Laws of the People's Republic of China

State Administration of Foreign Exchange

Circular of the State Administration of Foreign Exchange Concerning Relevant Issues on the Control of Foreign Exchanges relating to the Use of Foreign Capitals for Non-performing Asset Disposal of Financial Asset Management Companies

Hui Fa [2004] No.119

December 17, 2004

The branches and the foreign exchange administration departments of the State Administration of Foreign Exchange of all provinces, autonomous regions, and municipalities directly under the Central Government, the branches of the State Administration of Foreign Exchange in Shenzhen, Dalian, Qingdao, Xiamen, and Ningbo, and the China Huarong Asset Management Corporation, the China Orient Asset Management Corporation, the China Cinda Asset Management Corporation and the China Great Wall Asset Management Corporation:

For the purpose of regulating the control of foreign exchange relating to the use of foreign capitals for non-performing asset disposal of financial asset management companies, this Circular is hereby notified as follows:

I.

When selling or transferring non-performing assets to a foreign party, a financial asset management company shall report the issues regarding the income and expenditure in foreign exchange and the remittance to the State Administration of Foreign Exchange for approval within 15 working days after the trading program is approved by the department in-charge, and submit the following documents:

(i)

an application report on the issues regarding the foreign exchange income and expenditure and the remittance occurred in the asset selling and transferring;

(ii)

an approval or registration document of the department in-charge on the trading program concerning the foreign sale or transfer of non-performing assets;

(iii)

the relevant terms in the contract of asset sale and transfer; and

(iv)

an agreement of asset management and service, if the asset management company offers such asset management and service.

II.

Any foreign investor or its agent that has purchased or accepted the non-performing assets of a financial asset management company shall go through the procedures for archival-filing registration on selling or transferring non-performing assets at the local foreign exchange branch where the assets are located or at the branch designated by the State Administration of Foreign Exchange within 15 working days after the transaction is finished, and submit the following documents:

(i)

an approval document of the State Administration of Foreign Exchange on the sale or transfer of the relevant assets;

(ii)

a filled archival-filing registration form of external disposal of non-performing asset (see Annex I);

(iii)

a list of sold or transferred assets (its contents shall be detailed, including such fundamental information as the types of assets, par value of the assets, debtors, term of debts and interest rates, etc.); and

(iv)

if an application is put forward by the agent, the relevant agency agreement, the agent's business license and operational permit shall be provided in addition.

III.

A foreign investor or its domestic agent may (purchase foreign exchanges) remit abroad the proceeds from reselling and retransferring the non-performing assets or the proceeds from businesses. The approval procedure shall be gone through at the foreign exchange branch where the assets are located or the branch designated by the State Administration of Foreign Exchange for the (purchase of foreign exchanges) overseas remittance of proceeds, and a filled application form for remitting abroad the foreign party's proceeds from the external disposal of non-performing asset (see Annex II), an archival-filing registration form of external disposal of non-performing asset, a list of items to be disposed of and a certificate file of proceeds shall be provided in addition. In case the tax shall be paid according to the taxation regulations of our country, the relevant tax payment receipt or certificate shall be provided.

IV.

When handling the archival filing of assets sold or transferred, if the archival-filing assets are under any of the following circumstances, the enterprise that has received equity investment shall abide by the relevant laws and regulations of the State and go through equity assessment and confirmation procedures in accordance with the relevant regulations on the management of foreign exchanges:

(i)

if the assets to be filed contain equities;

(ii)

if the credits to be filed are turned into equities of the debtor's enterprise;

(iii)

if the physical assets to be filed are contributed after conversion into cash at home; or

(iv)

if a foreign investor uses the proceeds from the domestic disposal of non-performing asset for domestic reinvestment.

V.

In case a financial asset management company contributes its cash converted from non-performing assets to establish a foreign-invested enterprise, it shall abide by the relevant provisions on the management of foreign exchanges relating to foreign-invested enterprises and go through the relevant procedures at the foreign exchange branch where the foreign-invested enterprise is registered.

VI.

In case the non-performing assets to be disposed of by utilizing foreign capitals contain the third party guarantee, the financial asset management company shall notify the guarantor of the original debtor and creditor contract.

When handling the archival-filing registration of transferring non-performing assets, the foreign investor or its agent shall give a clear indication of the detailed instances about the guarantee in the asset archival-filing registration. The State Administration of Foreign Exchange and its branches shall not register any guarantee that injures social public interests or breaks laws or regulations.

After a financial asset management company disposes of the non-performing assets by using foreign capitals, except for the original guarantee , the debtor or the third party shall not offer any other guarantee for the sold or transferred credits.

VII.

In case the investor's ownership of the archival-filing assets is lost due to the buyback, sale (transfer), recovery, stock transfer or other causes, the foreign investor or its agent shall go through the procedures on canceling the archival filing of credits, physical assets or equities at the foreign exchange branch where the registration is handled within 15 working days after the loss of the ownership.

VIII.

In case a financial asset management company sells or transfers non-performing assets to the institutions or individuals in Hong Kong, Macao and Taiwan and to the natural persons with foreign nationalities, it shall be implemented by referring to this Circular.

IX.

In case any other financial institution disposes of non-performing assets by using foreign capitals with the approval of the department in-charge, , it shall be implemented by referring to this Circular.

X.

Anyone violating this Circular shall be punished according to the Regulation on the Management of Foreign Exchanges or other relevant provisions.

XI.

This Circular shall be implemented since January 1, 2005.

Annex:

1.

Archival-filing Registration Form of External Disposal of Non-performing Asset(omitted)

2.

Application Form for Remitting Abroad the Foreign Party's Proceeds from the External Disposal of Non-performing Asset(omitted)