.

Section 2 Pledge of Rights

Article 75

The following rights may be pledged:

1. draft, cheque, promissory notes, bonds, deposit certificates, warehouse receipt and bills of lading;

2. shares and stocks, which are duly transferable according to law;

3. property rights in the exclusive use right of trademark, patent right and the copyrights, which are transferable according to law; and

4. other rights which may be pledged according to law.

Article 76

Where drafts, cheques, promissory notes, bonds, deposit certificates, warehouse receipts or bills of lading are used as pledge, the certificates of right shall be delivered to the pledgee within the time limit as contracted. The pledge contract shall come into force on the date of delivery of such certificates.

Article 77

Where drafts, promissory notes, cheques bonds, deposit certificates, warehouse receipts or bills of lading, on which the date of cashing or taking delivery of goods is marked, are used as pledge, and if such date of cashing or taking delivery of goods of such drafts, promissory notes, cheque, bonds, deposit certificates, warehouse receipts or bills of lading is earlier than the time limit for performance of the debt, the pledgee may cash or taking delivery of goods prior to the expiration of the time limit for performance of the debt, and by agreement with the pledger, use the amount so cashed or goods taken delivery of to pay in advance the creditor's rights guaranteed or deposit at the third person agreed upon with the pledger.

Article 78

Where stocks which are transferable according to law are used as pledge, the pledger and the pledgee shall conclude a written contract and complete pledge registration with the securities registration organization. A pledge contract shall come into force on the date of registration. Stocks, once used as pledge, may not be transferred, however, those consented through negotiation by the pledger and the pledgee may be transferred, the money received from such transfer by the pledger shall be used to pay in priority the creditor's rights so guaranteed to the pledgee or be deposited at the third person agreed upon with the pledgee. Where shares of limited liability companies are used as pledge, the relevant provisions concerning shares transfer of the Company Law shall apply thereto. The pledge contract shall come into force from the date on which the shares pledge is recorded in the name list of shareholders.

Article 79

Where the property right in the exclusive use rights of trademarks, the patent rights or the copyrights, which is transferable according to law, is used as pledge, the pledger and the pledgee shall conclude a written contract and complete pledge registration with their respective administrative department. The pledge contract shall come into force on the date of registration.

Article 80

After the right provided in Article 79 of this Law is used as pledge, the pledger may not transfer or license others to use them, however, those consented through negotiation by the pledger and the pledgee may transferred or licensed to others for use. The transfer remuneration and royalties received by the pledger shall be used to pay in advance the creditor's rights so guaranteed to the pledgee or be deposited at the third person agreed upon with the pledgee.

Article 81

Apart from the provisions of this Section, the provisions of Section 1 of this Chapter shall apply to the pledge of rights.

Chapter V

Lien

Article 82

"Lien" as the term is used in this Law means that, subject to the provisions of Article 84 of this law, a creditor possesses the movables of the debtor as contracted, and if the debtor fails to pay his debt within the term as contracted, the creditor shall have the right to keep lien of such property in accordance with the provisions of this Law, and take the priority in compensation from the money received from converting such property into cash or from auctioning off and selling such property.

Article 83

The scope of guarantee by lien covers the principal creditor's right, as well as interests, fines for breach of agreement, compensation for loss and damage, maintenance costs of things under lien and expenses for the realization of the lien.

Article 84

With respect to the creditor's rights arising from maintenance contract, transport contract, processing and consignment contract, if the debtor fails to pay his debt, the creditor shall have the right of lien.

The provisions of the preceding paragraph shall apply to other contracts which are subject to liens as provided by law.

The parties may stipulate in the contract the things which may not be under lien.

Article 85

If a piece of property under lien is divisible thing, the value of the thing under lien shall be equivalent to the amount of a debt.

Article 86

The lienor shall be liable to properly maintain and keep the things under lien. If the loss of or damage to the things under lien is caused due to improper maintenance and storage, the lienor shall bear civil liability.

Article 87

A creditor and a debtor shall stipulate in a contract that, after the creditor takes lien of property, the debtor shall perform his debt within a term not less than two months. If the creditor and the debtor fail to make such stipulations in the contract, the creditor shall, after taking lien of the debtor's property, determine a term longer than two months and notify the debtor to perform his debt in that term.

If the debtor fails to perform his debt as scheduled, the creditor may, by agreement with the debtor, convert the things under lien into cash or auction off and sell the things under lien.

After the conversion into cash of the things under lien or auction and sale of such things, the proportion of money in excess of the creditor's right shall be owned by the debtor, the proportion in shortage shall be paid by the debtor.

Article 88

A right of lien ceases to exist under the following reasons:

1. where the creditor's right ceases to exist; or

2. where the debtor tenders separate guarantee which is accepted by the creditor.

Chapter VI

Earnest

Article 89

The parties concerned may stipulate that one party pays earnest as a guarantee for the creditor's rights to the other party. After the debtor pays his debt, such earnest shall be converted as the amount of price or be returned. The party which pays such earnest shall, if failing to perform his debt as contracted, have no right to require for the return of the earnest; and the party which accepts earnest shall, if failing to perform his debt as contracted, return two times of the earnest.

Article 90

Earnest shall be stipulated in a written form. The parties concerned shall also stipulate in the earnest contract the term for payment of earnest. An earnest contract shall come into force from the date on which the earnest is actually paid.

Article 91

The amount of earnest shall be stipulated by the parties, but may not exceed 20 percent of the amount of the subject-matter of the principal contract.

Chapter VII

Supplementary Provisions

Article 92

"Immovable" as the term is used in this Law means land as well as the things fixed on the land such as buildings and forest and trees.

"Movables" as the term is used in this Law means the things other than the immovables.

Article 93

For the purpose of this Law, guarantee contract, mortgage contract, pledge contract or earnest contract may be a written contract which is separately concluded, including letters and mail and facsimiles of guarantee nature among the parties concerned, and also may be the guarantee clauses in the principal contract.

Article 94

To convert into cash or sell the things mortgaged, things pledged or things under lien, the market price shall be taken as a reference.

Article 95

This Law shall enter into force on October 1, 1995.

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Law of the People's Republic of China on the People's Bank of China

(Adopted at the Third Session of the Standing Committee of the Eighth National People's Congress and promulgated by Decree No.46 of President of the People's Republic of China on March 18,1995)

Chapter I General Provisions

Article 1 This law is formulated for the purpose of establishing the status and functions of People's Bank of China (PBC), ensuring the correct formulation and implementation of the State monetary policies, instituting and perfecting a macro-control system through the central bank and strengthening supervision and administration over the banking industry.

Article 2 PBC is the central bank of the People's Republic of China.

As the central bank, PBC shall formulate and implement monetary policies and exercise supervision and control over the banking industry in the country under the leadership of the State Council.

Article 3 The aim of monetary policies is to maintain the stability of the value of the currency and thereby promote economic growth.

Article 4 PBC shall perform the following functions:

(1) Formulate and implement monetary policies in accordance with the law;

(2) Issue Renminbi (RMB) and control its circulation;

(3) Examine, approve, supervise and administer banking institutions in accordance with regulations;

(4) Supervise and control the financial market in accordance with regulations;

(5) Promulgate ordinances and rules concerning financial administration and business;

(6) Hold, administer and manage the State foreign exchange reserve and gold reserve;

(7) Manage the State treasury;

(8) Maintain the normal operation of the systems for making payments and settling accounts;

(9) Be responsible for statistics, investigation, analysis and forecasting for the banking industry;

(10) Engage in relevant international banking operations in its capacity as the central bank of the State; and

(11) Other functions assigned to it by the State Council.

In order to implement monetary policies, PBC may carry out financial operations in accordance with the relevant provisions of Chapter IV of this law.

Article 5 PBC shall report its decisions concerning the annual supply of banknotes, interest rates, foreign exchange rates, and other major issues specified by the State Council to the State Council for approval before implementation.

PBC shall immediately carry out decisions on matters concerning monetary policies, but not specified in the preceding paragraph, and report them to the State Council for the record.

Article 6 PBC shall submit to the Standing Committee of the National People's Congress an annual report on monetary policies and the supervision and administration of the financial affairs.

Article 7 PBC shall, under the leadership of the State Council, independently implement monetary policies, perform its functions and carry out its operations according to law free from any intervention by local governments or government departments at all levels, public organizations or individuals.

Article 8 All capital of the PBC is allocated by the State and owned by the State.

Chapter II Organization

Article 9 PBC shall have a governor and a certain number of deputy governors.

The governor of PBC shall be nominated by the Premier of the State Council, and affirmed by the National People's Congress for the post but whereas the National People's Congress is not in session, affirmed by the Standing Committee of the National People's Congress and appointed or removed by the president of the People's Republic of China for the post. The deputy governors of the PBC shall be appointed or removed by the Premier of the State Council.

Article 10 PBC shall institute a system in which the governor assumes the full responsibility. The governor shall direct the work of PBC and the deputy governors shall assist the governor in his/her work.

Article 11 PBC shall establish a monetary policy committee whose functions, composition and working procedures shall be prescribed by the State Council and reported to the Standing Committee of the National People's Congress of the record.

Article 12 PBC shall, for performing its functions, establish branches as its representative organs and exercise centralized and unified leadership and control over those branches.

The branches of the PBC, after being authorized by the Bank, shall be responsible for the supervision and control of the banking operation and for handling relevant business operations in the areas under their respective jurisdiction.

Article 13 The governor, deputy governors and other staff of PBC shall be diligent in carrying out their functions, refrain from abuse of power, malpractices for gaining private interests, or holding posts concurrently in any other banking institution, enterprise or foundation.

Article 14 The governor, deputy governors and other staff of PBC shall keep State secrets according to law and be obligated to keep secrets of the banking institutions and the clients under their supervision and control.

Chapter III Renminbi

Article 15 The legal tender of the PBC is Renminbi (RMB). Renminbi shall be used for repaying all public or private debts according to its face value within the territory of the People's Republic of China and not be whatsoever rejected by any organization or individual.

Article 16 The basic unit of Renminbi is the yuan and the units of fractional currency of Renminbi are the jiao and the fen.

Article 17 Renminbi shall be printed, minted and issued solely by PBC.

PBC shall make public announcement of the issuing date, face values, designs, patterns and specifications of a new Renminbi issue.

Article 18 Any counterfeiting, altering or illegal printing or minting of Renminbi is prohibited. Selling or buying counterfeit or altered Renminbi is prohibited. Transportation, possession or use of counterfeit, altered or illegally printed or minted Renminbi is prohibited. Deliberate damaging of Renminbi is prohibited. Illegal use of the image of Renminbi in propaganda materials, publications or other commodities is prohibited.

Article 19 No organization or individual may print or issue promissory notes as substitutes for Renminbi to circulate on the open market.

Article 20 The damaged or soiled Renminbi shall be exchanged in accordance with the regulations of PBC and PBC shall be responsible for collecting and destroying the aforesaid Renminbi.

Article 21 PBC shall establish a Renminbi issue treasury and its branches shall establish subsidiary issue treasuries. The subsidiary issue treasuries shall, in allocating Renminbi issue funds, act on the order of allocation from their superior treasury. No organization or individual may use the issue fund in violation of the relevant regulations.

Chapter IV Business Operations

Article 22 PBC may use the following instruments to implement the monetary policies:

(1) reserve fund at a required ratio deposited in PBC by banking institutions under demand;

(2) base interest rates fixed by the central bank;

(3) rediscount for banking institutions which have opened accounts in PBC;

(4) provision of loans for commercial banks;

(5) deals in State bonds and other government bonds and foreign exchange on the open market; and

(6) other monetary policy instruments defined by the State Council.

PBC may work out the specific conditions and procedures when applying the monetary policy instruments set forth in the preceding clauses to implement monetary policies.

Article 23 PBC shall manage the State treasury in accordance with the laws and administrative rules and regulations.

Article 24 PBC may issue government bonds to banking institutions and organize to exchange government bonds on behalf of the financial department of the State Council.

Article 25 PBC may open accounts for banking institutions as needed, but may not overdraw the accounts of the banking institutions.

Article 26 PBC shall organize or assist in organizing banking institutions in settling inter-institutional accounts, coordinating such activities and providing such services. PBC shall work at specific procedures for such operation.

Article 27 PBC may, for the implementation of monetary policies, determine the amounts, repayment schedules, rates of interest and forms of loans to commercial banks, but the time limit for such loans shall not exceed one year.

Article 28 PBC must not give any overdraw in exceeding financial budget of the government or directly subscribe to or act as sole sales agent for State bonds and other government bonds.

Article 29 PBC must not provide loans to the local governments, governmental departments of various levels, non-bank financial institutions and other organizations or individuals except to non-bank financial institutions specially permitted by the State Council.

PBC must not act as financial guarantor for any organization or individual.

Chapter V Supervision and Control over the Banking Industry

Article 30 PBC shall, in accordance with the law, exercise supervision and control over banking institutions and their business operations to maintain the legitimate, stable and sound operation of the banking industry.

Article 31 PBC shall, in accordance with relevant regulations, examine and approve the establishment, change, termination and scope of business of a banking institution.

Article 32 PBC shall have the power to audit, check and supervise at any time the deposits, loans, account settling, bad debts and other business affairs of banking institutions.

PBC shall have the power to check and supervise the raising or lowering of interest rates on deposits or loans by banking institutions in violation of regulations.

Article 33 PBC shall have the power to demand banking institutions to submit balance sheets of their assets, statements of profit and loss and other financial and accounting reports and materials in pursuance of regulations.

Article 34 PBC shall be responsible for compiling comprehensive statistics and accounting statements for the national banking system and for publishing them in accordance with relevant State provisions.

Article 35 PBC shall guide and supervise the business operations of the State banks responsible for implementing State policies.

Article 36 PBC shall establish and perfect auditing and checking system for and strengthen its control over the banking system.

Chapter VI Finance and Accounting

Article 37 PBC shall exercise independent control over its financial budget. The budget of PBC shall be incorporated in the central budget after it has been examined and verified by the financial department of the State Council.

