Laws of the People's Republic of China

No. 36

The Measures for the Administration on Securities Investment within the Territory of China by Qualified Foreign Institutional Investors, which has been deliberated and adopted at the 170th chairman's executive meeting of China Securities Regulatory Commission, the 4th president's meeting of People's Bank of China and the 5th director general's executive meeting of the State Administration of Foreign Exchange, are hereby promulgated, and shall come into force as of September 1st, 2006. Shang Fulin, the President of China Securities Regulatory Commission

Zhou Xiaochuan, the President of the People's Bank of China

Hu Xiaolian, the General Director of the State Administration of Foreign Exchange

August 24, 2006

Measures for the Administration on Securities Investment within the Territory of China by Qualified Foreign Institutional Investors (2006) Chapter I General Provisions

Article 1

With a view to regulating the investment acts of qualified foreign institutional investors in securities market within the territory of China and promoting the development of securities market of China, the present Measures are formulated according to relevant laws and administrative regulations.

Article 2

The term "qualified foreign institutional investors" (hereinafter referred to as QFII) as mentioned in the present Measures refers to foreign fund management institutions, insurance companies, securities companies and other asset management institutions, which invest in the securities market of China in accordance with the provisions of the present Measures upon the approval of China Securities Regulatory Commission (hereinafter referred to as CSRC) and upon the granting of an investment quota by the State Administration of Foreign Exchange (hereinafter referred to as SAFE).

Article 3

A QFII shall entrust a domestic commercial bank as its trustee to manage its assets, and entrust a domestic securities company to undertake its domestic securities transaction activities.

Article 4

The QFII shall abide by the laws, regulations and other relevant provisions of China.

Article 5

The CSRC shall, according to law, regulate the domestic securities investment activities undertaken by a QFII; and the SAFE shall, according to law, conduct foreign exchange administration on issues such as the investment quota and capital remitted inward and outward as involved in the domestic securities investment activities conducted by a QFII.

Chapter II Qualification Conditions and Procedures for Examination and Approval

Article 6

An applicant for QFII shall meet the following conditions:

(1)

The applicant shall be in a sound financial and credit status, and shall meet the conditions as prescribed by the CSRC on asset scale and other factors;

(2)

The employees of the applicant shall meet relevant professional requirements of the country or region where the applicant is located;

(3)

The applicant shall be equipped with sound governance structure and perfect inner control system, undertake business according to the relevant regulations, and have never been subject to any substantial penalty by the supervisory organ of the country or region where it is located;

(4)

The country or region where the applicant is located shall have a sound legal and regulatory system: and its securities supervisory organ has signed the regulatory cooperation understanding memorandum with the CSRC and has maintained an efficient regulatory and co-operative relationship; and

(5)

Other conditions as prescribed by the CSRC in light of the principle of prudent supervision.

Article 7

When applying for the QFII qualification and an investment quota, an applicant may file the required documents respectively with the CSRC and the SAFE through its trustee.

Article 8

The CSRC shall, within 20 workdays as of the receipt of complete set of application documents, examine and verify the application documents and decide whether or not to grant approval on the basis of the opinion of the SAFE. If it decides to approve the application, the CSRC shall issue a securities investment license; if it decides to disapprove the application, the CSRC shall notify the applicant in written form.

Article 9

The applicant shall, within 1 year as of the obtaining of a Securities Investment License, apply to the SAFE through the trustee for the investment quota.

The SAFE shall, within 20 workdays as of the receipt of the complete set of application documents, examine and verify the application documents and decide whether or not to grant approval on the basis of the opinion of the CSRC. If it decides to approve the application, the SAFE shall give a written reply and issue a foreign exchange registration certificate; if it decides to disapprove the application, the SAFE shall notify the applicant in written form.

Article 10

With a view to encouraging middle and long-term investments, preference shall be given to the pension fund, insurance fund, common fund, charity fund and other long-term capital management institutions that meet the provisions of the present Measures.

