Laws of the People's Republic of China

No. 37

The Administration Measures of Securities Issuance and Consignation, which were deliberated and adopted at the 189th chairman's executive meeting of China Securities Regulatory Committee Commission on September 11, 2006, are hereby promulgated and shall go into force as of September 19, 2006. Chairman of China Securities Regulatory Committee Commission, Shang Fulin

September 17, 2006

Administration Measures of Securities Issuance and Underwriting Chapter I General Provisions

Article 1

In order to regulate securities issuance and underwriting and protecting the legitimate rights and interests of investors, the present Measures are formulated under the Securities Law of the People's Republic of China and the Company Law of the People's Republic of China.

Article 2

The present Measures apply to issuers who issue stocks or convertible corporate bonds (hereinafter collectively referred to as securities) within the border territory of China, securities companies that underwrite securities within the border territory of China, and investors who subscribe securities issued within the border territory of China.

Issuers, securities companies and investors who participate in the issuance of securities shall abide by other provisions concerning securities issuance of China Securities Regulatory Commission (hereinafter referred to as CSRC) and the business rules of stock exchanges and securities registration and clearing institutions. In underwriting securities, securities companies shall also abide by the related provisions concerning sponsorship system, risk control system and inner control system of the CSRC.

Article 3

The securities service institutions and personnel that produce related documents for securities issuance shall rigidly fulfill the statutory duties in light of generally recognized business standards and ethical norms of the securities industry, and shall be responsible for the authenticity, accuracy and integrity of the issued documents.

Article 4

The CSRC shall supervise and manage the issuance and underwriting of securities in accordance with law.

Chapter II Inquiry and Price-Fixing

Article 5

As for the initial public offering of a stock, the issuing price of the stock shall be determined by making an inquiry to the specified institutional investors (hereinafter referred to as inquiry objects).

Inquiry objects refer to the securities investment funds management companies, securities companies, trust and investment companies, financial companies, insurance institutional companies, and qualified foreign institutional investors that meet the conditions prescribed in the present Measures, and other institutional investors authorized and approved by the CSRC.

Article 6

Inquiry objects of pricing and the securities investment products under its management (hereinafter referred to as object of shares rationing) shall be registered at Securities Association of China for record and be subject to the self-discipline management of Securities Association of China

Article 7

Inquiry objects of pricing shall meet the conditions as follows:

(1)

It is established in light of law, and has not been imposed with any administrative penalty, supervising measure or criminal penalty by the related supervising departments because of any significant violation of laws or regulations during the latest 12 months;

(2)

It may conduct stocks investment in accordance with law;

(3)

It has good credit record, and has necessary institutions and personnel for independently engaging in securities investment;

(4)

It has sound systems of inner risk evaluation and control which can be effectively executed, and the risk control indexes accord with the related provision; and

(5)

Where it has been removed from the list of inquiry objects by Securities Association of China according to the provisions of the present Measures, 12 months have lapsed since the date of removal.

Article 8

The following institutional investors, as inquiry objects, shall also satisfy the following conditions in addition to those provided in Article 7 :

(1)

A securities company may conduct securities self-run business and securities assets management business upon approval;

(2)

A trust and investment company shall have been newly reregistered at the relevant supervising department for two or more years, its registered capital shall not be lower than 400 million Yuan, and it shall have an active record of securities market investments in the latest 12 months;

(3)

A financial company which has been established for 2 years or more with a registered capital not lower than 300 million Yuan and has an active record of securities market investments in the latest 12 months; .

Article 9

A main consignee shall provide an investment value study report to the inquiry objects when making inquiries. Issuer, main consignee or inquiry object shall never publicly disclose the content of an investment value study report in any form.

Article 10

An investment value study report shall be independently written and signed by the research personnel of a consignee, which shall not provide an investment value study report written by an institution other than one of the underwriting syndicate. A consignee that produces investment value study report shall establish perfect quality control system of investment value study report; the personnel who write the report shall abide by the inner control system of securities companies.