Article 38 PBC shall turn over to the State treasury the entire net profit from its every accounting fiscal yearly income minus annual expenditures after withdrawing funds for its general reserve at a proportion determined by the financial department of the State Council.

Losses sustained by PBC shall be offset by State allocations.

Article 39 PBC shall abide by the laws, administrative rules and regulations and the unified State accounting system in managing its revenue and expenditures and in accounting and be subject to the respective auditing and supervision of the audit institution and the financial department of the State Council in pursuance of the law.

Article 40 PBC shall, within three months after the end of every fiscal year, complete balance sheets of its assets, statement of profit and loss and relevant accounting reports, prepare its annual report and publish them in accordance with relevant regulations of the State.

The fiscal year of the PBC begins on the first of January and ends on the thirty-first of December of the Gregorian calendar.

Chapter VII Legal Liabilities

Article 41 Anyone who illegally prints or mints Renminbi, sells counterfeit Renminbi, or knowingly transports counterfeit money or illegally printed or minted money shall be investigated for criminal responsibilities in accordance with the law.

Anyone who alters Renminbi or sells altered Renminbi or knowingly transports altered Renminbi shall, if the case constitutes a crime, be investigated for criminal responsibilities and shall, if the circumstances are not serious enough, be punished by the public security organ with a detention of no more than 15 days and a fine of no more than RMB 5,000 yuan.

Article 42 Anyone who buys counterfeit or altered Renminbi or knowingly holds or uses counterfeit or altered or illegally printed or minted Renminbi shall, if the case constitutes a crime, be investigated for criminal responsibilities and shall, if the circumstances are not serious enough, be punished by the public security organ with a detention of no more than 15 days and a fine of no more than RMB 5,000 yuan.

Article 43 In the event that anyone illegally uses the image of Renminbi in propaganda materials, publications or other commodities, PBC shall order to make corrections and destroy the illegally used image of Renminbi, confiscate any income illegally obtained and impose a fine of no more than RMB 50,000 yuan.

Article 44 In the event that anyone prints or sells promissory notes as substitutes for Renminbi for circulation on the open market, PBC shall order to cease the illegal practice and impose a fine of no more than RMB 200,000 yuan.

Article 45 In the event that anyone violates the laws or administrative rules or regulations regarding administration of banking, PBC shall order to cease the illegal practice and give administrative sanctions in accordance with the law; if the case constitutes a crime, criminal responsibilities shall be affixed.

Article 46 Upon refusal to administrative punishments, administrative procedures shall be taken in accordance with the "Administrative Procedure Law of the People's Republic of China".

Article 47 Whereas PBC commits any of the following acts, the person directly in charge and other persons held directly responsible shall be subject to administrative punishments; if the case constitutes a crime, criminal responsibilities shall be affixed in accordance with the law:

(1) Provide loan in violation of the stipulations in clause 1 of Article 29;

(2) Provide financial guarantee for a unit or an individual; or

(3) Use the currency to issue fund without authorization.

Whereas the aforesaid acts result in losses, the person directly in charge and other persons held directly responsible shall bear part of or all the liabilities for compensation.

Article 48 Whereas a local government or any other administrative organ, public organization or individual forces PBC and its functionaries into providing loans or guarantee in violation of Article 29 of this law, the person directly in charge and other persons held directly responsible shall be subject to administrative punishments in accordance with the law; if the case constitutes a crime, they shall be investigated for criminal responsibilities according to law and shall bear part of or all the liabilities for compensation for any resultant losses.

Article 49 Any functionary of PBC who divulges any State secret shall, if the case constitutes a crime, be investigated for criminal responsibilities according to law; if the circumstances are not serious enough, he/she shall be subject to administrative punishments according to law.

Article 50 Any functionary of the PBC who commits embezzlement, bribery, malpractices for personal gain, abuse of powers, or neglect of duties shall, if the case constitutes a crime, be investigated for criminal responsibilities according to law; if the circumstances are not serious enough, be subject to administrative punishments according to law.

Chapter VIII Supplementary Provisions

Article 51 This Law shall go into effect as of the date of its promulgation.

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Regulations on Information Disclosure of Listed Companies

The Regulations on Information Disclosure of Listed Companies, approved by China Securities Regulatory Commission’s 196th chairman meeting on December 13, 2006, are hereby issued and shall take effect as from the date of issue.

CSRC Chairman: Shang Fulin

January 30, 2007

Regulations on Information Disclosure of Listed Companies

Chapter I General Rules

1. According to laws including Corporate Law and Securities Law and administrative bylaws, these Regulations are formulated in order to standardize the information disclosures of stock issuers, listed companies and other disclosure obligors, to strengthen the management of information disclosures and to protect the legitimate interest of investors.

2. The disclosure obligors shall disclose information on truthful, accurate, complete and timely bases. Any falsehood, misleading statement or major omission is prohibited.

Information shall be disclosed to all investors at the same time.

Companies with stocks and derivatives listed both home and abroad shall make sure that any information revealed in overseas market(s) must be disclosed to Chinese market(s) as well.

3. The directors, supervisors and senior managers of the issuers and listed companies shall faithfully and assiduously fulfill their obligation of information disclosure, which shall be authentic, accurate, complete, prompt and fair.

4. People with access to insider information shall not disclose or divulge or trade on the information before it is available to the public.

5. Documentations to be disclosed include share offering prospectus, pro rata offering prospectus, listing announcements, periodical reports and ad hoc reports.

6. The disclosure obligors shall present the disclosure documentations and supporting files to the exchange for registration and make the disclosure public through media appointed by CSRC.

The disclosure obligors shall not make the disclosure on their own websites or other media before it’s published on the appointed media. They shall not resort to news conference in lieu of the obligated announcement, nor shall they default on ad hoc report obligation and replace it with periodical report.

7. The disclosure obligors shall present the disclosure documentations and supporting files to the local securities regulator and place the copies at the company’s office premise for possible public reference.

8. Information disclosure shall be made in Chinese. If foreign language disclosure is to be made simultaneously, the disclosure obligor shall ensure consistency between the languages. In case of any disparities, the Chinese version will prevail.

9. CSRC will supervise the documentation, content and management activities of information disclosures according to laws. The behaviors of the listed company’s shareholders, actual controller(s) and disclosure obligors will also be monitored.

The stock exchange(s) shall supervise the disclosure of listed companies and urge them to disclose information timely and accurately. The exchanges shall also perform real time monitoring over the trading of securities and their derivatives. Listing rules and information disclosure rules of the exchanges shall be submitted to CSRC for approval.

10. CSRC will regulate separately over the information disclosure activities of listed companies in special industries such as financial and real estate sectors.

Chapter II Stock Offering, Pro Rata Offering Prospectus & Listing Announcement

11. Stock issuers shall prepare the offering prospectus in line with CSRC’s relevant regulations. Any information to have major impact on the investors’ decisions shall be disclosed in the stock offering prospectus.

After the public offering application has been approved by CSRC, the stock issuer shall announce the prospectus prior to the issuance.

12. The directors, supervisors and senior managers of the issuing companies shall sign their confirmation in the prospectus to assure that the information contained is authentic, accurate and complete.

The prospectus shall bear the official seal of the issuing company.

13. IPO issuers shall disclose the offering prospectus draft for application on CSRC’s website after CSRC has accepted the application and before the Public Offering Review Committee deliberates the application.

Offering prospectus draft is not the formal documentation of stock offering and cannot contain price information and is not to be based upon for the offering.

14. The issuing company shall make written explanation to CSRC about any important incident(s) taking place after the offering application approval and before the offering is completed. The prospectus shall be amended or supplementary announcement shall be made about the latest development post CSRC’s approval.

15. Stock listing applicants shall provide listing announcements according to the exchanges’ rules and the announcement shall be disclosed after securing the exchange(s)’ nod.

The directors, supervisors and senior managers of the issuing companies shall sign their confirmation in the listing announcements to assure that the information contained is authentic, accurate and complete.

The listing announcement shall bear the official seal of the issuing company.

16. In case the prospectus or listing announcement have cited any professional opinions or reports of any sponsors or securities service providers, the content shall tally with those presented by the sponsors or securities service providers. None of these kinds of opinions shall be misleading.

17. Articles 11 to 16 of the Regulations, which are about stock offering prospectus, also apply to bond offering prospectus.

18. Listed companies shall make disclosures of any private offering of new shares in accordance with law(s).

Chapter III Periodical Reports

19. Listed companies’ periodical financial reports disclosure duties include those of annual report, interim report and quarterly report. Any information to have major impact on the investors’ decisions shall be disclosed.

The financial reports of a listed company shall be audited by CPA firms with qualifications for practice in securities- and futures-related business.

20. Annual report shall be prepared and disclosed within 4 months since the end of the fiscal year; Interim report shall be prepared and disclosed within 2 months since the end of the first half of the fiscal year; quarterly report shall be prepared and disclosed within 1 month since the end of the 3rd and 9th month of the fiscal year.

Financial report of the first fiscal quarter shall not be disclosed before the report of the last fiscal year has been disclosed.

21. Annual report shall contain the following information:

(1) basic information of the company;

(2) major accounting figures and financial indexes;

(3) company stock and bond issuance and changes; number of shares, bonds and shareholders and shareholding information of top 10 shareholders at the end of the reporting period;

(4) information about shareholders with stakes of 5% or above; controlling shareholders and actual controllers;

(5) information of positions, stock holding changes and annual remunerations of directors, supervisors and senior managers;

(6) board of directors’ report;

(7) management discussion and analyses;

(8) major incidents and their influence on the company during the reporting period;

(9) financial reports and full text of audit report;

(10) Other inclusions specified by CSRC.

22. Interim report shall contain the following information:

(1) basic information of the company;

(2) major accounting figures and financial indexes;

(3) company stock and bond issuance and changes; number of shareholders and shareholding information of top 10 shareholders; changes of controlling shareholders and actual controllers;

(4) management discussion and analyses;

(5) major lawsuit(s) and arbitration(s) and their influence on the company during the reporting period;

(6) financial reports;

(7) Other inclusions specified by CSRC.

23. Quarterly report shall contain the following information:

(1) basic information of the company;

(2) major accounting figures and financial indexes;

(3) Other inclusions specified by CSRC.

24. The directors and senior managers shall sign their confirmation in the periodical reports and the board of supervisors shall give its opinion in written to address the problems as to whether or not the board of directors’ report compilation and audit procedures are in line with laws, bylaws and CSRC rules and whether or not the report’s content is authentic, accurate, complete and indicative of the listed company’s actual condition.

Any unsureness or dissent by directors, supervisors or senior managers over the truthfulness, accuracy or completeness of the periodical report shall be substantiated with good reasons, expressed and disclosed.

25. Any forecasted operational losses or big fluctuations shall be disclosed in form of earnings forecast.

26. If earnings are divulged before the disclosure of a periodical report or earnings rumors are spread to cause unusual fluctuations of the company’s securities or derivatives, the company shall take immediate action to report the financials of the period in question.

27. For periodical financial reports with nonstandard audit report, the board of directors shall make explanations focused on the issue concerned by the auditor.

Periodical financial reports with nonstandard audit report suspected of any foul play by the exchange shall be submitted to CSRC for investigations.

28. Listed company that fails to disclose annual report of interim report within required deadline will be inspected by CSRC and the securities exchange(s) will also make punishment treatment according to stock listing rules.

29. The format and compilation rules of annual report, interim report and quarterly report will be specified by CSRC separately.

Chapter IV Ad Hoc Report

30. If any incident happens which can have significant impact on listed company’s securities or derivatives trading prices and is unknown to the investors yet, the company shall make immediate disclosure to inform the public of the incident’s reason, present state and possible consequences.

The hereinabove incidents deem as significant include:

(1) major adjustment of the company’s operation strategies or business scopes;

(2) decisions of important investment or asset purchase;

(3) signing of contracts that can have significant consequences in the company’s asset, liabilities, shareholder equity or operational result;

(4) major debt obligations or default of major debt or large amount indemnifications,

(5) Large amount losses;

(6) significant changes of exterior conditions;

(7) changes of the company’s directors, more than 1/3 of supervisors or managers; president or managers’ inability to perform their duties;

(8) changes of share holding of shareholders with more than 5% of the total shares or actual controllers, or changes in their other controlled companies;

(9) registered capital reduction, merger, spin-off, dissolving or bankruptcy of the company; or being forced into bankruptcy or shut down according to laws;

(10) involvement in major lawsuit or arbitrations, board resolutions cancelled or invalidated by law(s);

(11) company investigated for law-breaking or rule-breaking activities, or criminally or administratively punished; directors, supervisors and senior management suspected of law-breaking or rule-breaking activities and investigated or constrained;

(12) enforcement of new laws, bylaws, regulations and government policies with possible impact on the company’s operation to a great extent;

(13) board’s resolution regarding new share issuance or other re-financing solutions or stockholding arrangement as incentives;

(14) court’s verdict of prohibition of stock transfer; more than 5% of the company ‘s shares held by any shareholder being impawned, frozen, juristically auctioned, consigned, entrusted or limited of voting rights according to law;

(15) major assets sealed up, detained, frozen, pledged or impawned;

(16) main or all business halted;

(17) major guarantee undertakings for another party;

(18) large amount government subsidies or other unexpected revenue that can have big influence over the company’s asset, liabilities, equity or operational results;

(19) change of accounting polities or accounting estimate;

(20) ordained by authorities or decided by the board to make corrections of previous information disclosure that contains errors, deviation from rules or false record;

(21) Other situations specified by CSRC.

31 Listed companies shall fulfill their disclosure obligations immediately after any one of the following has taken place:

(1) the board of directors or board of supervisors has come to a resolution on the major incident;

(2) relevant parties have entered into any letter of intention or agreement about the major incident;

(3) A director, supervisor or manger has been aware of the incident and reported about it.

If any of the following situations has arisen in advance of the above three, the listed company shall take immediate action to disclose the incident’s status quo and the factor that can influence it;

(1) the situation is hard to keep confidential;

(2) it has been divulged to the market;

(3) Trading of company securities or derivatives has gone abnormal.

