Laws of the People's Republic of China

The Ministry of Foreign Trade and Economic Cooperation, China Securities Regulatory Commission

Circular on Printing and Distributing Some Opinions Relevant to Foreign Investment in Listed Companies

WaiJingMaoZiFa [2001] No.538

November 5, 2001

The commissions (departments, bureaus) of foreign trade and economic cooperation and the securities regulatory commissions of various provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan:

In order to promote the healthy development of the domestic stock exchanges and standardize the issuance of stocks by the stock companies with foreign investment and the entrance of enterprises with foreign investment into the stock market, the Ministry of Foreign Trade and Economic Cooperation and China Securities Regulatory Commission formulates jointly Some Opinions Relevant to Foreign Investment in Listed Companies in accordance with the Spirit of the State Council on Allowing the Enterprise with Foreign Investment Which Accords with the Condition Apply to issue A shares or B shares. It is now printed and distributed to you for earnest implementation combining reality. If some things or questions happen during the process of implementation, please report to these two Ministries (Commissions) on time.

This is hereby the notification.

Attachment:Some Opinions Relevant to Foreign Investment in Listed Companies

The following opinions are hereby by proposed for the purpose of promoting the healthy development of the domestic stock exchanges and standardizing the issuance of stocks by the stock companies with foreign investment and the entrance of enterprises with foreign investment into the stock market.

Article 1

The establishment of stock companies with foreign investment

The establishment of stock companies with foreign investment or the application of existing limited liability companies with foreign investment for changing into stock companies with foreign investment shall satisfy the requests as mentioned in the Interim Provisions on Some Issues Regarding the Establishment of Stock Companies with Foreign Investment (Decree of the MOFTEC [1995] No.1) and shall be subject to the approval of the MOFTEC according to stipulated procedures.

Article 2

Issuance of Stocks by Stock Companies with Foreign Investment

1.

The issuance of stocks within the territory of PRC by stock companies with foreign investment (A shares and B shares) shall be in conformity with the industrial policies regarding foreign investment and the requests for the issuance of stocks by listed companies;

2.

A stock company with foreign investment that become listed and publicly issues stocks for the first time shall meet the relevant provisions of the Company Law of the People's Republic of China, other regulations and rules of the China Securities Regulatory Commission, in addition, it shall satisfy the following requests:

(1)

having passed the joint annual inspections of enterprises with foreign investment for the recent three years;

(2)

the scope of business is in conformity with the requests as mentioned in the Interim Provisions on Guiding the Orientation of Foreign Investment and the Catalogue of Industries for Guiding Foreign Investment;

(3)

the proportion of shares held by foreign investors shall not be less than 10% in the total shares after the initial public offer;

(4)

those stock companies with foreign investment which, according to relevant provisions, shall be controlled (including being relatively controlled) by the Chinese parties or for which there are special provisions regarding the holding of shares by the Chinese parties shall continue to keep their controlling positions or continue to hold the proportion of shares after becoming listed on the stock market;

(5)

shall meet other requests as provided in other regulations and rules regarding the initial public offer.

3.

The stock companies with foreign investment shall, when applying for initial public offer and issuance of stocks, submit to the CSRC, in addition to those materials required by the CSRC, a certificate of approval and business license of the stock company with foreign investment that has passed the joint annual inspection;

4.

After a foreign-funded stock company has made its initial public offer, its issuance of additional stocks and rationed shares shall meet the conditions as mentioned in paragraph two of this article and other relevant provisions concerning the issuance of additional and rationed shares;

5.

After the stock company with foreign investment has made its initial public offer or has issued additional or rationed shares, it shall go through the procedures of altering relevant legal documents at the MOFTEC.

Article 3

If a stock company with foreign investment which holds B shares applies for exchanging its unlisted foreign shares at the B shares market, it shall, after obtaining the approval of the MOFTEC, submit a proposal to the CSRC for exchanging unlisted foreign shares.

An application for exchanging unlisted foreign shares shall meet the following conditions:

1.

It shall be less than 1 year since the holder of the unlisted foreign shares to be exchanged at the stock exchange obtained the shares;

2.

The original hold continue to hold the shares for a period of more than 1 year after the unlisted foreign shares are changed into exchangeable shares;

3.

The original holder of the unlisted foreign shares shall, on the basis of the Articles of Incorporation, the shareholders' agreement and other legal documents or other legal documents which have special commitments to the company or there are special duties and obligations in laws or regulations, perform its commitment or obligations;

4.

It shall meet the conditions as stipulated in relevant regulations on the initial public and the issuance of shares.

Article 4

An enterprise with foreign investment (including stock companies with foreign investment) shall, when accepting the noncirculating shares of listed companies within the territory of PRC, go through relevant procedures in accordance with the procedures and requirements of the Interim Provisions Concerning the Domestic Investment by Enterprises with Foreign Investment.

For the time being, no company with foreign investment is allowed to accept the noncirculating shares of listed companies.

Article 5

If a stock company with foreign investment holds less than 25% of total shares after making the initial public offer within the territory of PRC, it shall return the approval certificate of the enterprise with foreign investment, and go through alteration procedures according to relevant provisions.

If the noncirculating shares that a stock company with foreign investment accepts from a listed company results in the listed company's holding less than 25% of the total shares, the listed company shall return the approval certificate of the enterprise with foreign investment and go through alteration procedures according to relevant provisions.

Article 6

Any eligible enterprise with foreign investment may issues shares beyond the territory of People's Republic of China.