Article 11

When writing an investment value study report, the following requirements shall be observed:

(1)

Independence, prudence and objectiveness;

(2)

The materials quoted shall be authentic, accurate, integrate and authoritative, and their sources shall be indicated;

(3)

The evaluation concerning the industry of the issuer shall be consistent and coherent;

(4)

There shall be no false record, misleading statement or momentous omission.

Article 12

An investment value study report shall make comprehensive analysis concerning the elements that affect the investment value of an issuer, and shall at least contain the contents as follows:

(1)

The classification of the issuer's industry, industrial policies, comparison between the issuer and the major competitors, and the issuer's status in the same industry;

(2)

Analysis concerning the issuer's condition of operation and development prospect;

(3)

Analysis concerning the issuer's capacity of making profits and their financial conditions;

(4)

Analysis concerning the issuer's projects invested by raised funds;

(5)

Comparison between the investment value of the issuer and those that of the comparable listed companies in the same industry;

(6)

Macro economic trend, stock market trend and other elements that have important impact on the investment value of the issuer.

An investment value study report shall, on the basis of the above-mentioned analysis, anticipate the rational investment value of an issuer's stock by using the estimating methods recognized generally in the industry.

Article 13

An issuer and its main consignee shall make recommendations and inquiries to the inquiry objects after publishing the prospectus of an initial public offering stock and the announcement on issuance, and shall make recommendations to the public investors via internet.

Inquiry may be divided into initial inquiry and accumulated bidding inquiry. An issuer and its main consignee shall determine the issuing price span through initial inquiry, and determine the issuing price within the price span through accumulated bidding inquiry.

Article 14

If an initially offered stock is listed on the board of small and medium-sized enterprises, the issuer and its main consignee may determine the issuing price in light of the outcome of initial inquiry instead of further conducting accumulated bidding inquiry.

Article 15

an inquiry object may determine by itself whether or not to participate in the initial inquiry; if an inquiry object applies for participating in the initial inquiry, the main consignee can not refuse without legitimate reasons. An inquiry object that does not participate in the initial inquiry, or participates in the initial inquiry but doe not make effective quotation, shall not participate in the accumulated bidding inquiry and offline rationing.

Article 16

After the end of initial inquiry, where the number of the publicly offered shares is smaller than 400 million and the inquiry objects that provide effective quotations are less than 20, or the number of the publicly offered shares is larger than 400 million and the inquiry objects that provide effective quotations are less than 50, the issuer and its main consignee may not determine the issuing price and shall suspend the issuance.

Where an issuer and its main consignee resume the issuance after suspending it, they shall report to the CSRC in time.

Article 17

An inquiry object shall make reasonable quotation according to the principles of independence, objectiveness and sincerity, may not negotiate on the quotation or lower or raise prices on purpose.

Article 18

The securities self-run account of a main consignee may not participate in the inquiry, offline rationing and online issuance of the shares issued this time.

An inquiry object that has actual control relationship with the issuer or its main consignee may not participate in the inquiry and offline rationing of the shares issued this time, but may participate in the online issuance.

Article 19

An issuer and its main consignee shall, after the issuing price span and the issuing price being determined, respectively report them to the CSRC for record and make public announcements accordingly.

Article 20

An issuer and its main consignee may not mislead investors in the process of recommendation, or disturb the normal quotation or subscription of any inquiry object, or disclose other information of the issuer expect such public information as prospectus; there shall not be any false record, misleading statement or momentous omission in the recommendation materials.

Article 21

An inquiry object shall summarize the inquiry situation of the previous year within one month upon the end of that year, and make explanations on whether it persistently accords with the conditions prescribed in the present Measures and whether it complies with the requirements on inquiry objects as prescribed in the present Measures. The summary report shall be reported to Securities Association of China for record.

Article 22

When issuing securities, a listed company may determine the issuing price by means of inquiry, or by negotiating with its main consignee.

The price-fixing of securities issued by a listed company shall be in accordance with the relevant provisions on securities issuance of listed companies prescribed by the CSRC.

Chapter III Securities Offering

Article 23

Where the number of the initially offered shares is more than 400 million, shares may be rationed to strategic investors. The issuer shall subscribe a ration agreement with strategic investors in advance and shall report to the CSRC for record.

