Laws of the People's Republic of China

The Securities Commission of the State Council

Circular of the Securities Commission of the State Council Concerning Issuing the "Rules for the Implementation of the Provisions on Domestically-listed Foreign Capital Stock of Joint Stock Limited Company"

ZhengWeiFa [1996] No.9

May 3,1996

The people's governments of various provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan, all ministries, commissions and directly subordinate institutions of the State Council:

According to article 27 th of "Provisions of the State Council on Domestically-listed Foreign Capital Stock of Joint Stock Limited Company", the Securities Commission of the State Council formulated the "Rules for the Implementation of the Provisions on Domestically-listed Foreign Capital Stock of Joint Stock Limited Company", and hereby promulgated. Attachment:Rules for the Implementation of the Provisions on Domestically-listed Foreign Capital Stock of Joint Stock Limited Company

Chapter I General Provisions

Article 1

This set of rules has been formulated according to the Provisions of the State Council on Domestically-listed Foreign Capital Stock of Joint Stock Limited Company (hereinafter referred to as the Provisions), so as to strengthen the supervision and administration of the issuing and trading of such shares (hereinafter referred to as B shares) and related activities to protect the legal rights of the investors.

Article 2

The Provisions and this set of rules should be followed in the issuing and trading of B shares and related activities.

Areas not covered by the Provisions and this set of rules shall be governed by related provisions as set in the State's laws and regulations in related to securities.

Article 3

With the approval of the State Council's Securities Commission or with the approval of the State Council via the Commission, joint stock limited companies (hereinafter referred to as companies) may list B shares on domestic B share market to be sold to specified or unspecified investors.

The Companies referred to in the previous paragraph should be considered as the companies that have been established or have been approved to be established.

Chapter II Issuing and Listing

Article 4

Companies which apply for the issuing of B shares on the domestic markets for the first time should submit applications to the responsible departments of the people's government of the province, autonomous region or municipality directly under the Central Government, or to responsible departments under the State Council.

The responsible departments, after examining the applications and finding them as meeting the requirements for the issuing of B shares in domestic markets as laid sown in the Provisions, shall recommend to the Securities Commission of the State Council (hereinafter referred to as the Commission) with the following documents:

1.

recommendation papers;

2.

application forms filled up by the companies concerned;

3.

papers and related materials to show the conformance of the issuing concerned to requirements for the issuing of B shares in domestic markets as laid down in the Provisions;

4.

reports on the feasibility of the uses of the funds rallied through the issuance;

5.

the companies' statements of assets and liabilities and statements of profits and losses, which have been recognized through examination by registered Chinese accountants qualified for securities business;

6.

projections of the after-tax profits for the companies for the current year;

7.

for companies to be established, assets evaluation reports of the companies as prepared by the companies' sponsors;

8.

analytical reports on the prospects of the issuing by institutions qualified for underwriting of the shares;

9.

other materials as required by the Commission.

Article 5

Upon receipt of the application forms as specified in Article 4 of this set of rules, the Commission shall, together with related departments under the State Council, decide on which companies may list B shares in domestic markets and notify the responsible departments of the people's government of the province, autonomous region and municipality directly under the Central Government, or the responsible departments under the State Council, of the decisions.

Article 6

Companies with approval to list B shares on domestic markets shall present the required documents as specified in Article 11 and Article 12 of the Provisions to the responsible departments under the People's governments of the provinces autonomous regions and municipalities directly under the State, or to the responsible departments under the State Council, and through them, onto the Chinese Securities Regulatory Commission (hereinafter referred to as CSRC) for verification.

Article 7

Applications for issuings of B shares by companies that have already listed B shares on domestic markets for the second time (except issuings to original share-holders), should submit documents specified in Article 12 of the Provisions to the responsible departments under the people's government of the province, autonomous region and municipality directly under the Central Government, or to the responsible departments under the State Council, and through them, onto CSRC for verification.

Article 8

Professional documents prepared by overseas accountants' firms, lawyers' firms or other institutions on the issuings of B shares should also be presented in addition to the required application documents as specified in Articles 6 and 7.

The institutions mentioned in the previous paragraph, should meet qualifications as set by the State if there are any.

Article 9

The agreements on underwriting and prospectuses that are required under Articles 6 and 7 of this set of rules to be presented may be only initialed, or having not under signed or sealed but have to be confirmed by the parties involved.

Article 10

Upon verifying and approving the companies' applications presented by the responsible departments under the people's government of the province, autonomous region and municipality directly under the Central Government, or to the responsible departments under the State Council through examination, CSRC shall present them to the Securities Commission for further approval. For B shares issuing with a total value exceeding US $30 million, the documents shall be presented through the Securities Commission onto the State Council for further approval.