Chapter III Custody, Registration and Settlement

Article 11

A trustee shall meet the following conditions:

(1)

having established a special asset custody department;

(2)

the paid-in capital shall not be less than RMB 8 billion;

(3)

being of adequate full-time staff that are familiar with the custody business;

(4)

being able to manage the assets of the QFIIs in a safe way;

(5)

being able to make settlement and delivery in a safe and highly efficient way;

(6)

having obtained the qualification of a designated foreign exchange bank and the qualification of engaging in the RMB business; and

(7)

being of no records seriously violating the regulations on foreign exchange management in the recent three years.

Domestic branches of foreign-funded commercial banks, which have undertaken business for three consecutive years within China, may apply for the trustee qualification. And the amount of their paid-in capital shall be calculated on the basis of that of the oversea headquarter.

Article 12

The qualification of a trustee must be examined and approved by the CSRC and the SAFE. The CSRC shall, within 30 workdays as of the receipt of the full set of application documents, deliberate with the SAFE and decide whether or not to grant permit.

Article 13

A trustee shall fulfill the following duties:

(1)

safeguarding all the assets entrusted by QFIIs;

(2)

conducting such businesses as the settlement, sale, receipt and payment of foreign exchange and the settlement of RMB capital for QFIIs;

(3)

supervising the investment activities conducted by QFIIs, and reporting to the CSRC and the SAFE immediately after finding any investment instruction violating any of the laws or regulations;

(4)

reporting to the SAFE the inward and outward remittance of capital and the settlement and sale of foreign exchange of a QFII within two workdays after the QFII remits inward/outward its principal or proceeds;

(5)

within 8 workdays as of the end of each month, reporting the revenues and expenditures of both the foreign exchange account and the special RMB account, together with the asset arrangement of the QFII to the SAFE; reporting the investments and trades conducted under securities account to the CSRC;

(6)

within 3 months as of the end of each accounting year, compiling an annual financial report on the domestic securities investment activities by the QFII in the previous year, and submit it to the CSRC and the SAFE;

(7)

keeping the records and other related materials on the QFII's inward and outward remittances, conversion, receipt, payment and capital flow for at least 20 years;

(8)

making statistics reports on international balance of payments in light of the relevant provisions of the state on foreign exchange administration; and

(9)

other duties as prescribed by the CSRC and the SAFE by following the principle of prudent supervision.

Article 14

The trustee shall strictly separate its own assets from those under its custody, and set up a different account for the assets under its custody for separate management.

Article 15

Each QFII shall only entrust one trustee and may change the trustee.

Article 16

A QFII may apply with a securities registration and settlement institution for opening a securities account, which may be a real-name account or a nominal-holder account.

The nominal holder shall, within 8 workdays as of the end of each season, report the name, registration place, asset arrangement and securities investment status of the actual investor or funds, which are represented by it, to the CSRC and stock exchange.

Article 17

A QFII shall entrust a institution that has obtained the qualification of a clearing participant to securities depository and clearing institution to conduct capital settlement. This institution shall, within 5 workdays as of the opening of a RMB settlement account, report the opening to the SAFE for archiving.

Chapter IV Investment Operation

Article 18

A QFII may, in light of the approved investment quota, invest in financial instruments of RMB approved by the CSRC.

Article 19

A QFII may entrust a securities company or any other investment management institution established within China to manage its domestic securities investments.

Article 20

A QFII shall, when making any domestic stock investment, abide by the limits on the proportion of shares-holding as provided for by the CSRC and other relevant provisions of the state.

Article 21

A QFII shall, when performing its obligation of information disclosure, make incorporate calculation on domestic and oversea listed stocks of the same listed company, and shall observe the relevant laws and regulations on information disclosure.

Article 22

Securities companies and other relevant institutions shall preserve the entrustment records, transaction records and other materials of QFII for at least 20 years.

Article 23

A QFII shall, when undertaking domestic securities investment activities, accord with relevant provisions as provided by the stock exchanges or securities depository and clearing institutions.