An issuer and its main consignee shall disclose the standards for selecting strategic investors, the total amount of shares rationed to strategic investors, the proportion taken of the shares issued this time, and time limit on holding shares, etc.

Article 24

A strategic investor may not participate in the initial inquiry and accumulated bidding inquiry of a stock of initially public offering, and shall make a promise that the holding period of the shares rationed to it this time shall not be less than 12 months, The holding period shall be calculated as of the date when the stock publicly offered this time is listed.

Article 25

An issuer and its main consignee shall ration shares to the inquiry objects that take part in the offline rationing. Where less than 400 million shares are offered publicly, the quantity for rationing shall not be more than 20% of the total amount of this issuance; where 400 million or more shares are offered publicly, the quantity for rationing shall not be more than 50% of the total amount of this issuance after deducting the amount rationed to strategic investors. An inquiry object shall make a promise that the holding period of the shares obtained this time through offline rationing shall not be less than 3 months. The holding period shall be calculated as of the date when the stock publicly offered this time is listed.

Where the shares issued this time are rationed to strategic investors, upon the completion of the issuance, the quantity of the shares without any restriction on holding period shall not be less than 25% of the total amount of this issuance.

Article 26

The rationing objects of shares shall be limited to the following categories:

(1)

Securities investment funds raised upon approval;

(2)

National social security funds;

(3)

Securities self-run accounts of securities companies;

(4)

Aggregate asset management plans of securities companies established upon approval;

(5)

Securities self-run accounts of trust and investment companies;

(6)

Aggregate trust plans established by trust and investment companies which have performed reporting procedures to the relevant supervision departments;

(7)

Securities self-run accounts of financial companies;

(8)

Approved securities investment accounts of insurance companies or insurance assets management companies;

(9)

Securities investment accounts managed by qualified foreign institutional investors;

(10)

Enterprise annuity funds that have been put on records at the relevant supervision departments;

(11)

Other products of securities investment approved by the CSRC.

Article 27

An inquiry object shall respectively appoint fund accounts and securities accounts for the objects of shares rationing under its management, which shall be specially used for accumulated bidding inquiry and offline placement, and shall report the accounts appointed to the CSRC, Securities Association of China and securities registration and clearing institutions for record.

Article 28

An object of shares rationing that participates in accumulated bidding inquiry and offline rationing shall pay the amount for subscription in full amount, where only a securities account is appointed, the accumulated quantity of subscription shall not exceed the total amount of shares rationed to inquiry objects this time.

Article 29

An issuer and its main consignee who determined the issuing price through accumulated bidding inquiry, where the aggregate quantity of effective subscription with price above the issuing price is larger than the quantity of offline rationing, shall ration all the effective subscription with price above the issuing price at the same proportion.

Where an issuing price is determined through initial inquiry, if the aggregate quantity of offline effective subscription is larger than the quantity of offline rationing, all the effective subscription shall be rationed at the same proportion.

Article 30

A main consignee shall check the registration situation of inquiry objects and objects of shares rationing. An inquiry object that falls under any of the following circumstances may not be rationed with shares:

(1)

It did not participate in the initial inquiry;

(2)

The name or account information of an inquiry object or object of shares rationing is inconsistent with those registered at Securities Association of China;

(3)

It fails to offer a quotation within prescribed time limit or appropriate capital for subscription in full amount;

(4)

There is evidence which can prove the existence of such circumstances as violation of any law or regulation or violation of the principle of good faith in the process of inquiry.

Article 31

An issuer and its main consignee shall conduct offline rationing of shares and online issuance at the same time.

Where the online issuing price is not yet determined, the investors taking part in the online issuance shall subscribe in accordance with the upper limit of the price span; if the finally determined issuing price is lower than the upper limit of the price span, the price difference shall be refunded to the investors.

An investor that takes part in online issuance shall observe the related provisions of securities exchanges and securities registration and clearing institutions.