Before the actual listing of their B shares on domestic markets, the companies should submit the officially signed agreements on underwriting and prospectuses to CSRC. The shares may be listed once approvals are issued.

Article 11

The prospectuses referred to in the Provisions and this set of rules may be information memoranda or other expository materials on the issuing of the shares.

Article 12

The companies, in issuing B shares on domestic markets, should publish their prospectuses within the Chinese territory in accordance with contents, forms and ways as set by related Chinese laws and regulations. Prospectuses being sent to overseas investors, should be formulated and sent in accordance with requirements as set by Chinese laws and regulations except otherwise stipulated in the laws of the localities where the rallies are made.

The prospectuses being sent to domestic and overseas investors must not contradict with each other in contents, neither can they have major information left out or contain misleading or untrue statements.

Article 13

In issuing additional B shares to the original shareholders, provisions on such issuances as stipulated by CSRC should be abided by.

Article 14

When submitting the required documents as specified in Article 7 and 13 of this set of rules, the companies concerned should simultaneously present the following documents:

1.

notices of meetings of the shareholders and explanations on the notices;

2.

detailed processes of the meetings of holders of the A and B shares and the results of their votings.

Article 15

With the approval of the Securities Commission, the companies may set aside no more than 15% of the total amount of shares agreed to be underwritten in the present issuing upon agreements with the underwriters concerned. The shares set aside should be considered as part of the current issuance.

Article 16

An underwriting period of B shares must not exceed 90 days.

Article 17

Main underwriters of B shares should, within 15 days after the sales of the shares, present their reports to CSRC on the names of and amounts of the shares held by the 10 largest shareholders with detailed description of the process of the sales of the shares and the results.

Article 18

B shares held by domestic securities institutions as a result of underwriting should be reported to CSRC in conformity with provisions on disclosure of information.

Article 19

Information and execution of the agreements on underwriting and settlement of disputes arisen from the execution, related provisions of laws and regulations of the State must be abided by.

Article 20

The companies should present the following documents to CSRC, within 7 days upon the completion of the documents, for record-keeping:

1.

certification reports prepared, signed and sealed by at least two registered qualified Chinese accountants and their firms on the funds collected through the sales of the shares;

2.

the companies' business licenses (duplicates);

3.

resolutions and articles of association as passed at the establishment or shareholder meeting of the company.

Article 21

In case there is necessary to apply for registration or recognition from securities administration departments overseas, a company issuing B shares domestically should submit the applications submitted and the registration or recognition documents acquired, if any, to CSRC for record-keeping.

Article 22

B shares issued by the companies can be traded at the stock exchanges.

Article 23

The companies should abide by related regulations of stock exchanges where their shares are traded.

Chapter III Trading, Registration and Settlement

Article 24

In purchasing and selling domestically listed B shares investors and agents of the shares should abide by the related regulations of the stock exchanges and the stocks registration and settlement institutions.

Article 25

For trading B shares, one has to open an account for such shares in accordance with related provisions of stocks registration and settlement institutions.

Article 26

A B shares holder may entrust an institution which has been recognized by the stocks registration and settlement institutions to handle matters related to the shares on his/her behalf.

Article 27

Matters such as registration of the roster of the share holders, keeping, management, registration of the ownership transfer and the capital settlement of B shares shall be handled by the stocks registration and settlement institutions designated by the stock exchange in which the shares are listed and traded.

The roster of the holders of B shares is a valid proof for the holding of the shares by the holders listed in the roster, except otherwise noted in other proofs.

Article 28

Agents and trust institutions may, in accordance with related provisions of the stocks registration and settlement institutions, apply for as members for the settlement of the B shares.

Article 29

Clearance of B shares by a settlement member should be made through a special foreign currency account.

Article 30

The settlement members shall pay in certain venture capital and fees in accordance with related provisions of the stocks registration and settlement institutions.

Chapter IV Institutions Handling Securities

Article 31

Securities institutions involved in the underwriting of B shares should be recognized by CSRC as qualified for underwriting of the shares.

Article 32

Domestic securities institutions involved in the commissioned sales of B shares should be recognized by CSRC for as qualified for, brokerage of the shares.

Article 33

Overseas securities institutions may sign commissioning agreements with domestic agents and engage in commissioned sales of B shares through means as stipulated by the stock exchanges.

Chapter V Disclosure of Information

Article 34

Except otherwise stipulated by the provisions and this set of rules, companies issuing B shares shall abide by related provisions of related laws of the State as well as provisions of CSRC on disclosure of the companies' information. The companies shall also abide by provisions on the disclosure of information of the listed companies as stipulated by the stock exchanges.