32. If a disclosed incident is about to cause major influence on the trading prices of company securities or derivatives, the listed company shall disclose the progress, changes of the incident and its possible influences in time;

33. If any incident happens to the listed company’s subsidiary which can have significant impact on listed company’s securities or derivatives trading prices and is unknown to the investors yet, the company shall also fulfill its disclosure obligations.

Disclosure obligations also arise if such incident happens to the companies of which the listed company has shares;

34. If any M&A, spin-off, share offering or stock repurchase connected with the listed company has caused big changes in the company’s total share capital, shareholders or actual controllers, the disclosure obligors shall disclose it according to law.

35. The listed company shall pay attention to any unusual trading of its securities and derivatives and media report regarding the company.

If such trading abnormities or media reports are found to have major influence on the trading of the securities and derivatives of the company, the listed company shall make immediate effort to find out the reasons and truth, using written inquiry if necessary.

The listed company’s shareholders, actual controllers or persons acting in concert shall timely and accurately inform the listed company of any share transfer, asset restructuring or other events and cooperate with the company to fulfill its disclosure obligations.

36. If the trading of the company’s securities or derivatives has been deemed abnormal by CSRC or the stock exchanges, the listed company shall try to find out the reason and reveal it to the public in time.

Chapter V Management of Information Disclosure Affaires

37. Listed companies shall establish rules governing information disclosure affairs.

The rules include:

(1) specification and standard of information that should be disclosed;

(2) work flows of passage, audit and reveal of undisclosed information;

(3) duties of information disclosure department and its director;

(4) duties of directors, board of directors, supervisors, board of supervisors and senior managers in reporting, deliberation and disclosing;

(5) recording and archive system of duty fulfillment of directors, supervisors and senior mangers;

(6) confidentiality measures on undisclosed information, scope of insiders and their confidentiality obligations;

(7) internal control and monitoring scheme of financial management and accountings;

(8) work flows of application, deliberation and disclosure of information; rules of communication with investors, securities service providers and media;

(9) archive management of information disclosure documents and files;

(10) management and reporting rules related to subsidiaries’ information disclosure;

(11) rules to go behind unauthorized disclosures and punishment of violators;

Information disclosure affairs management rules shall be approved by directors’ meeting and reported to local securities regulator and exchange for archive.

38. Listed company’s directors, supervisors and senior managers shall perform their due diligence focused on the compilation of information disclosure documentations to make sure that the periodical and ad hoc reports are disclosed within deadlines. They shall also facilitate the listed company or other disclosure obligors to fulfill their obligations.

39. Listed companies shall establish procedures of compilation, review and disclosure of periodical reports. Managers, financial chief, board secretary and other senior management shall prepare periodical report draft and present it to the board for approval; the draft will be submitted by the board secretary to the board; the president is responsible of summoning and presiding over the board meeting to deliberate the periodical report; the board of supervisors is responsible of reviewing the periodical report prepared by the board of directors; the board secretary is responsible of organizing the disclosure of periodical report.

40. Listed companies shall establish work flows of reporting, forwarding, deliberating and disclosing of major events. When directors, supervisors and senior managers are informed of the events, they shall fulfill the reporting obligation according to the company rule in no time; after receiving the report, the president of the board shall report to the board immediately and urge the board secretary to coordinate the disclosure of an ad hoc report.

41. When the listed company is communicating its operations, financial profile and other events to any institution or individual through performance introduction meeting, analyst conference, road show or investor investigations, it shall not reveal any insider information.

42. The directors shall keep track of the company’s operation, financial status, significant happenings and their consequences and take initiatives to check out and acquire the data in need for decision making.

43. Supervisors shall supervise disclosure behaviors of the directors and senior managers; they shall pay attention to the company’s information disclosure and carry out investigations and make suggestions when foul play is found.

The board of supervisors shall issue written reviewing opinions over the periodical report and indicate whether its compilation and audit are in accordance with laws, administrative bylaws and rule of CSRC and whether the report’s content can truthfully, accurately and completely present the listed company’s real situation.

44. Senior management shall timely report to the board of any major events, development of disclosed incidents and other information regarding the company’s operation or financials.

45. The board secretary is responsible of organizing and coordinating the company’s information disclosure affairs. He/she shall collect the information to be disclosed and report it to the board and maintain continued attention to media reports about the company and try to find out the reports’ credibility initiatively. The board secretary has the right to participate in the shareholders’ meeting, board of directors meeting, board of supervisors meeting and senior management meeting. He/she has the right to be informed of the company’s financial and operational state and can review all the files related to the information disclosures.

Board secretary has the responsibility of arranging for the information disclosure of the listed company. Disclosures shall be made in forms of either board of supervisors’ statement or board of directors’ statement. Without authorization, directors, supervisors and senior managers are not allowed to disclose the listed company’s information.

The listed company shall facilitate the secretary of board’s task of information disclosure; financial head shall help the secretary with that as well.

46. Shareholders and actual controllers of listed company shall inform the board of the events as listed below and help the company with disclosures.

(1) changes of share holding of shareholders with more than 5% of the total shares or actual controllers, or changes in their other controlled companies;

(2) court’s verdict of prohibition of stock transfer; more than 5% of the company ‘s shares held by any shareholder is impawned, frozen, juristically auctioned, consigned, entrusted or limited of voting rights according to law;

(3) major asset or business restructures of the listed company are to be conducted;

(4) Other events specified by CSRC.

If information is divulged before the it is disclosed and has caused unusual fluctuations in the trading of the company’s securities or derivatives, the shareholders or actual controllers shall timely and faithfully report that to the listed company in written and cooperate with the company to make timely and accurate disclosures.

Shareholders and actual controllers shall not abuse their shareholder rights or dominating positions and are not supposed to request for insider information from the listed company.

47. When listed company is offering stocks in private, its controlling shareholders, actual controllers and share offering buyers shall provide relevant information to the company in a timely manner and help it with the disclosure.

48. Directors, supervisors, senior managers, shareholders of 5% plus of shares, parties acting in concert, and actual controllers shall submit the list of listed company’s related parties and explanation of relationship to the listed company’s board of directors. The listed company shall go through the deliberation procedures for related party transactions and strictly abide by the rule of voting withdrawal of related directors. Related parties shall not try to conceal their relationship or circumvent deliberation procedures and information disclosure obligations of listed company’s related party transactions.

49. Shareholders or actual controllers securing more than 5% of shares through consignment or trust shall inform the listed company of such trust and help the company with its information disclosure.

50. Disclosure obligors shall provide all relevant information to the sponsor and the securities service providers, and the information must be authentic, accurate and complete without reluctance, concealment or falsehood.

If the sponsor or securities service provider finds any false record, misleading statement, major omission or other significant irregularities, in the disclosed information when issuing disclosure documentations, the sponsor or securities service provider shall require the company for complement or corrections. In case the disclosure obligor refuses to make that complement or correction, the sponsor or securities service provider shall report that to the local securities regulator or exchange.

51. If the listed company dismisses a CPA firm, it shall timely inform the firm after board resolution has been made. When the shareholders’ meeting votes on the dismissal, the CPA firm should be allowed to make its statement. If the shareholders’ meeting votes for the dismissal, the listed company shall explain the reasons and provide the CPA firm’s statement in the disclosure.

52. The sponsor or securities service provider who issues professional documentations for the disclosure obligor shall give their opinions with due diligence, sound credibility and in accordance with lawful business rules, practitioner standards and ethical standards to make sure that the files are authentic, accurate and complete.

53. Certified public accountants shall observe risk oriented audit philosophy and perform their functions strictly in accordance with CPA practitioner rules. They shall try to improve the forensic procedures, adopt scientific forensic approaches and techniques and develop sound understanding of the subject company’s background and environment. The auditors shall pay close attention to avoid big misreporting and glean sufficient and appropriate evidence to make rational forensic conclusions.

54. Asset assessment agencies shall abide by their professional ethics and follow assessment rules or other standards to select the right assessment approaches. Presumptions for the assessment shall be compatible with realistic situations. Sufficient proofs shall be collected regarding the legitimacy of the assessment subject’s transactions, income, expenditures, investment and the reliability of forecasts. Various possibilities and their influences shall be considered to come to rationalized assessment conclusions.

55. No agent or individual shall secure, provide or disseminate insider information of listed companies, nor shall they utilize any obtained insider information to trade or recommend others to trade the company’s securities or derivatives. No insider information shall be used in the investment value analysis report or research report.

56. The media shall objectively and faithfully report information about the listed companies and function as public watchdogs.

No agent or individual shall provide, spread false or misleading information about listed companies.

Violators of the two rules above shall take the indemnification accountabilities according to law if such violation has caused any damages to the investors.

Chapter VI Supervision, Management and Legal Responsibilities

57. CSRC has the right to request the listed companies or other disclosure obligors or their directors, supervisors, senior mangers to explain, clarify or provide supporting document of their information disclosure and request the listed company to present the professional opinions issued by the sponsor or securities service provider.

If CSRC has any suspicion over the authenticity, accuracy or completeness of the documents issued by the sponsor and securities service provider, it can request the relevant agencies to explain or complete the documents and inspect their working notes.

In such cases, the listed company or other disclosure obligors or sponsor or securities service provider shall respond to those requests immediately and cooperate in CSRC’s investigation and inspections.

58. Listed company’s directors, supervisors and senior managers are accountable for the disclosed information’s authenticity, accuracy, completeness, immediacy and fairness. But they can be exempted of the responsibilities if there is sufficient proof that they have fulfilled their due diligence.

Listed company’s chairman of board, GM and board secretary hold the principal responsibility over the disclosed ad hoc reports’ information’s authenticity, accuracy, completeness, immediacy and fairness.

Listed company’s chairman of board, GM and board secretary hold the principal responsibility over the disclosed periodical reports’ information’s authenticity, accuracy, completeness, immediacy and fairness.

In case listed company’s directors, supervisors senior managers, shareholder, actual controllers, acquisition bidders or their directors, supervisors and senior managers have violated this regulation, CSRC is in the position to administer the following regulatory measures:

(1) correction ordination;

(2) regulatory talk

(3) letter of admonishment;

(4) credibility record and announcement of irregularities;

(5) deemed as unsuitable candidate;

(6) other regulatory measures according to law

60. Listed company that fails to establish information disclosure affairs management procedures according to these regulations shall be ordained by CSRC to make corrections. Those who refuse to make such corrections will be admonished and fined by CSRC.

61. Disclosure obligors who fail to disclose the information within deadline or disclose falsely, misleadingly, or with major omissions shall be punished by CSRC according to Article 193 of Securities Law.

62. Disclosure obligors who fail to deliver the relevant reports within deadline or report falsely, misleadingly, or with major omissions shall be punished by CSRC according to Article 193 of Securities Law.

63. Disclosure obligors who conceals related party relationship or circumvents disclosure obligations shall be punished by CSRC according to Article 193 of Securities Law.

64. Listed company’s shareholders or actual controllers who fail to cooperate in the company’s disclosure activities or try to extract insider information of the listed company shall be ordained to correct, admonished or fined.

65. Sponsors or securities service providers that breach Securities Law, administrative bylaws or CSRC rules shall be ordained to correct, summoned for regulatory talks, admonished in written or recorded in credit files by CSRC. If punishable according to administrative bylaws, they shall be punished accordingly by CSRC.

66. Any agencies or individuals who have divulged listed company’s insider information or traded on that information shall be punished by CSRC according to Articles 201, 202 of Securities Law.

67. Any agencies or individuals that forge or disseminate false information to cause securities market disturbance or media that report falsely or unobjectively shall be punished by CSRC according to Article 206 of Securities Law.

Unauthentic or misleading statement over securities or their derivatives trading shall be punished by CSRC according to Article 207 of Securities Law.

68. Suspected blackmailing of listed company with threatening of media report or other means shall be ordained to correct by CSRC or criminally punished by relevant authorities when regulatory opinions are issued by CSRC to the relevant authorities.

69. If the violation of these regulations by listed companies or other disclosure obligors is severe, CSRC can opt to prohibit the relevant personnel in charge from entering securities market.

70. If crimes are suspected in the violation of these regulations, the case will be transferred to law enforcement department for criminal punishment.

Chapter VII Supplementary Rules

71. Terminologies of the Regulations:

(1) sponsors and securities service providers to issue professional documents for the disclosure obligors refer to the sponsors, CPA firms, asset assessment agencies, law firms, financial advisors and credit rating agencies that prepare and issue letter of sponsorship, audit report, asset assessment report, legal opinions, financial advisory report and credit rating report for securities activities such as offering, listing and trading.

(2) “Timely” means within two trading days since the information can be disclosed.

(3) Related party transactions refer to transfer of resources or obligations between the listed company and its subsidiaries and the listed company’s related parties.

Related parties can be either legal persons or natural persons.

Legal persons listed below are listed company’s related legal persons:

1. legal persons that control the listed company directly or indirectly;

2. Legal persons other than the listed company and its subsidiaries that are also controlled by the same legal person defined in paragraph 1.

3. legal persons other than the listed company and its subsidiaries that are controlled directly or indirectly by related natural persons or of which the related natural persons are directors or senior managers;

4. legal persons holding more than 5% of the listed company’s shares or person acting in concert;

5. existence of situations specified hereinabove during the past 12 months or within 12 months to come according to relevant agreement;

6. Legal persons deemed by CSRC, exchange(s) or the listed company itself to be related pursuant to the rule of “essence more important than form” and probably to cause or have caused any interest bias at the listed company’s part.

Natural persons listed below are listed company’s related natural persons:

1. Natural persons that hold more than 5% of the listed company’s stock directly or indirectly.

2. directors, supervisors and senior managers of the listed company;

3. directors, supervisors and senior managers of legal persons that control the listed company directly or indirectly;

4. close families of natural persons specified in paragraph 1 and paragraph 2, including their spouse, parents, offspring older than 18 year of age, siblings, spouse’s parents, spouse’s siblings and offspring’s parents in law;

5. existence of situations specified hereinabove during the past 12 months or within 12 months to come according to relevant agreement;

6. Natural persons deemed by CSRC, exchange(s) or the listed company itself to be related pursuant to the rule of “essence more important than form” and probably to cause or have caused any interest bias at the listed company’s part.