Article 32

Where initially public issuance of a stock reaches a certain scale, the issuer and its main consignee shall establish a claw-back mechanism between offline rationing and online issuance, and adjust the proportion between the two in light of the situation of subscription.

Article 33

If there is any profit distribution plan or plan concerning the conversion of public accumulation funds into shares capital that has not been handed in to the general meeting of shareholders for voting, or that has been voted and adopted by the general meeting of shareholders but has not been actualized, the listed company shall issue securities after such plan is actualized. Before the related plan is actualized, the main consignee may not underwrite the securities issued by the listed company.

Article 34

Where a listed company rations shares to the original shareholders (hereinafter referred to as rationing shares), it shall ration shares to the shareholders registered at the book on the date of record at the same rationing ratio.

Article 35

Where a listed company publicly raises shares from unspecified objects (hereinafter referred to as additional issuance) or issues convertible corporate bonds, the main consignee may classify the institutional investors that participate in offline rationing , and set different rationing ratios for different categories, while the institutional investors belonging to the same category shall be rationed at the same ratio. The main consignee shall specify the standards of classification in the issuance announcement.

Where a main consignee fails to classify the institutional investors, it shall establish a claw-back mechanism between offline rationing and online issuance, the rationing ratios of the two shall be the same with each other after the claw-back.

Article 36

Where a listed company issues additional stocks or convertible corporate bonds, it may ration all or part of shares by giving priority to the original shareholders, the proportion of priority ration shall be disclosed in the issuance announcement.

Article 37

Where a listed company makes non-public issuance of securities, it shall conform to the related provisions on securities issuance of listed companies prescribed by the CSRC in choosing the issuing objects and the issuing quantities.

Chapter IV Securities Consignation

Article 38

Before underwriting securities, a securities company shall report the issuing plan and the underwriting plan to the CSRC.

Article 39

A securities company that underwrites securities shall adopt the mode of exclusive sales or sales by proxy in light of provisions of Article 28 of the Securities Law of the People's Republic of China. A listed company that issues stocks non-publicly and does not adopt the mode of self-distribution, or the mode of rationing, shall adopt the mode of sales by proxy.

Article 40

Where the mode of sales by proxy is adopted in the issuance of a stock, the disposal measures in case of issuance failure shall be disclosed in the issuance announcement. If the issuance failed, the main consignee shall assist the issuer in refunding to the stock subscribers in accordance with the issuing price adding the bank deposit interest of the same period.

Article 41

Where a securities issuance shall be underwritten by an underwriting syndicate in accordance with the provisions of laws and administrative regulations, the consignees that compose the underwriting syndicate shall conclude an underwriting syndicate agreement, and the main consignee shall be responsible to organize the underwriting work.

Where a securities issuance is mainly underwritten jointly by two or more securities companies, all securities companies that occupy the position of main consignee shall bear the responsibilities of main underwriting together and fulfill the related obligations. Where an underwriting syndicate is constituted with three or more consignees, a deputy-main consignee may be set to assist the main consignee in organizing the underwriting activities.

Article 42

The member of an underwriting syndicate shall carry through underwriting activities in light of the provisions in the underwriting syndicate agreement and the underwriting agreement, and may not conduct any false underwriting.

Article 43

The underwriting syndicate agreement and the underwriting agreement may be concluded after the issuing price is determined.

Article 44

The main consignee shall set up special departments or institutions to coordinate the company¡¯s departments of investment bank research, marketing, etc, to complete such work as information disclosure, recommendation, book-keeping, price-fixing, shares rationing and capital clearance, etc together.

Article 45

A securities company may not, in the process of underwriting, induce other people to subscribe shares by means of providing overdraft or kickback or other illegitimate means recognized by the CSRC.

Article 46

A listed company, in arranging the suspension and resumption of listing related securities during the period of securities issuance, shall observe the related rules of securities exchanges corporation.

The main consignee shall appropriate and pay the interests on funds deposited for the purchase of new securities in time according to the related provisions.

