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CIRCULAR OF THE STATE COUNCIL CONCERNING FURTHER STRENGTHENING THE ADMINISTRATION OF SHARE ISSUANCE AND LISTING OVERSEAS

    The State Council and the competent department for securities under the
State Council have expressly instituted policies concerning share issuance and
listing overseas by a series of regulations and official documents since 1992.
However, for a period of time of late, there are some institutions and
enterprises which have, in violation of provisions, transferred domestic
assets in various forms overseas for listing shares without approval,
resulting in harmful effects. Issuing and listing shares overseas is a
policy-intensive work which must be carried out step by step in an organized
way and in accordance with the relevant state provisions. In view of the
current problems in share listing overseas and for the purpose of further
strengthening the administration to ensure order in share issuance
and listing overseas, the relevant questions are hereby notified as follows:

    1. Any overseas listed company registered in a foreign country and held
by a Chinese shareholder(s) (including in the case where a Chinese shareholder
is the largest one, the same below) (hereinafter referred to as "an overseas
Chinese-holding listed company") shall subject itself to the supervision and
regulation of the local securities supervisory and regulatory organ when
engaging in activities such as capital-dividing for listing shares and
increase in issuance of shares. However, the share-holding unit(s) inside the
country of the Chinese shareholder(s) should report the case to the China
Security Supervisory and Regulatory Commission for the record afterwards and
shall strengthen the supervision and administration over the share ownership.

    2. Local laws are applicable where a Chinese invested non-listed
company or a Chinese-holding listed company which has entered into
registration overseas applies overseas for issuing and listing
shares with its overseas assets or its domestic assets which are formed from
its overseas assets invested in China and have been in its actual possession
for over three years. However, the share-holding unit(s) inside the country
should obtain consent in advance from the provincial people's government or
the competent department under the State Council based on its subordination
thereto. For domestic assets in its possession for not more than three years,
the company shall not apply for share issuance and listing overseas. In the
case of special requirements, a report thereon shall be submitted to the China
Securities Supervisory and Regulatory Commission for verification and then
subject to the examination and approval of the State Council Securities
Commission. After the listing has been completed, the share-holding unit(s)
inside the country should report the relevant details to the China Securities
Supervisory and Regulatory Commission for the record.

    3. Where assets of an internal enterprise are to be transferred to an
overseas Chinese invested non-listed company or an overseas Chinese-holding
listed company by purchase, exchange of shares, allocation or by any other
means for listing shares overseas, or where domestic assets are to be first
transferred to an overseas Chinese invested non-listed company and then
injected into an overseas Chinese-holding listed company for listing shares
overseas, the internal enterprise or the share-holding unit(s) inside the
country of the Chinese shareholder(s) should obtain in advance consent from
the provincial people's government or the competent department under the State
Council based on its subordination thereto, then report to the China
Securities Supervisory and Regulatory Commission for verification, and
thereafter subject it to the examination and approval of the State Council
Securities Commission in accordance with the state industrial policies, the
relevant provisions of the State Council and the total volume for the year.

    4. In reiteration of the spirit contained in the provisions of the
Circular of the State Council Concerning Suspending the Purchase of Overseas
Enterprises and Further Strengthening the Administration of Overseas
Investment (Guo Fa [1993] No.69), internal institutions and enterprises are
prohibited from listing their shares through shell firms by purchasing
share-holding rights of overseas listed companies.

    5. Violations of the aforesaid provisions shall be treated and punished as
issuing of shares without authorization. Persons in charge of the competent
departments held responsible for such violations shall be given administrative
sanctions by the department concerned. Persons in charge of a violating unit
and other persons directly responsible shall be removed from their posts or
even expelled therefrom by the department at the next higher level than the
unit. Those who commit crimes shall be transferred to the judicial organs and
investigated for criminal responsibility according to law. Violating units,
intermediary agencies involved and violators shall be penalized by the China
Securities Supervisory and Regulatory Commission in accordance with the
provisions of the Provisional Regulations on the Administration of Share
Issuance and Trading and other relevant provisions.

    All localities and departments shall, in strict accordance with the
provisions of this Circular, take practical and effective measures to exercise
supervision on its subordinate enterprises for the earnest implementation of
the relevant state laws and policies. Internal enterprises should take direct
listing of shares as the main form in which they seek funds on the overseas
securities market. The State Council Securities Commission shall continue to
direct this work well and select state-owned enterprises which conform to the
state industrial policies and overseas listing requirements to list shares
directly overseas.

    This Circular shall come into effect as of the date of promulgation.