(4) Appointed media refer to newspapers and website appointed by CSRC.

72. These Regulations are effective upon promulgation.

Publicly Listed Company Information Disclosure Implementation Rules (Trial) (No. 43 [1993] CSRC), Notice on Stock Public Offering and Information Disclosure Affaires (No. 19 [1993] CSRC), Notice on Strengthening of Audit of Listed Company Ad Hoc Report (No. 26 [1996] CSRC), Notice on Issues Related to Listed Company’s Clarification Announcement (No. 28 [1996] CSRC), Notice on Disclosure of Electronic Archive of Listed company (No. 50 [1998] CSRC), Notice on Supervision Strengthening of Disclosure of ST, PT Companies (No. 63 [2000] CSRC), Notice on Issues Related to New Share Offering Listed Company’s Interim Report (No. 69 [2001] CSRC) and Notice on Listed Company’s Ad Hoc Report & Appendixes’ Registration with CSRC’s Dispatched Offices (No. 7 [2003] CSRC) are abolished at the same time.

China Securities Regulatory Commission

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Decree of China Securities Regulatory Commission No. 24

The Measures for the Administration of Senior Managers of Securities Companies, which were deliberated and adopted at the 93rd executive meeting of the chairman of China Securities Regulatory Commission on June 4, 2004, are hereby promulgated and shall go into effect as of November 15, 2004.

Chairman, Shang Fulin

October 9, 2004

Measures for the Administration of Senior Managers of Securities Companies

Chapter 1: General Provisions

1. With the view of regulating the administration of senior managers of securities companies, promoting the formation of professional management contingents in securities industry, improving the business management level of securities companies, and protecting the lawful rights and interests of investors, the present Measures are formulated according to the Securities Law, the Company Law, the Decision of the State Council about Setting Administrative Licensing for the Administrative Examination and Approval Items Necessary to be Preserved, and other laws and administrative regulations .

2. The senior managers of securities companies (hereinafter referred to as the senior managers) mentioned herein refer to the persons who have leadership duties to make decisions, operate business and manage the company, namely, the chairman of the board, vice chairman of the board, supervisor, general manager, vice general manager, the person in charge of financial matters, the person responsible for compliance with the company’s regulations and the persons who actually perform the aforesaid functions.

3. A securities company shall select and engage the persons who have obtained the qualification for being the senior managers of securities company (hereinafter referred to as the SM qualification). Anyone without such qualification can’t assume the office of senior managers.

The SM qualification shall be approved by the China Securities Regulatory Commission (hereinafter referred to as the CSRC) according to law.

4. The senior managers shall observe the laws, the administrative regulations, the regulations of the CSRC, the articles of association of the company and the industrial criteria, and scrupulously abide by good faith, keep prudent and diligent, and faithfully perform their duties.

5. The CSRC shall make supervision and administration on the senior managers according to laws.

The Securities Association of China (hereinafter referred to as the SAC) and the stock exchanges shall conduct the management of the senior managers according to the laws, the administrative regulations, the regulations of the CSRC and the self-disciplinary rules.

Chapter 2: Qualification for Holding a Post

6. When applying for the qualifications of such senior managers as the chairman of board, the vice chairman of board and the chief supervisor, the applicant shall meet the following conditions:

(1) Having engaged in securities work for more than three years, or worked in fields of finance and law or as accountant for more than five years, or worked in economic field for more than ten years;

(2) Having passed the test on qualification level as approved by the CSRC;

(3) Having the educational background of college or university graduates or above;

(4) Being honest and keeping faith, having good professional ethics and no bad records within the past five years;

(5) Knowing well the relevant legal knowledge on the business management of securities companies, and having abilities of the business management and the organization and coordination that are necessary for performing the function of senior managers;

(6) Having no circumstances that prohibit them from holding the posts of senior managers and business personnel by the laws and administrative regulations such as the Company Law and the Securities Law;

(7) Other conditions as prescribed by the CSRC.

7. When applying for the SM qualification such as the general manager, vice general manager, the person in charge of finance and the person responsible for the compliance with regulations, the applicant shall satisfy the following conditions besides those as prescribed in items two to six of Article 6 herein.

(1) Having obtained the qualification for practice in securities industry;

(2) Having engaged in securities work for more than three years or in field of finance for more than five years;

(3) Having held the posts of department leaders or above in such financial institutions as securities, funds, futures, banks, insurance and etc. for not less than two years, or having management work experiences of the equivalent posts.

The board chairman or vice board chairman who exercises the business management powers of a company shall meet the conditions for holding the post as prescribed in this article.

8. When applying for the SM qualifications, the applicant shall be recommended by two senior managers currently holding the posts for more than one year, and submit the written recommendation opinions from them.

9. An applicant shall submit the following application documents to the CSRC when applying for the SM qualifications:

(1) The application form for the SM qualifications;

(2) The recommendation opinions of two recommenders.

(3) The audit reports on leaving post issued by the previous units, the appraisal opinions issued by the units he worked with during the past three years and the supervision opinions issued by the supervision departments of the financial institutions he once worked with in the past five years on the conditions concerning the work experiences of the applicant and whether he has ever been punished or had any bad records;

(4) Copies of the identity certificates;

(5) Copies of the certificate of educational background, the certificate of securities-related qualification, the conformity certificate for qualification level tests and the certificate of professional qualification;

(6) Legal opinions issued by the law firms;

(7) Other materials prescribed by the CSRC.

The recommendation opinions, the audit reports on leaving post, the appraisal opinions and the supervision opinions as prescribed in the second and third items of the preceding paragraph shall be mailed to the CSRC and the dispatched institution at the residence of the applicant by the entity or individual that issues the opinions as an agent, and other application documents shall be submitted to the dispatched institution of the CSRC at the residence of the applicant for recording.

10. The explicit recommendation opinions issued by the recommenders shall mainly describe the applicant’s morality, observance of laws and disciplines, vocational level and management ability.

11. The dispatched institutions of the CSRC shall examine the materials for recording within ten working days in receipt of them, review and talk with the applicant, and submit to the CSRC the examination opinions and the review and talk drafts.

12. The CSRC shall accept and examine the application materials according to law and make the decision on administrative approval. If the application meets the conditions, the approval shall be granted and the certificate of SM qualification shall be issued.

The CSRC may check the morality, working ability and working experiences of the applicant through inspection and talk.

13. Where any applicant applies for the SM qualification by disguising the relevant conditions or providing false materials, the CSRC shall reject or disapprove the application for assuming the post, and the applicant is prohibited to reapply within one year. Where any applicant obtains the SM qualification by cheating or bribery or other malfeasance means, the applicant may not make reapplication within three years.

14. The board of directors of a securities company shall sign the engagement agreements with the general manager, the vice general manager, the person in charge of finance and the person responsible for compliance with regulations once they are engaged, and make stipulations on terms of the duty, the performance examination, reasons for dismissal, rights and obligations of both parties, liabilities for breach of contract and etc.

15. Where a securities company selects and engages a senior manager, it shall submit the following record-filing materials for assuming the post to the CSRC and its dispatched institutions at the place of registration of the company and the residence of the senior managers within five working days following the engagement decision.

(1).The record-filing report for holding the post of senior managers, including the duty and the scope of functions of the engaged senior managers;

(2).The documents of engagement decision and the engagement agreement;

(3).The letter of commitment signed by the engaged senior managers for conducting management in good faith;

(4).Other materials prescribed by the CSRC.

16. The CSRC shall check up the record-filing materials for holding the post of senior managers according to law. In case the post-assuming procedures do not comply with the related regulations, the CSRC shall order the company concerned to make correction.

17. In case a senior manager is found in any of the following circumstances, the SM qualification shall be invalidated automatically:

(1) Having the circumstances that prohibit him from assuming the office of the director, supervisor or manager as prescribed by the Company Law and the Securities Law;

(2) Being subjected to criminal punishments;

(3) Failing to hold the post of senior manager in any securities company within five years since the SM qualification is obtained;

(4) Being liable for the entrusted custody, the administrative taken-over, the revocation or the charge of closing the securities company where he assumes the post due to the serious infringements upon laws and regulations;

(5) Failing to participate in the annual examination as required;

(6) Other circumstances prescribed by the CSRC.

Chapter 3: Basic Criteria of Conducts

18. The senior managers shall earnestly perform the duties as prescribed by laws and the company’s articles of association, promote the company to establish and improve the internal control system and the risk management system, ensure the effective implementation of the relevant systems, maintain the effective operation of the control system, and bear the leadership liabilities for any infringements upon the laws and regulations in the business within his scope of power.

19. The senior managers shall exercise the duties in line with the provisions of the company’s articles of association and shall not authorize any person without the SM qualification to exercise the power as a representative.

20. The senior managers shall refuse to perform any instruction or authorization of any institution or individual that infringes upon the interests of the company or the lawful rights and interests of any customer. Once any conduct in violation of laws and regulations infringes upon the lawful rights and interests of any customer, the senior managers shall report without delay to the dispatched institution of the CSRC at the place of registration of the company.

The CSRC shall protect the lawful rights and interests of any senior manager who suffers from unjust treatment due to their lawful performance of duties and earnestly maintaining the customers' interests.

21. The senior manager shall never accept or take bribery or obtain other illegal incomes by making use of his authority, or embezzle the assets of the company or any customer, or lend to others the capital of the company or any customer, or provide guaranty for the debts of the company, shareholders of the company or other institutions and individuals by using any customers' assets.

22. The general manager, vice general manager, the person in charge of finance, and the person responsible for compliance with the regulations may not hold another post concurrently in other profit-making entities except the equity-shared companies of the securities company or undertake other business activities apart from his own work.

Chapter 4: Supervision and Administration

23. If any person with the SM qualification and the working experience in a securities company is found in any of the following circumstances, the company shall report to the dispatched institution of the CSRC at its registration place within five working days following such occurrence and explain the reasons:

(1) Being subjected to a criminal punishment and an administrative punishment;

(2) Being put on records for investigation by the administrative or judicial department;

(3) Being subjected to the punishment of any self-disciplinary management institution;

(4) Being subjected to the dismissal or disciplinary actions by the company;

(5) Failing to perform duties due to resignation, leaving job, losing capacity of civil behavior or other reasons;

(6) Other circumstances that may influence his normal performance of the duties or his qualification for holding the post.

Where any person, who has obtained the SM qualification but does not work in a securities company, is subjected to the aforesaid circumstances, he shall report it to the dispatched institution of the CSRC at its residence within five working days following such occurrence and explain the reason. The recommenders shall urge the recommended person to report in time. In case the recommended person is found not to report in time, he shall report to the dispatched institution of the CSRC at the place of residence of the recommended person within 15 working days following such occurrence.

24. Where there is any change in the division of responsibilities of senior managers, the company shall report within ten working days to the CSRC and the dispatched institution of the CSRC at the place of registration of the company.

25. In case the board chairman of any securities company is unable to perform his duties or the post of board chairman becomes vacant, the vice board chairman or other directors with the SM qualification shall perform the duty of the board chairman in accordance with the Company Law and the provisions of the company’s articles of associations.
In case the general manager of a securities company is unable to perform the duty or the post of the general manager becomes vacant, the board of directors shall decide within 15 working days to have another senior manager of the company to perform the duty as an agent.

The period of duty performance as an agent may not exceed 90 days unless specified otherwise by the laws and the administrative regulations.

26. Where any securities company or any senior manager is suspected of any serious infringements upon the laws and regulations and is investigated by the administrative or judicial department, the company’s board of directors shall suspend the duties of the relevant senior managers.

Where any of the following circumstances occurs in any securities company, the CSRC may order the company’s board of directors to change the senior managers within a prescribed time limit or designate another person to perform the duty of senior manager temporarily:

(1) The company has major business risk and fails to take the effective control and dissolving measures;

(2) The senior manager fails to perform his duties according to law;

(3) The senior manager fails to fulfill the duties diligently, which results in or may result in the major risks or potential risks of the company;

(4) Other circumstances as defined by the CSRC according to the principle of prudent supervision.

27. Where a securities company changes its board chairman or general manager, it shall go through the formalities for altering the securities business license within 15 working days since the CSRC approves the post-holding issues.

28. The CSRC shall examine annually the work of any senior manager and his observance of laws and compliance with regulations.

The senior manager shall, from the second year of holding the post, submit the annual examination form signed with the opinions of the securities company to the dispatched institution of the CSRC at the place of registration of the company within the first quarter of each year.

The senior manager with the SM qualification but without the previous post in a securities company shall, from the next year after obtaining the post-holding qualification, submit the annual examination form signed with the opinions by the two persons who have recommended him to the dispatched institution of the CSRC at his residence place within the first quarter of each year.

29. The dispatched institutions of the CSRC shall complete the annual examination on the senior managers before June 30 each year and submit the examination result to the CSRC.

30. The persons with the SM qualification shall take part in the vocational training programs organized by the SAC or other institutions approved by the CSRC.

31. Where any senior manager leaves his post, the company shall conduct the post-leaving audit immediately and submit the audit report to the CSRC and its dispatched institution at the place of registration of the company for recording within 60 days since the senior manager leaves his post. The audit report on leaving post shall include the following contents:

(1) The basic business conditions such as the scale, profits and losses and assets quality;

(2) The effectiveness of internal and risk control in the related business;

(3) The compliance with the regulations of his business, including whether there have been any major infringements upon the laws and regulations within the scope of power and the personal liabilities thus incurred;

(4) Audit conclusions.

The post-leaving audit of the chairman of board or of the general manager in a securities company and that of the dismissed senior manager due to his infringements upon the laws and regulations shall be handled by the accounting firms that have the securities-related qualification through the entrustment of the company’s board of supervisors.

32. No senior managers may hold a post in any other securities company during the period of being audited for leaving his post.