Article 47

After the end of payment for subscription by investors, a main consignee shall employ an accounting firm with the qualification of related securities business (hereinafter referred to as accounting firm) to examine and verify the capital for subscription and produce a report on the verification of capital; where a stock of initial public offering is issued, it is necessary to further employ a law firm to witness whether the acts of inquiry and rationing to strategic investors and inquiry objects are in line with laws, administrative regulations and the provisions of the present Measures, and then produce special legal opinions.

Article 48

Where more than 400 million shares of initially public offering are issued, the issuer and its main consignee may adopt greenshoe, the exercise of this power shall abide by the related provisions of the CSRC, securities exchanges and securities registration and clearing institutions.

Article 49

Where a securities is publicly offered, the main consignee shall report the summary report of underwriting to the CSRC for record within 10 days as of the date when the securities is listed so as to summarize and explain the basic situations during the issuance period and the performance of the new shares after being listed, and shall provide documents as follows:

(1)

Separate edition of the prospectus;

(2)

Underwriting agreement and underwriting syndicate agreement;

(3)

Opinions of witness by the lawyer (only for the initially public offering);

(4)

Report on the verification of capital produced by the accounting firm; and

(5)

Other documents required by the CSRC.

Article 50

Where a listed company makes non-public issuance of a stock, the issuer and its main consignee shall hand in the following documents to the CSRC upon the accomplishment of the issuance:

(1)

Statement on issuance situation;

(2)

Report made by the main consignee on the compliance of this issuing process and objects of subscription;

(3)

Opinions of witness concerning the compliance of this issuing process and objects of subscription presented by the lawyer of the issuer;

(4)

Report concerning the verification of capital produced by the accounting firm; (5) Other documents required by the CSRC.

Chapter V Information Disclosure

Article 51

An issuer and its main consignee shall, in the process of issuance, prepare the documents of information disclosure and perform the obligation of information disclosure in light of the procedures, contents and formats stipulated by the CSRC.

Article 52

The information disclosed by an issuer and its main consignee in the process of issuance shall be authentic, precise, and integrate; and there shall be no false record, misleading statement or momentous omission.

Article 53

An issuer and its main consignee shall publish the information disclosed in the process of issuance on at least one of the newspapers and periodicals appointed by the CSRC; and shall, at the same time, publish such information on the internet website appointed by the CSRC; and exhibit such information at the place appointed by the CSRC for public reference.

Article 54

The letter of intent publicized by an issuer shall conform to the prospectus in terms of contents and formats, except that the letter of intent does not include the issuing price and the amount of capital to be raised, and shall have equal legal biding force of law with the prospectus.

Article 55

An issuer and its main consignee shall publish the issuance announcement simultaneously when publishing the abstract of the letter of intent or the prospectus, and shall make detailed explanation of the issuing plan.

Article 56

Where an issuer and its main consignee announce the issuing pricing and the price-earning ratio, the earnings per share shall be calculated on the basis of the net profit of the previous year of the issuance audited by accounting firm before or after deducting non-routine profits/losses, whichever is smaller, divided by the total capital of stocks.

The issuer that provides profit forecasting shall still complement the disclosure of the issuing earnings per share ratio based thereon. The earnings per share shall be calculated on the basis of the forecasted net profit of the previous year of the issuance audited by accounting firm before or after deducting non-routine profits/losses, whichever is smaller, divided by the total capital of stocks.

The issuer may also disclose such issuing price index as the net value per share ratio, which can reflect the features of the industry where the issuer belongs.

Article 57

In case of rationing a stock of initially public offering to strategic investors, the issuer and its main consignee shall disclose the name, subscription quantity, promised holding period and other information of each strategic investor in the announcement of the results of offline rationing.

Article 58

After a listed company makes non-public issuance of new shares, it shall prepare and disclose the statement on issuing situation.

Article 59

Before the securities issued this time is listed, the issuer and its main consignee shall prepare the documents of information disclosure and make announcement in light of the requirements of securities exchanges.

Chapter VI Supervision and Punishment

Article 60

Where any issuer, securities company, securities service institution or inquiry object violates any provision of the present Measures, the CSRC may order it to rectify; as for the directly responsible person in charge and other persons directly responsible, the CSRC may take such administrative supervision measures as supervised talks and determining them as inappropriate persons, and register at the record of creditworthiness and publicize the names.