Chapter V Fund Management

Article 24

A QFII shall, upon the approval of the SAFE, open a foreign exchange account and a special RMB account at the place of the trustee.

Article 25

The revenue and expenditure scopes of the foreign exchange account and the special RMB account of a QFII shall be in line with the relevant provisions as prescribed by the SAFE.

Article 26

A QFII shall remit the principal into China within the time limit as prescribed by the SAFE. The currency of the principal from the QFII shall be an exchangeable currency as approved by the SAFE, and the amount of the principal shall not exceed the approved quota.

A QFII, which fails to remit principal into China within the time limit as prescribed by the SAFE, shall make a written explanation to the CSRC and the SAFE, and the actual amount remitted shall be deemed as the approved quota. The balance between the approved quota and the amount that has been actually remitted inward shall not be remitted inward before being approved by the SAFE.

Article 27

A QFII may apply to the SAFE for remitting capital outward as of the day of expiration of the time limit as prescribed by the SAFE, unless it is otherwise prescribed by the SAFE.

Article 28

The SAFE may, in light of the economic and financial status of China, the supply and demand situation of foreign exchange market and the international balance of payments, adjust the time, amount and time limit of the remittance of principal by a QFII in accordance with the arrangement of the People's Bank of China.

Chapter VI Supervision and Administration

Article 29

The CSRC and the SAFE may, according to law, require QFIIs, trustees, securities companies and other institutions to provide relevant information on the QFIIs, and make necessary inquiries and examinations.

Article 30

Where, under any of the following circumstances, a QFII shall, within 5 workdays as of the occurrence, report to the CSRC and the SAFE for record:

(1)

the alteration of trustees;

(2)

the alteration of legal representatives;

(3)

the alteration of the controlling shareholders;

(4)

adjustment of the registered capital;

(5)

being involved in any important litigations and other grave events;

(6)

being imposed upon a great penalty overseas; or

(7)

other circumstances as specified by the CSRC and the SAFE.

Article 31

Where, under any of the following circumstances, a QFII shall re-apply for a Securities Investment License:

(1)

the alteration of business name;

(2)

being acquired by or merged with other institution(s); or

(3)

other circumstances as specified by the CSRC and the SAFE.

During the period of re-applying for a Securities Investment License, a QFII may continue its securities transaction, except that it shall be suspended by the CSRC according to the principle of prudent supervision.

Article 32

Where, under any of the following circumstances, a QFII shall surrender its securities investment license and foreign exchange certificate respectively to the CSRC and the SAFE.

(1)

where the applicant has not applied to the SAFE for an investment quota within 1 year after obtaining a securities investment license;

(2)

where the institution is dismissed, has entered the bankruptcy procedure or has been taken over by the administrator;

(3)

where the QFII intends to re-apply for a license;

(4)

where the QFII has committed any serious illegal act, and other circumstances as determined by the CSRC and the SAFE.

Article 33

Where there exists any serious violation of laws or regulations with respect to the securities accounts managed by a QFII, the CSRC shall restrict its transaction under relevant securities accounts or take other measures according to law; the SAFE may restrict its remittance of capital or take other measures according to law.

Article 34

Where a trustee has seriously violated any law or regulation, the CSRC and the SAFE shall jointly make a decision to cancel its qualification as a trustee.

Article 35

Where a QFII, trustee, or securities company violates the present Measures, the CSRC and the SAFE shall impose corresponding administrative penalties upon it according to law.

Chapter VII Supplementary Regulations

Article 36

The present Measures shall be also applicable to that the institutional investors from Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan Region conduct securities investment business within the Mainland of China.

Article 37

The present Measures shall come into force as of September 1st, 2006, and the Interim Measures for the Administration on Domestic Securities Investments by Qualified Foreign Institutional Investors as jointly issued by the CSRC and the People's Bank of China on November 5, 2002 shall be abolished simultaneously.