Laws of the People's Republic of China

China Banking Regulatory Commission

Order of the China Banking Regulatory Commission

No.6

The Measures for the Administration of the Investment and Shareholding in Chinese-funded Financial Institutions by Overseas Financial Institutions have been approved by the State Council and are hereby issued.

Liu Mingkang, the Chairman of the China Banking Regulatory Commission

December 8, 2003

Measures for the Administration of the Investment and Shareholding in Chinese-funded Financial Institutions by Overseas Financial Institutions

Article 1

The present Measures are formulated with a view of regulating the overseas financial institutions' investment and shareholding in Chinese-funded financial institutions, and optimizing the capital structure of Chinese-funded financial institutions.

Article 2

The present Measures shall be applicable to the overseas financial institutions investing and holding shares in Chinese-funded financial institutions.

The term "overseas financial institutions" as used herein include international financial institutions and financial institutions of overseas countries. The term "international financial institutions" refers to the World Bank and the affiliated agencies thereof, other intergovernmental development financial institutions, and other international financial institutions recognized by the China Bank Regulatory Commission (hereinafter referred to as CBRC); the term "financial institutions of overseas countries" refers to the financial holding companies, commercial banks, securities companies, insurance companies, and funds that are registered in overseas countries, and other overseas financial institutions recognized by CBRC.

The term "Chinese-funded financial institutions" as used herein refers to the Chinese-funded commercial banks, urban credit cooperatives, rural credit cooperatives, trust and investment companies, enterprise group finance companies, and financial leasing companies that are set up within China in the light with law, and other Chinese-funded financial institutions that are set up upon approval of CBRC.

The term "proportion of the investment or shareholding" as used herein refers to the share that the capital contributed or the shares held account for in the paid-in total capital or total shares of the Chinese-funded financial institution.

Article 3

CBRC shall be responsible for supervising and administering the overseas financial institutions' investment and shareholding in Chinese-funded financial institutions in the light with law.

Article 4

A overseas financial institution shall obtain the approval of CBRC so as to make investment or hold shares in a Chinese-funded financial institution.

Article 5

An overseas financial institution shall, when making investment or holding shares in a Chinese-funded financial institution, do so on the basis of good credit and with the goal of medium-and long-term investment.

Article 6

An overseas financial institution shall, when making investment or holding shares in a Chinese-funded financial institution, make the capital contribution in money.

Article 7

In order to invest or hold shares in Chinese-funded financial institutions, an overseas financial institution shall meet the conditions as follows:

1)

In a general principle, for making investment or holding shares in a Chinese-funded commercial bank, the total assets of the overseas financial institution at the end of the last year shall, as, be no less than 10 billion US dollars; for making investment or holding shares in a Chinese-funded urban credit cooperative or rural credit cooperative, the total assets at the end of the last year shall be no less than 1 billion US dollars; for making investment or holding shares in a Chinese-funded non-bank financial institution, the total assets at the end of the last year shall be no less than 1 billion US dollars;

2)

The long-term credit rank given by an international ranking institution recognized by CBRC for that overseas financial institution is good;

3)

The overseas financial institution has made profit for two consecutive fiscal years;

4)

If the overseas financial institution is a commercial bank, the capital adequacy rate shall be no less than 8%; if it is a non-bank financial institution, the total amount of capital shall be no less than 10% of the total amount of the risk-weighted assets;

5)

The overseas financial institution has sound internal control system;

6)

The place of registration of the overseas financial institution has sound supervision and administration system;

7)

The home country (region) of the overseas financial institution has satisfactory economic status; and

8)

Other prudential conditions required by CBRC.

In the light with the risk status of the financial industry and the needs of regulation, CBRC may adjust the qualification requirements for overseas financial institutions, which intend to make investment and hold shares in Chinese-funded financial institutions.

Article 8

The proportion of the investment or shareholding in a Chinese-funded financial institution by a single overseas financial institution may be no more than 20%.