Article 35

The companies, in providing foreign language versions of the required documents as described in Article 17 , should ensure the accuracy of the versions. When there are discrepancies between the Chinese and the foreign language versions, the Chinese version shall dominate.

Article 36

In provision of mid-term or annual financial statements, in addition to those in format as accepted by Chinese accounting rules, those in formats as accepted by international accounting rules or having been adjusted in accordance with rules of the localities for chief rally of the shares can also be provided. If there are major differences between financial statements in different formats, the differences must be addressed clearly in the statements.

Annual financial statements prepared in formats as accepted under international accounting rules or in formats as having been adjusted in accordance with rules of the localities for chief rally of the shares should be audited by accountants' firms.

The companies may also entrust overseas accountants' firms that are qualified under State provisions or requirements to examine and audit the financial statements that are in formats as accepted by international accounting rules or having been adjusted in accordance with the rules of the localities for chief rally of the shares, as described in the first paragraph of this article. But when publishing the examination or auditing reports of the companies' financial statements at home, the reports must also be signed by Chinese accountants or Chinese accountants and their firms.

Article 37

Information disclosed by a company should be published through domestic and overseas press or other means allowed by CSRC so as to reach domestic and overseas investors at the same time, and the contents of the domestic and overseas versions should be the same in principle.

The disclosure of prospectuses shall be governed by provisions as laid down in Article 12 of this set of rules.

Article 38

Shareholders each directly or indirectly holding 5% of the total of the common B shares of a company should report to CSRC, the stock exchanges and the company as well as announce to the public of the fact and intentions of the holding within three business days since the holding should reach the proportion of 5%. Similar reports and announcements shall also be made whereas 2% of the total is increased to or decreased from the holding.

Before or on the date of making the reports or announcements, the shareholders concerned should not make any further purchase of the shares, whether directly or indirectly.

Chapter VI Accounting and Auditing

Article 39

The companies should make and compile their financial statements in accordance with the Enterprises Accounting Rules and other State accounting laws, regulations and provisions and employ registered Chinese accountants with qualifications for securities businesses as well as the accountant firms in the locality to audit and re-examine the statements in accordance with Article 14 of the Provisions.

Article 40

Before distributing dividends, the companies should set aside legally prescribed common reserve funds and public welfare funds in accordance with related provisions, the amount of after-tax dividends should be set according to the following two figures, whichever the smaller:

1.

the sum of after-tax profits available for distribution as listed in the financial statements compiled in accordance with China's accounting rules and audited by accountants' firms;

2.

the sum of after-tax profits available for distribution as listed in the audited financial statements compiled on the basis of China's accounting rules but having been modified in accordance with international accounting rules or with the accounting rules of the locality for chief rally of the shares.

Article 41

The dividends should be converted to foreign currency at exchange rates as determined in accordance with stipulations, as set in the articles of association or resolutions passed at general meetings of shareholders of the companies. Without such stipulations, the rates should be the median as announced by Chinese People's Bank for the currencies involved on the business day immediately following the date of the passage of the last resolution of the general meeting of shareholders.

Article 42

Besides employing domestic accounting firms with qualifications for securities businesses, the companies, if necessary, can also employ overseas accounting firms that are qualified according to requirement of the State to audit or examine their financial statements.

Article 43

Employment or disemployment of accounting firms should be up to the decision of the general meeting of shareholders and reported to CSRC for the record.

The term of the employment of accounting firms shall start at the date of the conclusion of the current general meeting of the shareholders and end at the date of the end of the next shareholders' meeting.

During the planning of a company issuing B shares to be established upon approval, employment of accounting firms shall be decided by the main sponsor of the company or its reorganizing precedent.

Article 44

The companies shall notify the accounting firms in advance of the decision of their employment or dis-continuance of employment. The accounting firms are entitled to put forward their opinions before the general meeting of the shareholders.

The accounting firms, when resign, should explain before the general meeting of shareholders should there be any improper circumstances or not.

Chapter VII Supplementary Provisions

Article 45

Disputes between B shareholders and the companies; between B shareholders and directors, supervisors and other senior managerial personnel of the companies, between the holders of B shares and A shares (for domestic investors) of the same companies involving contents specified in the articles of association concerned or other related affairs should be handled in accordance with the laws of the People's Republic of China.

Article 46

State Council-approved municipalities separately listed on the State plan may refer to provisions of the Provisions and rules in concerns with people's governments of the provinces, autonomous regions and municipalities directly under the Central Government.

Article 47

CSRC can formulate its own special rules on the basis of this set of rules.

Article 48

This set of rules shall ento into force as of the date of promulgation.