33. Under any of the following circumstances, the CSRC and its dispatched institution may issue a warning letter to or have a supervision talk with the senior manager directly responsible or having the leadership liability:

(1) The securities company or the senior manager is suspected of violating the laws, the administrative regulations or the provisions of the CSRC;

(2) There are major potential risks in the corporate governance structure and the internal control system of the securities company;

(3) The senior manager fails to keep his promise;

(4) The financial indexes of the securities company do not comply with the risk monitoring indexes as prescribed by the CSRC.

34. Where a securities company is subjected to the disciplinary action by the SAC, the securities exchanges and other self-disciplinary organizations, or to an administrative punishment by the administrative departments of taxation, audit or industry and commerce, it shall report in written form the reasons for the disciplinary actions and penalties and the list of the senior managers assuming the leadership liabilities to the dispatched institution of the CSRC at the registration place within 10 working days since such occurrence.

35. In case any senior manager is found in any of the following circumstances, the CSRC can define him as an improper person:

(1) Being issued the warning letters or given the supervision talks for three times by the CSRC;

(2) Being subjected to the disciplinary punishments for three times by the self-disciplinary organizations;

(3) Having the leadership liability for the disciplinary actions or administrative punishments imposed on the company for five times;

(4) Having the evidences to prove his lack of professional competency, his poor management work or his breach of commitment;

(5) Failing to effectively implement the relevant systems concerning the corporate governance and the internal control;

(6) Being absent without leave;

(7) Being liable for the business risks of the company or the infringements upon laws and regulations as showed in the audit report on leaving post;

(8) Authorizing any person with no or expired SM qualification or any improper person to exercise power as his representative;

(9) Determining in violation of Article 25 herein the person to perform the duties as a representative;

(10) Concealing any major infringements upon the laws and regulations or any major business management liabilities of other senior managers of the company;

(11) Refusing to provide the relevant supervision information to the CSRC or other circumstances under which he does not cooperate in the supervision;

(12) Violating the provision of Article 22 herein.

In case the CSRC plans to define any relevant senior manager as an improper person, it shall notify the company and the person himself before sending a letter of suggestion to the securities company. The securities company may submit the written statement to appeal to the CSRC within 10 working days in receipt of the letter of suggestion.

36. A securities company shall remove the improper person from the post of senior manager within ten working days in receipt of the letter of suggestion of the CSRC, and shall report the removal in writing to the CSRC and its dispatched institution at the registration place of the company within fifteen working days in receipt of the suggestion letter.

No securities companies may select or engage the person defined as an improper person by the CSRC to hold the post of senior manager within two years after the confirmation.

37. Where any senior manager is dismissed due to the expired SM qualification or being defined as an improper person, he shall cooperate with the company to hand over the work and accept the audit on leaving the post.

38. If the person recommended is specified by the CSRC as an improper person or the person is revoked or suspended of the qualification for holding the post within one year since the recommender signs the recommendation opinions, the CSRC shall not accept the recommendation opinions of the said recommender or the annual examination form signed with his opinions since the decisions on revocation and suspension are made.

39. Where any securities company violates the provisions of the Measures, the CSRC shall charge the company to make rectifications. During the period of rectifications, the CSRC may suspend the acceptance or examination of such application matters concerning the operation qualifications and the newly established institutions of the company.

40. The CSRC shall develop a database of senior managers to record the contents of the persons who have obtained the SM qualification such as the identity information, the information on post-holding qualification, the professional conducts, and the violations of laws and disciplines.

The CSRC may disclose the relevant information concerning the senior managers in a proper manner.

Chapter 5: Legal Liabilities

41. If any senior manager of a securities company violates the laws, the administrative regulations and the provisions of the CSRC and shall be subjected to the administrative punishments according to law, the punishments shall be imposed according to relevant provisions. In case of the suspected criminal acts, the senior manager concerned shall be transferred to the judicial organ for having the criminal liability investigated.

42. If any applicant applies for the SM qualification by concealing the relevant issues or providing the false materials, the warnings shall be given.

If anyone obtains the SM qualification by cheating, bribery or other malfeasance means, the person concerned shall have the post-holding qualification revoked and imposed a fine of less than CNY 30000.

43. If found in any of the following circumstances, the person concerned shall be ordered to make corrections, and the company and the senior manager held responsible shall be given the warnings singly or concurrently and imposed a fine of less than CNY30000. In case of the serious offenses, the relevant business qualification of the company shall be suspended within six months, and the senior manager held responsible shall be given the warnings and have the SM qualification suspended or revoked.

(1) Large business risk, major financial loss or serious financial crime in the company;

(2) Impairing the lawful rights and interests of customers;

(3) Providing the false information or concealing major matters to the CSRC;

(4)Failing to make rectifications as required by the CSRC or make ineffective rectifications;

(5) Failing to perform reporting and record-filing duties as required;

(6) Failing to make the post-leaving audit on the senior managers as required.

44. If anyone violates the provision of Article 22 herein, he shall be ordered to make corrections, given the warnings singly or concurrently, or imposed a fine of less than CNY30000. In case of the serious offenses, his SM qualification shall be suspended or revoked.

Chapter 6: Supplementary Provisions

45. The persons with the qualifications of senior managers before the Measures are implemented shall apply for the qualification certificates of senior managers within the time limit prescribed by the CSRC.

46. The Measures shall come into force as of November 15, 2004.

The China Securities Regulatory Commission

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Provisional Administrative Measures on Securities Market Credit Rating Businesses

Decree No. 50 of China Securities Regulatory Commission

Provisional Administrative Measures on Securities Market Credit Rating Businesses were passed at the No.202 Session of China Securities Regulatory Commission Chairman Meeting on March 23, 2007, and are hereby issued. The Measures shall take effect on September 1, 2007.

Chairman of China Securities Regulatory Commission: Shang Fulin

August 24, 2007

Provisional Administrative Measures on Securities Market Credit Rating Businesses

Contents

Chapter 1 General Provisions

Chapter 2 Permit for Business

Chapter 3 Business Rules

Chapter 4 Supervision and Administration

Chapter 5 Legal Responsibilities

Chapter 6 Supplementary Provisions

Chapter 1 General Provisions

Article 1 To facilitate the standardized development of the securities market credit rating businesses, promote the efficiency and transparency of the securities market, and protect the legal rights and interests of the investors and the social benefits, Provisional Administrative Measures on Securities Market Credit Rating Businesses (hereinafter referred to as the Measures) are hereby formulated in accordance with the Securities Law.

Article 2 To practice in securities market credit rating businesses (hereinafter referred to as securities rating businesses), the credit rating organizations shall, based on the Measures, make applications to the China Securities Regulatory Commission (hereinafter referred to as the CSRC) and obtain the permit for securities rating businesses. Without the permit for securities rating businesses from the CSRC, neither any organization nor any individual is allowed to practice the securities rating businesses.

The securities rating businesses mentioned in the Measures refer to the credit rating services offered to the following rating objects:

(1) The bonds, asset-supported securities and other securities with fixed income or structured debt securities approved to be issued by the CSRC;

(2) The bonds, asset-supported securities and other securities with fixed income or structured debt securities listed on stock exchanges with the exception of the treasury bonds;

(3) The issuers, listed companies, non-listed public companies, securities companies, securities investment fund management companies for the securities stated in Items (1) and (2) of this Article;

(4) Other rating objects specified by the CSRC.

Article 3 When the credit rating organizations that have obtained permit for securities rating businesses from the CSRC (hereinafter referred to as the securities rating organizations) practice the securities rating businesses, they shall follow the principles of independency, objectivity and fairness.

Article 4 When the securities rating organizations practice the securities rating businesses, they shall follow the principle of consistency. When conduct rating on or trace the rating of the objects of the same type, they shall adopt consistent rating standards and operation procedures. If any change is made to the rating standards, it shall be fully disclosed.

Article 5 When the securities rating organizations practice the securities rating businesses, they shall formulate scientific rating methods and comprehensive quality control system, follow the industry standards, code of conducts and business rules, and be in due diligence.

Article 6 The CSRC and its branches shall conduct supervision and administration on the securities rating business activities according to the relevant laws.

The Securities Association of China shall conduct self-discipline management on the securities rating business activities according to the relevant laws.

Chapter 2 Permit for Businesses

Article 7 The credit rating organizations applying for permit for securities rating businesses shall satisfy the following conditions:

(1) Have the qualification of China legal person, with paid-in capital and net assets no less than RMB 20 million;

(2) Have no less than 3 senior executives meeting the stipulation of the Measures, and no less than 20 rating practitioners with the qualification of securities business practice, including no less than 10 rating practitioners with over 3 years of credit rating business experiences and no less than 3 rating practitioners with Chinese CPA qualifications;

(3) Have sound and well implemented internal control mechanism and management system;

(4) Have comprehensive business systems, including credit classification and definition, rating standards, rating procedures, rating committee system, rating result publication system, rating trace system, confidentiality system, securities rating business archive management system, etc;

(5) Have not been subject to criminal punishment in the past 5 years, have not been subject to administrative punishment for illegal operation in the past 3 years, and are not being investigated on because of illegal operation or criminal conducts;

(6) Have no dishonest record in the taxation departments, industrial and commercial administration departments, financial administration departments, self-discipline organizations or commercial banks for the past 3 years;

(7) Other conditions formulated by the CSRC for protecting the investors and maintaining the social benefits.

Article 8 The senior executives responsible for the securities rating businesses in the credit rating organizations shall satisfy the following conditions:

(1) Have the securities business practice qualification;

(2) Be familiar with the specialized knowledge, legal knowledge related to the credit rating businesses, have the operation management and organization coordination abilities for performing their duties, and have passed the senior executive competency test for securities rating businesses;

(3) Have no such situations that prohibit them from holding the relevant posts as specified in the Company Law and Securities Law;

(4) Have not been banned from accessing the market by the financial supervisory organization, or the banning period has expired;

(5) Have not been subject to administrative punishment for illegal operation in the past 3 years, and are not being investigated on because of illegal operation or criminal conducts;

(6) Be honest and trustworthy, have no dishonest record in the taxation departments, industrial and commercial administration departments, financial administration departments, self-discipline organizations or commercial banks for the past 3 years;

If foreigners apply to hold the above posts, they shall have been working in Mainland China, Hong Kong or Macao for no less than 3 years.

Article 9 The credit rating organizations applying for permit for securities rating businesses shall submit the following materials to the CSRC:

(1) Application report;

(2) Copies of Business License;

(3) Articles of Association;

(4) The register of shareholders, and the report on their contribution amount, contribution mode, contribution proportion, background information, and whether there exists any affiliated relation between the shareholders;

(5) Financial reports audited by the CPA firm with securities and future business practice qualification;

(6) General information of the senior executives and rating practitioners and the relevant certificates;

(7) Report on internal control mechanism, management system and implementations;

(8) Report on business rules and implementations;

(9) Other materials required by the CSRC.

Article 10 The CSRC shall, based on the legal conditions and procedures, following the principle of supervision in due diligence, and fully taking into account the needs of the market development and fair industry competition, review the application of the credit rating organizations for permit for securities rating businesses and make proper decisions.

Chapter 3 Business Rules

Article 11 The securities rating organizations shall, within 20 days after obtaining the permit for securities rating businesses, file the credit classification and definition, rating method and rating procedures with the Securities Association of China, and disclose to the public through the websites of the Securities Association of China, their own websites and other public media.

If any change is made to the credit classification and definition, rating method and rating procedures, the relevant securities rating organizations shall make relevant record submission and announcement in time.

Article 12 If there exists one of the following interests between the securities rating organization and the rating object, the relevant securities rating organization shall not be allowed to accept the task for securities rating:

(1) The securities rating organization and the organization or securities issuer to be rated are controlled by the same actual controller;

(2) The same shareholder holds over 5% of the equity of the securities rating organization and the organization or securities issuer to be rated;

(3) The organization or securities issuer to be rated or their actual controller directly or indirectly holds over 5% of the equity of the securities rating organization;

(4) The securities rating organization or its actual controller directly or indirectly holds over 5% of the equity of the organization or securities issuer to be rated;

(5) The securities rating organization or its actual controller trades the securities to be rated within 6 months before the securities rating business is conducted;

(6) Other situations specified by the CSRC for protecting the investors and maintaining the social benefits.

Article 13 The securities rating organization shall establish the evasion system. If the rating committee member or rating practitioner of the securities rating organization has one of the following situations when conducting the securities rating businesses, the relevant rating committee member or rating practitioner shall evade from participating in the relevant business:

(1) The relevant person or his/her direct relative holds over 5% of the equity of the organization or securities issuer to be rated, or is the actual controller of the organization or securities issuer to be rated;

(2) The relevant person or his/her direct relative is the director, supervisor or senior executive of the organization or securities issuer to be rated;

(3) The relevant person or his/her direct relative is the head of the CPA firm, law firm and financial adviser and other service organization hired by the organization or securities issuer to be rated or the relevant project signing personnel;

(4) The relevant person or his/her direct relative holds over RMB 500 thousand in the securities issued by the organization or securities issuer to be rated, or has transactions valued accumulatively over RMB 500 thousand with the organization or securities issuer to be rated;

(5) Other situations deemed by the CSRC to be sufficient in affecting the principles of independency, objectivity and fairness.

Article 14 The securities rating organizations shall establish clear and sound organizational structure, set the departmental functions reasonably, establish and improve the firewall system, and maintain the independency of the business department engaged in securities rating businesses from other business departments.

The staff assessment and remuneration system of the securities rating organizations shall not affect the rating practitioners’ practice following the principles of independency, objectivity, fairness and consistency.

The securities rating organizations shall appoint special personnel to check the legal compliance of the securities rating businesses and report to the CSRC office located at the registered address.

Article 15 When conducting securities rating businesses, the securities rating organizations shall establish project teams. The project team leaders shall have the qualification for securities business practice and over 3 years of experiences in credit rating business practice.

The project team shall review and analyze the rating object, generate initial review report, and check and verify the authenticity, correctness and completeness of the relevant documents.

Article 16 The securities rating organizations shall establish rating committee system. The rating committee shall be the supreme authority for determining the credit level of the rating object.

The rating committee shall review the initial review report submitted by the project team and make resolution to determine the credit level.