Article 61

Where any issuer, securities company, securities service institution, inquiry object or its directly responsible person in charge violates any law, administrative regulation, or any provision of the present Measures, administrative penalties shall be imposed thereupon in accordance with law when it is due; where it/he is suspected of being involved in any crime, it/he shall be transferred to judicial authorities and its/his criminal liabilities shall be investigated.

Article 62

Where a securities company falls under any of the following circumstances, in addition to undertaking the legal responsibilities stipulated in the Securities Law, it may not take part in the underwriting of securities within 36 months as of the date of being confirmed by the CSRC:

(1)

Underwriting unapproved securities;

(2)

In the process of underwriting, making advertisements that are false or may mislead investors or conducting other activities of publicity and recommendation; or inducing other people to purchase shares by illicit means; or

(3)

In the process of underwriting, there is false record, misleading statement or momentous omission in the disclosed information .

Article 63

Where a securities company falls under any of the circumstances as follows, in addition to undertaking the legal responsibilities stipulated in the Securities Law, it may not take part in the underwriting of securities within 12 months as of the date of being confirmed by the CSRC:

(1)

Leaking information on securities issuance in advance;

(2)

Canvassing underwriting business by means of unfair competition;

(3)

Failing to disclosing information as required in the process of underwriting;

(4)

The actual operation in the process of underwriting does not conform to the issuing plan submitted to the CSRC;

(5)

Writing or publishing the study report concerning investment value by violating the related provisions.

Article 64

Where an issuer and its main consignee provide, by violating the related provisions, any financial subsidy or compensation to the investors that take part in subscription, the CSRC may order it to rectify; where the former circumstance is serious, it may give admonition or impose fines.

Article 65

Where an inquiry object falls under any of the following circumstances, Securities Association of China shall remove it from the list of inquiry objects:

(1)

It does not meet the conditions prescribed in the present Measures any longer;

(2)

Three or more supervising talks has have been held within the latest 12 months because of its violation of the relevant supervising requirements;

(3)

Failing to hand in annual summary report on time.

Chapter VII Supplementary Provisions

Article 66

The term "online issuance" refers to the issuance of securities through the technical systems of securities exchanges.

The term "offline rationing" refers to the issuance securities issuance organized and carried out by the main consignees instead of through the technical systems of securities exchanges.

Article 67

The issuance and underwriting of other securities of listed companies shall be conducted with reference to the present Measures.

Article 68

The present Measures shall enter into force as of September 19, 2006. The Regulations concerning the Management of Stock Underwriting by Securities Institutions ([1996] No.18 of the China Securities Regulatory Commission), the Notice concerning Banning the Improper Behaviors in Stock Issuance ([1996] No.21 of the China Securities Regulatory Commission), the Notice concerning Firmly Preventing Such Behaviors as Overdraft in Stock Issuance ([1996] No.169 of the China Securities Regulatory Commission), the Notice concerning Forbidding Securities Institutions from Purchasing their Own Underwriting Stocks ([1997] No.4 of the China Securities Regulatory Commission), the Notice concerning Strengthening the Supervising Work over Stock Underwriting Business of Securities Institutions ([1999] No.54 of the China Securities Regulatory Commission), the Notice on the Related Issues Concerning the Stocks Ration of Legal Persons ([1999] No.121 of the China Securities Regulatory Commission), the Notice on the Relevant Issues Concerning the Arrangements of Stocks Listing ([2000] No.86 of the China Securities Regulatory Commission), the Supplementary Notice concerning the Supervising Work over Stock Underwriting Business of Securities Institutions ([2000] No.199 of the China Securities Regulatory Commission), the Notice concerning Companies that Issue New Shares Conduct Introduction and Recommendation through Internet ([2001] No.12 of the China Securities Regulatory Commission) and the Notice on Several Issues Concerning the Trial Execution of the Price Inquiry System for Initial Public Offerings ([2004] No. 162 of the China Securities Regulatory Commission) shall be abolished simultaneously.