Laws of the People's Republic of China

The People's Bank of China

Circular of the People's Bank of China on Relevant Issues Concerning Commercial Banks' Application for Engaging in the Entrusted Business of Investment of Securities within China by Qualified Foreign Institutional Investors

YinFa [2002] No.371

December 17, 2002

All the branches and the business and managerial departments of the People's Bank of China, all the wholly state-owned commercial banks and the joint stock commercial banks:

In order to support the implementation of the Interim Measures Governing the Investment of Securities within China by Qualified Foreign Institutional Investors (Decree [2002] No.12 of the China Securities Regulatory Committee and the People's Bank of China, hereinafter referred to as the Measures), relevant issues concerning commercial banks' application for engaging in the entrusted business of investments of securities within China by qualified foreign institutional investors (Ħ°QFIIĦħ) are notified as follows:

1.

Chinese-funded commercial banks shall submit the application materials as provided in Article 16 of the Interim Provisions Governing the Intermediate Business of Commercial Banks (Decree [2000] No. 5 of the People's Bank of China).

2.

The branches of Wholly foreign-funded banks, equity joint banks and foreign banks shall submit the application materials as provided in Article 44 of the Rules for the Implementation of the Regulations of the People's Republic of China on the Management of Foreign-funded Financial Institutions (Decree [2002] No. 1 of the People's Bank of China):

a.

An application form for engaging in the entrusted business of investments of bonds and securities inside China by qualified foreign institutional investors as signed by the person authorized by the head office of the applicant. Where the application is signed by the chairman of the board of directors or the president (chief executive office, general manager), no power of attorney is required; where an application is signed by any other person, a power of attorney is required. The power of attorney shall be subject to the notarization of an institution acknowledged by the country or region where it is located or subject to the authentication of the Chinese embassy or consulate to that country. "The country or region where it is located" refers to the country or region where the authorizer is holding a position. If the authorizer is within the borders of China, the notarization shall be issued by a notarial institution located at the city where the authorizer is holding a position. If the authorized person is holding a position within the borders of China on the temporary basis, where his (her) present position has been examined and approved by the People's Bank of China and where the scope of the authorization is in conformity with that approved by the People's Bank of China, he (she) can merely offer a copy of the authorization that had been submitted to the People's Bank of China when he (she) started to hold the position, but the said copy shall be signed by himself (herself).

b.

Detailed description of the proposed business, necessary preparations for engagement in the business, including operational procedures, risk-benefit analysis, control measures, professionals and installations of computer systems etc.

c.

Other materials required by the People's Bank of China.

3.

For the branches of the foreign banks in China, only one of the branches may apply for engaging in the entrusted business of securities investment as a QFII inside China, and for the solely foreign-funded banks and the equity joint banks, only the head offices thereof may apply for engaging in the entrusted business of securities investment as a QFII.

4.

The wholly state-owned commercial banks and joint stock commercial banks shall file an application to the People's Bank of China via their head office. City commercial banks shall file an application to the branch or the business managerial department via their respective head offices. Wholly foreign-funded banks, equity joint banks and branches of foreign banks shall submit the application materials (in triplicate) to any branch of the People's Bank of China where the applicant is located. After the materials of application have been examined and accepted by the branch of the People's Bank of China, they shall be submitted via the branch' s superior to the People's Bank of China for approval.

5.

As to the commercial banks approved to engage in the entrusted business of investments of bonds and securities inside China by qualified foreign institutional investors, no modification shall be made on their license for financial business and no public announcement is required.

6.

Upon the approval of the Bank and by presenting the document of approval and by reference to the Measures, a commercial bank shall file an application to the China Securities Regulatory Commission for the title of a trustee of investments of bonds and securities within borders of China by qualified foreign institutional investors.

7.

The circular shall be applicable to the Chinese Mainland branches of the banks of Hong Kong, Macao and Taiwan and the wholly foreign-funded banks, equity joint banks established in the Chinese Mainland by financial institutions of Hong Kong, Macao and Taiwan by referring to the provisions concerning wholly foreign-funded banks, equity joint banks and branches of foreign banks.

All branches and business managerial departments should distribute the circular to local branches, city commercial banks and foreign-funded banks.