Article 17 The securities rating organizations shall establish re-evaluation system. When the securities rating organizations have conducted the securities rating businesses and determined the credit level, they shall inform the organization or securities issuer to be rated of the credit level. If the organization or securities issuer to be rated has dissent on the credit level, it can apply for re-evaluation.

If the securities rating organization accepts the re-evaluation application, it shall convene rating committee meeting to conduct review again. And resolution shall be made to determine the final credit level.

Article 18 The securities rating organizations shall establish rating result announcement system.

The rating result shall include the credit level of the object and the rating report. The rating report shall be concise and clear, clearly describing the credit level of the rating object and signed by the senior executives stated in the Measures.

Article 19 The securities rating organizations shall establish rating trace system. The securities rating organizations shall specify the rating trace matters in the initial rating report issued to the rating object. During the existence of the rating object, the securities rating organizations shall carry out on-going trace over the policy environment, industry risk, operating strategy, financial status of the rating object for any major change, conduct prompt analysis on the influence of such change over the credit level of the rating object, and issue periodic or unperiodic rating trace report.

Article 20 If the organization or securities issuer to be rated has any dissent on the rating report issued by the securities rating organization and entrusts other securities rating organization to issue the rating report, the original securities rating organization and the new securities rating organization shall publicize the rating result at the same time.

Article 21 The securities rating organizations shall adopt effective statistics method to verify the correctness and stability of the rating result and publicize the statistics result to the public through the websites of the Securities Association of China and their own websites.

Article 22 The securities rating organizations shall establish confidentiality system for securities rating business information. The securities rating organizations and their practitioners shall keep confidential the national secret, commercial secret and individual privacy acquired during the securities rating business activities.

Article 23 The securities rating organizations shall establish securities rating business archive management system. The business archives shall include the power of attorney for securities rating businesses, original materials that the rating report is based on, the work sheets, initial review report, rating report, votes and comments of the rating committee, minutes, rating trace information, and rating trace report.

The business archives shall be maintained for another five years after the rating contract is terminated or after the existence period of the rating object expires. The maintenance period of the business archives shall be no less than 10 years.

Article 24 The securities rating organizations shall establish securities rating business practitioner and executive training system, conduct training and take effective measures to improve the occupational ethics and business level of the staff.

Chapter 4 Supervision and Administration

Article 25 The directors, supervisors, senior executives and securities rating business practitioners of the securities rating organizations shall not work in part time in the organization or securities issuer to be rated.

Article 26 The directors, supervisors and senior executives of a securities rating organization shall not invest in other securities rating organizations.

Article 27 The securities rating organizations shall report to the CSRC office located at the registered address within 5 working days after change is made to the following matters:

(1) Name and domicile of the organization;

(2) Directors, supervisors and senior executives;

(3) Actual controllers and shareholders holding over 5% of the equity;

(4) Internal control mechanism and management system, business system;

(5) Other matters specified by the CSRC.

Article 28 The securities rating organizations shall not alter, sell, lease or lend out the permit for securities rating businesses or otherwise illegally transfer the permit for securities rating businesses.

Article 29 The securities rating organizations shall not provide finance or guarantee for others.

The actual controllers, shareholders, directors, supervisors and senior executives of the securities rating organizations shall comply with laws and regulations and shall not conduct any activities that will damage the rights and interests of the securities rating organizations and the rating objects.

Article 30 The securities rating organizations shall, within 4 months after the ending date of each fiscal year, submit the annual report to the CSRC office located at the registered address. The annual report shall include the general information of the organization, the operating situation, the financial accounting report audited by the CPA firm with securities and future businesses practice qualification, major litigation events, statistics of the correctness and stability of the rating result. The directors and senior executives of the securities rating organizations shall sign on the annual report for confirmation. If they have any dissent on the report, the relevant comments and reasons shall be provided.

The securities rating organizations shall, within 10 working days after the ending date of each quarter, submit the quarterly report containing the operating situation and financial data to the CSRC office located at the registered address.

When important events that affect or may affect the operation management of the organization occur, the securities rating organization shall submit the interim report to the CSRC office located at the registered address immediately, stating the event cause, current status and possible consequence.

Article 31 The CSRC office shall conduct onsite or offsite inspection on the internal control and management system, operation, risk status, practice and financial status of the securities rating organizations.

The securities rating organizations and their staff shall facilitate the inspection and provide authentic, correct and complete information and materials.

Article 32 If the securities rating organizations and the practitioners breach the Measures, the CSRC office shall send warning letter to the securities rating organizations, have supervisory talking with the principals or senior executives and order for correction within specified time limit.

If the securities rating organizations fail to make correction within the specified period, the CSRC has the right to reject the rating report they issue.

Article 33 If a securities rating organization no longer meets the conditions for permit for securities rating businesses, the relevant organization shall submit written report to the CSRC office located at the registered address immediately and make public announcement. The CSRC office shall order for correction within specified time limit, and the relevant organization shall not practice the securities rating businesses within the correction period. If it still fails to meet the relevant conditions, the CSRC shall cancel the permit for securities rating businesses according to the relevant laws.

If the senor executives of the securities rating organization fail to meet the relevant conditions, they shall be replaced within specified time limit. If the relevant senor executives still hold the relevant positions after the time limit, the CSRC office shall order the securities rating organization for correction, and the relevant organization shall not practice the securities rating businesses within the correction period.

Article 34 The securities rating organizations shall join the Securities Association of China.

The Securities Association of China shall formulate the self-discipline standards and practice codes for the securities rating organizations and punish the relevant organizations for any conducts breaching the self-discipline standards and practice codes.

The Securities Association of China shall establish information database and integrity archive of the securities rating organizations and their securities rating business practitioners.

Chapter 5 Legal Responsibilities

Article 35 If any organization or individual engages in securities rating businesses without the permit for securities rating businesses issued by the CSRC, Item 2, Article 226 of the Securities Law shall be followed for the handling.

Article 36 If the securities rating organization and its practitioners are not in due diligence and provide documents containing false record, misleading statement or major omission, Article 223 of the Securities Law shall be followed for the handling.

Article 37 If the practitioners of securities rating organization provide false information intentionally and allure the investors into trading securities, Article 200 of the Securities Law shall be followed for the handling.

Article 38 If the securities rating organization breaches the Measures and employs staff without the qualification for the position and securities practice qualification, Article 198 of the Securities Law shall be followed for the handling.

Article 39 If the securities rating organization fails to maintain the relevant documents and materials according to the Measures, Article 225 of the Securities Law shall be followed for the handling.

Article 40 If insider trading is conducted by taking advantage of practicing securities rating businesses, Article 202 of the Securities Law shall be followed for the handling.

Article 41 If the securities rating organization has conducted one of the following activities, it shall be ordered for correction, subject to warning and a penalty of more than RMB 10 thousand but less than RMB 30 thousand. The personnel in direct charge and other direct responsible persons shall be subject to warning and a penalty of more than RMB 10 thousand but less than RMB 30 thousand. If the case is severe or they reject to make correction, Item 3, Article 226 of the Securities Law shall be followed for the handling.

(1) Breach the evasion system or conflict of interests avoidance system;

(2) Breach the confidentiality system;

(3) Fail to trace the rating according to the Measures;

(4) Fail to disclose the relevant information according to the Measures, or fail to check and verify the authenticity, correctness and completeness of the documents and information it is based on;

(5) Alter, sell, lease or lend out the permit for securities rating businesses or otherwise illegally transfer the permit for securities rating businesses;

(6) Breach the Measures, and reject to submit and provide the operation management information and materials, or the submitted or provided operation management information and materials contain false record, misleading statement or major omission;

(7) Promise to provide high credit level, disparage and denigrate other securities rating organizations, and the practitioners have improper competition activities;

(8) Have poor internal control mechanism, management system and business system and improper execution, and reject to make correction;

(9) Provide finance or guarantee for others;

(10) The directors, supervisors and senior executives invest in other securities rating organizations.

Chapter 6 Supplementary Provisions

Article 42 The credit rating organizations shall also comply with the Measures when conducting future credit rating activities.

Article 43 The Measures shall be implemented as of September 1, 2007.

The China Securities Regulatory Commission

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Administrative Measures on the Operation of Securities Investment Funds

Decree No. 21 of the China Securities Regulatory Commission

Signed by: Chairman Shang Fulin

June 29, 2004

The Administrative Measures on the Operation of Securities Investment Funds duly reviewed and approved by China Securities Regulatory Commission at the 93rd Chairman Office’s Meeting on June 4, 2004 are now promulgated and shall be fully implemented as of July 1, 2004.

Administrative Measures on the Operation of Securities Investment Funds

Chapter 1 General Provisions

1. With a view to standardizing the operations of securities investment fund, safeguarding the legitimate interests of investors, promoting the healthy development of securities investment fund markets, Administrative Measures on the Operation of Securities Investment Funds (the Measures) are formulated in accordance with Securities Investment Fund Law and other relevant laws, administrative rules and regulations

2. The Measures are applicable for the collection of the securities investment fund (hereinafter referred to as the Fund), subscription and redemption of fund share, investment of fund assets, allocation of fund proceeds, the convening of meetings of fund unit holders and other operations of the Fund.

3. Operations of the Fund shall be strictly implemented in accordance with laws, administrative rules, regulations stipulated by the China Securities Regulatory Commission (hereinafter referred to as the CSRC), adhering to the principle of voluntariness, fairness, sincerity and trust, and at any rate, they shall not harm or impair the national interests and the public interests.

4. The operation of Fund shall be regulated and supervised by the CSRC and its dispatched offices in accordance with laws, administrative rules, and regulations herein prescribed as well as the principle of prudential supervision.

5. Associates to the Fund industries shall exercise self-disciplinary administration over the operations of the Fund in accordance with laws, administrative rules, regulations specified by the CSRC as well as the self-discipline principle.

Chapter 2 Collection of the Fund
6. The following circumstances shall be met when applying for the collection of the fund, appointing the fund manager(s) and custodian(s):

(1) The fund manager to be appointed according to the law shall be a fund management company and the fund custodian to be appointed shall be a commercial bank qualified for the fund custody.

(2) The Fund shall have the practitioners who are qualified as per the regulations of the CSRC and have relevant expertise in line of the management and custody of funds to be collected (including the fund managers).

(3) The procedures and systems involved with the investment management, sales, registration, value evaluation of funds are highly regularized and standardized, and no circumstances exist which would influence the normal operations of the fund, harm or perhaps harm the legitimate interests of fund unit holders.

(4) No administrative penalties or criminal punishments are incurred by transgression of laws and regulations within the recent one year.

(5) The unit is not subject to the investigation by the supervision authorities or in rectification period because of transgression of laws and regulations.

(6) There exist no major changes which may potentially produce or have produced any adverse or negative effects to the operations of funds.

(7) There exist no material operation risks, such as the unsound internal governance mechanism, disorder of operation and management, ineffectual implementation of internal control and risk management system, and degradation of financial status.

(8) Prior to the appointment of fund manager, the fund contract for the fund approved to collect has come into effect, or 6 months has passed since the date of refunding the total contributions rendered by investors and related interests once the conditions specified in article 12 herein cannot be satisfied at the expiry of the collection period.

(9) Other conditions stipulated by the CSRC in accordance with the principle of prudential supervision.

7. Application to collect the funds and the funds to be collected shall be subject to the following requirements:

(1) Definite and legal investment direction;

(2) Definite fund operation mode;

(3) Conformity with the provisions on fund categories stipulated by the CSRC;

(4) Not being the same with or similar to the fund managed by the fund manager to be appointed.

(5) Drafts of legal instruments including the fund contract, prospectus, shall conform to the laws, administrative rules and the CSRC regulations.

(6) The name of fund shall indicate the categories and investment characteristics of the fund. There exist no such contents that may harm the national interests and public interests, cheat or mislead the investors, or infringe the legitimate interests of other parties.

(7) Other conditions stipulated by the CSRC in accordance with the principle of prudential supervision.

8. The fund manager shall submit the application documents in accordance with provisions of Securities Investment Fund Law and the CSRC regulations when applying to collect the funds.

During the application period, if the contents of application documents undergo some crucial changes and alternations, the fund manager shall submit the latest updated documents to the CSRC within five working days as of the date of such changes and alternations.

9. The CSRC shall accept and review the application of fund collection and then make the final decision in accordance with provisions of Administrative Licensing Law and article 39 of Securities Investment Fund Law.

10. The CSRC has the right to sponsor an expert review meeting to review the application of fund collection in light of the principle of prudential supervision.

11. The term of fund collection shall be valid for three months from the date of sales of fund shares.

12. Upon the expiry date of fund collection, if the total amount of fund shares collected is in conformity with article 44 of Securities Investment Fund Law and meet the following conditions, the fund manager shall go through the capital verification procedures and fund filing procedures according to the stipulations.

(1) The total fund shares collected are not less than two hundred million shares, while the total amount collected are not less than CNY two hundred million.

(2) The number of the people who hold the fund shares is not less than two hundred.

13. Upon the receipt of the capital verification report and fund filing documents submitted by the fund manager, the CSRC shall issue the written confirmation within three working days from the date of receipt. The fund filing procedures will come to the end as of the date of the written confirmation by the CSRC, and the fund contract shall come into effect.

The fund manager shall announce to the public on the following day after receiving the written confirmation from the CSRC.

14. Expenses and charges, including the attorney fees, accounting fees and other fees, shall not be disbursed from the account of fund assets. Nevertheless, if the subscription fee is charged by the fund, such expenses shall be paid out of the subscription fee.

Chapter 3 Subscription and Redemption of Fund Shares
15. The date and time for the fund manager to process the subscription and redemption of fund shares (hereinafter referred to as the Open Day) shall be clearly stipulated in the fund contract of the open-end and recorded in the prospectus.

16. The fund contract of open-end fund may stipulate that the fund manager can hold the processing of the redemption within a certain period from the date of effectiveness of the contract; however, the contracted term shall be no longer than three months and shall be clearly set out in the prospectus.