Article 9

If the total proportion of the investment or shareholding in a non-listed Chinese-funded financial institution by several overseas financial institutions reaches or exceeds 25%, that non-listed financial institution shall be considered an overseas-funded financial institution in the supervision and administration.

If the total proportion of the investment or shareholding in a listed Chinese-funded financial institution by several overseas financial institutions reaches or exceeds 25%, that listed financial institution shall still be considered a Chinese-funded financial institution in the supervision and administration.

Article 10

In the case that an overseas financial institution intends to make investment or hold shares in a Chinese-funded financial institution, the Chinese-funded financial institution that absorbs the investment shall act as the applicant and submit the application to CBRC:

1)

In the case that a commercial bank solely funded by the state, or a joint stock commercial bank, or any other non-bank financial institution directly under the control of CBRC absorbs the investment of an overseas financial institution, the applicant shall directly submit the application to CBRC for approval;

2)

In the case that any Chinese-funded financial institution other than those provided for in Item 1) of this Article absorbs the investment of an overseas financial institution, the applicant shall submit the application to the provincial agency of CBRC of the place where it is located, and the agency shall submit the application to CBRC for approval after examination.

Article 11

A Chinese-funded financial institution shall submit the following documents when submitting the application to CBRC for absorbing overseas investment:

1)

Application form of the Chinese-funded financial institution for absorbing overseas investment;

2)

Resolution of the shareholders' meeting or the board of directors of the Chinese-funded financial institution on agreement with the absorption of investment or the document of approval of the competent authority at the higher level;

3)

Resolution of the shareholders' meeting or the board of directors of the overseas financial institution on agreement with investing and holding shares in the Chinese-funded financial institution;

4)

Agreement of intent signed by the two parties;

5)

Annual reports, or audited balance sheets, statements of profits, and other financial statements of the overseas financial institution for the last three years;

6)

Information about the source of fund and the business operations of the overseas financial institution, etc.; and

7)

Other relevant documents required by CBRC.

In the case that the investor is an overseas financial institution, the Chinese-funded financial institution shall also submit the ranking reports of that overseas financial institution for the last two years made by an international ranking institution recognized by CBRC, and the documents of approval of the financial authority of the place of registration of that overseas financial institution.

Article 12

CBRC shall, within 3 months from receiving the complete set of application documents, make the decision on whether or not to grant the approval; and if it decides not to grant the approval, it shall notify the applicant in writing and explain the reasons.

Article 13

An overseas financial institution shall, within 60 workdays from receiving the decision of approval of CBRC, transfer the capital in full amount to the account of the Chinese-funded financial institution, and the amount of the capital shall be validated by an accounting firm recognized by CBRC.

Article 14

In the case that a Chinese-funded financial institution makes any alteration of its registered capital or shareholding structure as a result of the investment or shareholding by any overseas financial institution, it shall carry out alteration formalities in accordance with the relevant provisions.

Article 15

In the case that a Chinese-funded financial institution, in violation hereof, changes the shareholders or adjusts the shareholding structure without permission, CBRC shall punish it in the light with the relevant provisions.

Article 16

In the case that an overseas financial institution that has already invested or held shares in a Chinese-funded financial institution increases its proportion of shareholding, the relevant provisions hereof shall be applicable.

Article 17

The present Measures shall be applicable to the investment and shareholding in Chinese-funded financial institutions by financial institutions from Hong Kong, Macao and Taiwan area; and if the State Council has otherwise provisions, such provisions shall be applicable.

Article 18

The present Measures shall not apply to the purchase of negotiable shares of listed Chinese-funded financial institutions by qualified overseas institutional investors.

Article 19

Investment and shareholding in automobile financial companies shall be administrated by the relevant provisions of the Measures for the Administration of Automobile Financial Companies.

Article 20

The authorization to interpret the present Measures shall remain with CBRC.

Article 21

The present Measures shall go into effect on December 31, 2003. In the case that any relevant documents issued prior to the implementation hereof conflict with the present Measures, the latter shall prevail.