17. The prices of subscription and redemption of the open-end fund shares shall be calculated on the basis of the net value of fund shares on the subscription or redemption day plus or minus the related expenses. The specific calculation methods for the prices of subscription and redemption of open-end fund shares shall be clearly stipulated and set out in the fund contract and prospectus.

Net value of the open-end fund shares shall be calculated by dividing the net value of fund assets with the fund shares of that day after the close of each Open Day. The specific calculation method shall be clearly set out in the fund contract and prospectus.

18. The fund manager shall not be allowed to subscribe, redeem or transfer the fund shares beyond the date or time stipulated in the fund contract.

If the fund manager submits the application of subscription, redemption or transfer beyond the date and time stipulated in the fund contract, the prices of subscription and redemption of fund shares shall be the prices on the Open Day of the next round of subscription and redemption of fund shares.

19. When subscribing the fund shares, the investors shall effect the full-payout of subscriptions, except those special fund categories specified by the CSRC; upon the payout of such subscriptions, the application of subscription shall come into effect.

20. The fund manager shall confirm the effectiveness of the subscription and redemption within three working days from the date of receipt of the application of subscription and redemption submitted by the investor(s).

The fund manager shall effect the payout of redemption money within seven working days from the date of accepting the investors’ redemption application, except for the special fund categories specified by the CSRC.

21. The open-end fund contract could stipulate that if the funds have developed to some extent in the scale, the fund manager could reject the further application of subscription, but it shall be clearly stipulated and set out in the prospectus.

During the period of collecting the funds, the fund manager shall not adjust the fund scale stipulated in the fund contract. However, after the fund contract comes into effect, the fund manager could adjust the fund scale according to the real circumstances and in accordance with the provisions of the fund contract, but it shall be announced to the public three days in advance and the prospectus shall also be updated.

22. The open-end fund contract could set out the limitations on percentage or quantities of fund shares held by individual fund unit holders, while such limitations shall be clearly set out and stated in the prospectus.

23. If the net redemption applied in a single Open Day of the open-end fund exceeds 10% of total fund shares, it shall be deemed as substantive redemption.

In case the substantive redemption occurs to the open-end fund, the redemption shares handled at that day shall be not less than 10% of the total fund shares, and then the fund manager could postpone the schedule and handle other redemption applications later.

24. In case the substantive redemption occurs to the open-end fund, as far as the redemption application submitted by individual fund unit holder is concerned, the fund manager shall determine the redemption shares of individual fund unit holder processed on that day in light of the percentage of applied redemption shares to the total applied redemption shares on that day.

The fund unit holder could choose to withdraw the unprocessed transactions when applying for the redemption. If the fund unit holder chooses not to withdraw, then the fund manager could postpone such unprocessed transactions to the next Open Day, while the price of redemption will be the price on that day.

25. As for the open-end fund subject to substantive redemption and processed in a postponed time, the fund manager shall inform the fund unit holder within three trading days of the way of how to handle it by the way of mail, facsimile or other ways specified in the prospectus, and at the same time, release the announcements on the specified publications and other related media.

26. As for the open-end fund subject to continual substantive redemptions, the fund manager could choose to suspend the acceptance of redemption application according to the stipulations of fund contract and provisions of prospectus; as for the redemption application accepted, the fund manager could postpone the payout of redemption money, but the postponement duration shall not be longer than twenty working days and shall release the announcements on the specified publications and other related media.

27. The open-end fund contract could also cover the following stipulations that when the fund shares of redemption applied by the individual fund unit holder in a single Open Day exceed certain percentage of total fund shares, the fund manager could choose to suspend the acceptance of such redemption or postpone the payouts in accordance with provisions of article 26 of the Measures.

28. The open-end fund shall keep and hold some amount of cash not less than 5% of the net value of fund assets or the treasury bonds mature within 1 year so as to effect the payout of redemption to the fund unit holders, except for the special fund categories specified by the CSRC.

Chapter 4 Investment and Proceeds Allocation of Funds
39. The categories of funds shall be set out in the fund contract and prospectus in accordance with the following stipulations:

(1) Funds invested in the stocks taking up more than 60% of total fund assets shall be classified as stock fund.

(2) Funds invested in the bond taking up more than 80% of total fund assets shall be classified as bond fund.

(3) Funds invested only in money market instruments shall be classified as money market fund;

(4) Funds invested in stock, bond and money market instruments, and the respective percentage of stock investment and bond investment in unconformity with the stipulations (1) and (2), shall be classified as hybrid fund;

(5) Other fund categories stipulated by the CSRC.

30. If the name of fund indicates the investment direction, there shall be at least 80% non-cash fund assets falling into the scope of such investment.

31. The following conditions shall not exist when the fund manager invests the fund assets in securities markets.

(1) One fund holds the stocks of one listed company and the market value exceeds 10% of the net value of the fund assets;

(2) All the funds managed by the same fund manager hold the securities issued by one company, and the securities held by the funds exceed 10% of the securities of the company;

(3) The fund assets participate in the subscription of new issue and the amount declared by one fund exceeds the total assets of such fund; the stock quantities declared by one fund exceed the total stock quantities to be issued by the stock company this time.

(4) Violating the stipulations concerning the investment scope, investment strategies and investment percentage stipulated in the fund contract;

(5) Other conditions prohibited by the CSRC.

The fund categories going through the securities investments completely according to the percentage of related indexes may be exempt from the percentage restrictions stipulated in the previous item (1) and (2).

32. The fund manager shall ensure the conformity of the investment-portfolio ratio with the stipulations of fund contract within six months from the date of effectiveness of the fund contract.

33. If the fund investment is not in conformity of the percentage specified in subparagraphs (1) and (2) of paragraph 1 of article 31 or the investment percentage specified in the fund contract, the fund manager shall enforce adjustments within ten trading days, whereas such unconformities shall result from the elements beyond the control of fund manager including the fluctuation of securities markets, merge of listed companies and change of fund scale.

34. The following expenses with the fund concerned could be disbursed from the fund assets:

(1) Management fees for fund manager;

(2) Custodian fees for fund custodian;

(3) Fee of information disclosure after the execution of fund contract;

(4) Accounting fees and attorney fees after the execution of fund contract;

(5) Fees for the meeting of fund unit holders;

(6) Securities trading fees of the fund;

(7) Other fees and charges that could be disbursed from the fund assets in accordance with the relevant national regulations and stipulations of the fund contract.

35. The allocation of proceeds of the closed-end fund shall be carried out at least one time per year and its percentage shall not be lower than 90% of realized proceeds of fund year.

The open-end fund contract shall stipulate the maximum times of allocation of fund proceeds each year as well as the minimum percentage of allocation of fund proceeds.

36. The fund proceeds shall be allocated with cash.

The fund unit holder of open-end fund could choose in advance to convert the cash proceeds to be the fund shares in accordance with stipulations regarding the subscription of fund shares in the fund contract; the fund unit holder failing to make a choice shall be paid by cash by fund manager.

Chapter 5 Meeting of Fund Unit Holders
37. In addition to the events specified in the paragraphs (1) through (5), article 71 of Securities Investment Fund Law, the fund contract shall also stipulate other events for the alternation or modification of the fund contract in accordance with provisions specified by the CSRC, including the events with great impact on the responsibilities and obligations of the parties to the fund contract and calling for the convening of the meeting of fund unit holders.

38. The fund custodian who deems the convening of the meeting of fund unit holders necessary shall submit a written proposal to the fund manager. The fund manager shall confirm whether to convene the meeting within ten days from the date of such written proposal and inform the fund manager of the decision in writing.

The meeting which the fund manager decides to convene shall be convened within sixty days from the date of issuance of the written decision; if the fund manager decides not to convene such meeting while the fund custodian deems it necessary, the meeting shall be convened at the option of the custodian.

39. When the fund unit holders taking up more than 10% of the fund shares deem the convening of the meeting necessary, a written proposal shall be submitted to the fund manager. The fund manager shall confirm whether to convene the meeting within ten days from the date of such written proposal and inform the fund unit holder’s representative raising the proposal and the fund custodian of the decision in writing.

The meeting which the fund manager decides to convene shall be convened within sixty days from the date of issuance of the written decision; if the fund manager decides not to convene such meeting while the fund unit holders taking up more than 10% of fund shares deem it necessary, then the written proposal shall be rendered to the fund custodian.

The fund custodian shall decide whether to convene the meeting within ten days from the date of the receipt of the written proposal and then inform the fund unit holder’s representative and fund manager of the decision in writing. In case the fund custodian decides to convene the meeting, the meeting shall be convened within sixty days from the date of the issuance of such written decision.

40. Where neither fund manager nor fund custodian chooses to convene the meeting of fund unit holders, the holders could convene the meeting at their own option in accordance with the provisions specified in paragraph 2, article 72 of Securities Investment Fund Law.

The meeting convened by the fund unit holders at their own option shall be filed with the CSRC at least thirty days in advance.

41. Where the meeting of fund unit holders is convened by such holders at their own option according to the laws, the fund manager and the fund custodian shall provide positive cooperation instead of impedance or interference.

42. As for the events which are voted through at the meeting of fund unit holders in accordance with the provisions of article 75 of Securities Investment Fund Law, the convener shall report such events to the CSRC for approval or filing within five days from the date of pass.

The events determined by the meeting of the fund unit holders shall come into effect as of the date of issuance of the approval or no comment letter by the CSRC according to the law.

43. The fund manager, fund custodian and the fund unit holder shall enforce the decisions effected by the meeting of fund unit holders.

Chapter 6 Supervision and Legal Responsibilities

44. After the fund contract comes into effect, if the figure of fund unit holders is less than two hundred or the net value of fund assets is blow CNY fifty million, the fund manager shall report such issues to the CSRC in time; if the above-mentioned circumstances lasts for the consecutive 20 working days, then the fund manager shall provide the relevant reasons and solutions to the CSRC.

45. The CSRC and its dispatched offices could review periodically or non-periodically the fund operations carried through by the fund manager and fund custodian, while the fund manager and fund custodian shall positively cooperate with them in the process.

46. When the fund manager, fund custodian are breaking the laws, administrative rule and regulations and the provisions of the Measures, the CSRC and its dispatched offices shall order the relevant parties for rectification and suspend to process the related businesses; and further, administrative supervision measures shall be enforced to the persons-in-charge directly responsible or other persons with direct responsibilities. The measures available include supervision talks, issuance of warning letters, filing with integrity documents, suspension of duties and the recognition of unsuitable assumption of relevant duties.

47. If the fund manger, fund custodian and other persons-in-charge directly responsible or other persons with direct responsibilities carry through the fund operations in breach of the Measures, the administrative penalties would be enforced to them by the CSRC in accordance with the stipulations of laws and administrative rules; as for those not specified in the laws and administrative rules, the administrative penalties could be enforced in accordance with the provisions specified in Measures; as for those suspected of criminal, they shall be transferred to the competent judicial authorities to investigate the criminal liabilities.

48. If the fund manager processes the subscription, redemption or transfer of the fund shares beyond the date or time specified in the fund contract against the stipulations of article 18 of the Measures, the relevant fund manager shall be subject to the punishments in accordance with the stipulations of article 89 of the Securities Investment Fund Law.

49. If the fund manager uses the fund assets in the securities investment against the stipulations of article 31 of the Measures, the relevant fund manager shall be subject to the punishments in accordance with the stipulations of article 90 of the Securities Investment Fund Law.

50. If the fund manager and fund custodian fail to abide by the stipulations specified in article 38 and 39 of the Measures to convene the meeting of fund unit holders, the relevant fund manager and fund custodian shall be subject to the punishments in accordance with the stipulations of article 95 of the Securities Investment Fund Law.

50. If the fund manager conceals or disguises relevant information or submits the false or fraudulent documents in its application for fund collection, the CSRC shall reject such application; the accepted application shall not be approved and the fund manager shall be subject to warnings.

52. If any of the following circumstances has happened to the fund operations, the fund manager shall be ordered for rectification and subject to warning and/or penalty. The persons-in-charge directly responsible or other persons with direct responsibilities shall be subject to warning and/or penalty.

(1) Fail to calculate of prices of subscription and redemption in accordance with stipulations of article 17 of the Measures.

(2) Fail to confirm the effectiveness of subscription and redemption as well as the payout of the redemption money in accordance with the stipulations of article 20 of the Measures.

(3) Fail to process the redemption application in accordance with the stipulations of paragraph 2, article 23 of the Measures.

(4) Fail to hold cash or treasury bonds in accordance with the stipulations of article 28 of the Measures.

(5) Fail to adjust investment ratio in accordance with the stipulations of article 33 of the Measures;

(6) Fail to allocate the proceeds in accordance with the stipulations of articles 35 and 36 of the Measures;

(7) Fail to report or explain the relevant issues or provide solutions in accordance with the stipulations of article 44 of the Measures.

53. If any of the following circumstances has happened to the fund operations, the fund manager and fund custodian shall be ordered for rectification and subject to warning and/or penalty. The persons-in-charge directly responsible or other persons with direct responsibilities shall be subject to warning and/or penalty.

(1) Fail to cooperate with fund unit holders to convene the meeting of fund unit holders in accordance with the stipulations of article 41 of the Measures;

(2) Fail to apply for approval of or file the decisions formed at the meeting of fund unit holders in accordance with the stipulations of article 42 of the Measures;

(3) Fail to implement the decisions effected by meeting of fund unit holders in accordance with the stipulations of article 43 of the Measures;

(4) Fail to cooperate with the CSRC or its dispatched offices to carry though the review in accordance with the stipulations of article 45 of the Measures.

Chapter 7 Supplementary Provisions

54. The Measures will be put in force as of the date July 1, 2004.

The China Securities Regulatory Commission

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Guidance on Internal Control for Securities Companies

Chapter 1 General Provisions
1. The Guidance on Internal Control for Securities Companies (the Guidance) is formulated to guide the standardized operations, improve the internal control mechanism, enhance the self-control capability, push forward the building up of modern enterprise system, and prevent and minimize the financial risks in accordance with the Securities Law of the People’s Republic of China, Administrative Measures for Securities Companies and the requirements for prudent supervision by the China Securities Regulatory Commission (hereinafter referred to as CSRC).

2. The internal control for securities companies defined in the Guidance refers to the systematic arrangement, organizational framework and control measures taken by securities companies for the identification, evaluation and management of risks brought about during the process of operation and management based on the changes of operational environment in order to achieve their business objectives.

3 As far as the internal control is concerned, the following factors shall be taken into account, such as the control environment, identification and evaluation of risks, control activities and measures, communication and feedback, and monitoring and assessment.

(1) Control environment: the securities companies’ ownership structure and actual controllers, corporate governance structure, organizational framework, decision-making procedures, mode of distribution of powers and responsibilities among the management personnel, the management personnel’s management philosophy and risk awareness, the business strategies and style of securities companies, employees’ good faith, ethics and values, and human resources policies.

(2) Identification and evaluation of risks: duly identify and recognize the risks during the process of achieving business objectives, and make appropriate evaluation on the risks brought about by the constant changes of operation environment and on the risk bearing capacity of securities companies through making rational systematic arrangements and taking risk measurement methods.

(3) Control activities and measures: the policies, procedures to achieve the strategic goals and business objectives and the measures to prevent and mitigate risks, including the authorization, approval, review, verification, operation flow and procedures, post authority and division of labor, mutual independence and balance, and emergency and prevention measures, which shall be taken in the operation and management of securities companies.

(4) Communications and feedback: duly record, summarize, analyze and process various kinds of information and conduct effective inside and outside communication and feedback.

(5) Supervision and evaluation: conduct inspection and evaluation on the control environment, identification and evaluation of risks, control activities and measures, and the validity of communications and feedback, and make rectifications on any weakness found in the internal control design and operation.

4. The effective internal control shall ensure that securities companies achieve the following goals:

(1) To ensure the legality and regularity of operations as well as the full implementation of the internal rules and regulations of securities companies.

(2) To prevent the business risks and ethics risks.

(3) To protect the properties of clients and securities companies with respect to security and integrity.

(4) To ensure the reliability, completeness and timeliness of the business records, financial information and other information of securities companies.

(5) To improve the business efficiency and effects of securities companies.

5. A securities company shall establish effective internal control mechanism and system in accordance with the requirements of the Guidance as well as the specific business objectives, operation status and environmental conditions of its own.

6. Securities companies shall regularly evaluate the validity of internal control and make adjustment and improvements based on the changes of market, technological and legal environments.

Chapter 2 Basic Requirements
7. Securities companies shall conduct internal control in the principle of soundness, rationality, balance and independence in order to ensure the effective internal control.

(1) Soundness: The principle of consistency shall be adhered to before, during and after the internal control. The internal control must be carried out throughout the whole company, including all businesses, departments and personnel, from decision-making to implementation, from supervision to feedback, so as to ensure there is no blank or flaw in the internal control.

(2) Rationality: The internal control shall be implemented in accordance with relevant state laws and regulations and the CSRC rules on the basis of business scale, business scope, risk status and environment of specific securities companies so as to achieve the internal control goal at a reasonable cost.

(3) Balance: The departments and posts inside securities companies shall be set up with clear division of responsibilities and powers that shall be checked and balanced mutually. The foreground operation should be separated from the background management in an appropriate way.

(4) Independence: The department that undertakes the functions of internal control and supervision shall be independent of other departments inside the securities companies.

8. Securities companies shall build up the philosophy of lawful operation and awareness that stresses the priority of risk control, improve the companies’ code of conducts and employees’ ethical standards, and create a systematic and cultural environment for compliable operation.

9. Securities companies shall take effective measures to ensure the security and integrity of clients’ properties by precluding the misappropriation of clients’ settlement fund for transactions, clients’ assets and securities deposited in the companies.

10. Securities companies shall establish dynamic monitoring mechanism for net capital in line with the changes of operational environment to ensure that the net capital complies with the requirements for related monitoring index.

11. Securities companies shall establish sound corporate governance structure which encompasses the scientific decision-making procedures and rules of procedure, highly efficient and strict business operation system, sound and effective internal supervision and feedback system, and effective incentive and regulating mechanism. The board of supervisors and independent directors of securities companies shall perform their duties to prevent the major shareholders and insiders from controlling and manipulating the companies.

12. Securities companies shall maintain independence of their shareholders, actual controllers and affiliated parties with respect to assets, finance, personnel, business and institutions in order to ensure the independent operation.

13. Securities companies shall establish a clear-cut and rational organizational structure and set up close and effective monitoring system by taking the following three steps according to the environment and specific operation characteristics of their own:

(1) To monitor the frontline posts based on two-person, dual-position and double-responsibility, while enhancing the monitoring on the businesses conducted by single person at single post.

The system of two-person responsibility shall be implemented on the posts that are directly associated with capital, securities, important blank vouchers, business contracts and stamps and the posts involving information system security.

(2) To mutually monitor and balance among related departments and posts. A clear division of labor and responsibilities among different departments shall be made and the irrelevant posts shall be properly set apart.

(3) To conduct overall monitoring, inspection and feedback throughout all businesses, departments, branches and posts by setting up an independent supervision department.

14. Securities companies shall strengthen the corporate governance and establish specific systems for authorization, inspection and hierarchical accountability while clarifying the goals, responsibilities and authorities of different departments and branches so as to ensure that the functions of operation and management are performed within the authorized range.

Any authorization concerning business of securities companies shall be made in written form.

15. Securities companies shall assign appropriate responsibilities and authorities to different posts by virtue of their nature, and each post shall be defined with specific job description and clear reporting relationship.

16. A complete information-retaking wall shall be set up among major business departments inside securities companies to ensure the independence of such businesses as brokering, self-management, entrusted investment management, investment banking, research and consultancy service. The personnel in the computer department, department of finance, supervision department and business department are forbidden to hold positions concurrently among these departments. And the clearing personnel shall not be the personnel who hold positions in the computer department and trading department.

17. Securities companies shall continually improve their integrated information management systems such as business, finance and human resources, enhance the background management for business operation in line with their actual situations, upgrade centralized systems for clearing, accounting and management for clients’ information, and strengthen the ability to pre-warn, monitor and prevent risks in real time.

18. Securities companies shall establish a complete system for identifying, evaluating and controlling the business risks, and conduct constant monitoring on the credit risk, market risk, liquidity risk, operation risk, technology risk, risk of policy and regulations and ethics risk by taking multiple means including sensitivity analysis.

19. Securities companies shall establish various internal management systems, including authorization management, post responsibility, supervision and inspection, assessment and rewards and punishment, formulate a uniform business process and operating standards for brokering, self-management, investment banking, entrusted investment management, research and consultancy service and creative business, and map out definite control measures for major risks by virtue of their nature.

20. Securities companies shall make vigorous efforts to strengthen the control over the risks of self-owned and clients’ funds, establish a self-owned capital management system in which the decision-making, approval, ratification and monitoring are conducted separately, enhance the control over the line of funds and daily supervision of the capital utilization, and set major target for monitoring on such actions as abnormal capital flow and deposit and withdrawal of large amount of funds.

21. Securities companies shall establish a smooth and highly efficient channel for information exchange, a reporting system for major events, and an information feedback system for internal employees and clients to ensure a sound transmission of information, make sure that the board of directors, supervisory committee, management personnel and supervision department are to be informed of the operation and risks status of securities companies in time, and guarantee that various complaints, suspected matters and weakness in internal control shall be handled in an appropriate way.

22. Securities companies shall record all businesses truly, comprehensively and duly, playing the role of supervision on accounting, while guaranteeing the authenticity and integrity of the information supplied, establish a complete customs duty deposit system and conduct cross verification through the customs duty deposit system and accounting system to prevent the problems such as off-the-balance-sheet business and ambiguous accounts.

23. Securities companies shall strengthen the management over the contracts, negotiable instruments, stamps and test keys by assigning special persons for such purpose who are mutually checked and balanced while performing appropriate approval and strict registration.

Special control measures, such as consecutive number, nullification, blank vouchers and collection registration, should be taken for the important contracts and negotiable instruments.

The safekeeping, approval and use of securities companies’ official seals, special seal for contracts, special seal for finance and electronic broad seals shall be separated and checked mutually in a proper way.

24. Securities companies shall strengthen the safekeeping and management of various files including meeting minutes and resolutions, business agreements, clients’ information, trading records, vouchers sheets, records of handling complaints and conflicts, and files of laws, regulations and systems.

25. Securities companies shall establish crisis management mechanism and procedures, and formulate effective emergency and contingency measures and schemes.

Chapter 3 Main Control
Section 1 Internal Control over Brokering Business

26. The key points of internal control for brokering business department shall be focused on the misappropriation of clients’ settlement funds for transaction and other assets, illegal capital inflow and outflow by financing and settlement risks.

27. Securities companies shall strengthen the overall planning of brokering business and enhance the general control and centralized management over the layout, scale and site selection of business offices as well as the software and hardware technical standards (including upgrade), and formulate uniform and complete service procedures, operation flow and relevant management system to ensure that the standard brokering businesses are rendered.

28. Securities companies shall set out standardized text format and uniform procedure for opening accounts, demand their affiliated business offices to conscientiously examine the clients’ information in regard to its authenticity and completeness by relevant procedures while paying attention to the legality of the source of clients’ funds.

29. Securities companies shall establish a review and confidential system for the clients’ information recorded in the securities trading system, well keep clients’ information concerning opening accounts, trading and other aspects while precluding any unauthorized modification of clients’ information, improve the systems related to query, consultancy service and complaint handling, make sure that the clients are to be fully informed with respect to their accounts, funds, trading and clearing.

30. A securities company shall require their affiliated business offices to sign agency trading agreements with their clients, which, in addition to clarifying both parties’ rights and obligations and risks indications, shall explicitly list the statutory business scope and businesses authorized as well as prohibited by the securities company.

31. Securities companies shall formulate relevant operating procedures and specific measures for controlling the risks in such business links as account management, deposit, withdrawal and transfer of funds, entrustment and cancellation, clearing and settlement, designated transactions and custodian transfer, query and consulting.

32. Securities companies shall make appropriate segregation among the posts for account opening, deposit, withdrawal and transfer of funds, entrustment, and clearing and settlement. The operation and management of clients’ funds should be strictly independent of that of the funds owned by securities companies.

33. Securities companies shall adopt a uniform over-the-counter system in their business offices, strengthen the risk evaluation for such over-the-counter system and prevent any illegal activities by modifying the functions and data of the over-the-counter system. Securities companies shall take rigorous system security measures and strict authorized entry and recording system, and enable the audit marking function of the system.

34. Securities companies shall carry out the centralized system for legal persons clearing and centralized management system for clients’ settlement funds to ensure the security of the clients’ settlement funds and prevent the settlement risks.

35. Securities companies shall establish the registration procedures and independent monitoring mechanism for securities in trust, strictly preventing any misappropriations of clients-entrusted securities for mortgage, buyback or short sale and other acts that infringe the clients’ rights and interests.

36. Securities companies shall enhance the management of trading and clearing system by taking the measures such as ID certification, certificates review, password management and command recording so as to ensure the security of the system.

37. Securities companies shall establish a sound real-time monitoring system for brokering business, in which the supervision department or other independent departments shall be responsible for the real time monitoring on the transfer of funds, securities transfer and trading activities, and shall conduct real time pre-warning for any abnormal transfer of funds, securities, irregular transactions and incompliances.

38. Securities companies shall enhance the verification of the information concerning trading, finance and clearing by making inspection on the trading system, financial system and clearing system of the business offices at regular or irregular intervals, and make sure that the relevant information is consistent with that provided by the stock exchange, registration and settlement securities companies and commercial banks.

39. Securities companies shall set up a backup system for trading data, in which the data are backed up in multiple media and in different places so as to ensure the security and integrity of such trading data.

40. Securities companies shall adopt effective ID certification and access control measures for the online trading system that shall record in detail the processes in which clients make online transactions and queries, and shall enhance the ID recognition of trading parties and perform control over the access authority to ensure the secure and reliable transactions.

41. Securities companies shall protect the network security by setting up firewalls and taking intrusion detection measures, and use the effective technical means like robust encryption to prevent the clients’ data from being stolen or distorted.

42. Securities companies shall formulate and regularly amend the disaster recovery and emergency plans for the network interrupt, entrustment suspension, loss of clients’ data, failure of transfer of funds between banks and securities companies, trading server failure as well as the emergencies like power cut, fire and robbery, and shall establish a mechanism of emergency exercise to ensure an immediate and effective handling of different failures and crises.

43. Securities companies shall establish an investor education and communication mechanism, through which the investors will be fully informed of various investment risks and the communication with investors will be enhanced.

44. Securities companies shall establish handling procedures and approval system for the errors occurring in the transaction clearing, set up a reporting system for major transaction errors, clarify the disputes handling for transaction clearing errors, prevent the hiding or handling such errors without authorization. The handling of errors shall be marked in audit.

45. Securities companies shall establish a system in which the relatively independent personnel shall make a regular return visit to the major clients.

Section 2 Internal Control for Self-support Business

46. Securities companies shall enhance the management over the investment decision-making, funds, accounts, clearing, transactions and confidentiality with respect to self-support business, and put important efforts on preventing such risks as the loss of scale control, decision fault, authorization overriding, self-support business in disguise, off-the-balance-sheet self-support business, market manipulation and insider trading.

47. Securities companies shall establish a sound decision-making agency and complete decision-making procedures with regard to self-support business, and tighten the decision-making management over the self-support business in terms of the investment strategies, scale, categories, structure and term.

48. Securities companies shall exercise strict control over the operation risks of self-support business through practical pre-warning system, rigorous account management, funds approval and scheduling, standardized transaction operations and a complete transaction records storage system.

49. Securities companies shall establish a sound authorization system for self-support business and ensure that the self-support business departments and their staff are performing their duties under appropriate authorization.

50. Securities companies shall make proper division of functions among the research and planning, investment decisions, transaction execution, transaction records, capital clearing and risk monitoring with respect to the self-support business, and shall make detailed research report, risk evaluation and decision-making records for the important investment.

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