Laws of the People's Republic of China

People's Bank of China

Decree of the People's Bank of China

No.2

In order to regulate the issuance and trade of the short-term financing bonds, and to protect the interests of the parties concerned of the short-term financing bonds, the People's Bank of China formulates the Measures for the Administration of the Short-term Financing Bonds, which were approved at the 8th Governor's meeting on May 9, 2005. It is hereby promulgated and shall enter into force as the date of promulgation.

Governor Zhou Xiaochuan

May 23, 2005

Measures for the Administration of the Short-term Financing Bill

Chapter I General Provisions

Article 1

These Measures are formulated in accordance with the Law of the People's Republic of China on the People's Bank of China and relevant laws and administrative regulations, for the purposes of further promoting the development of the money market, of expanding the direct financing channels of the enterprise, of regulating the issuance and trading of the short-term financing bonds, and of protecting the legitimate rights and interests of the parties concerned of the short-term financing bonds.

Article 2

These Measures shall be applicable to the short-term financing bonds domestically-issued by a non-financial enterprise with a legal personality (hereinafter referred to as the enterprise) within the territory of the People's Republic of China.

Article 3

The "short-term financing bonds" (hereinafter referred to as the financing bonds) as mentioned in these Measures refers to the negotiable securities issued and traded, in accordance with the conditions and procedure stipulated in these Measures, by an enterprise in the inter-bank bond market with a commitment to repay both the principal and the corresponding interests within a time limit.

Article 4

The People's Bank of China shall conduct a supervision and administration of the issuance, trading, registration, custody, settlement and payment of the financing bonds.

Article 5

The issuance of the financing bonds shall be in line with the conditions stipulated in these Measures.

Article 6

The financing bonds shall be issued to an institutional investor in the inter-bank bond market, and only be traded in the inter-bank market, and shall not be issued to the general public.

Article 7

The issuance and trading of the financing bonds shall follow the principles of openness, fairness, impartiality, good faith, and self-discipline.

Article 8

Such an enterprise as issues financing bonds shall truly, exactly, completely and timely disclose the information in accordance with the provisions.

Article 9

An investor itself shall assume the investment risk of financing bonds

Chapter II Issuance, Registration and Custody

Article 10

Such an enterprise as applies for the issuance of financing bonds shall meet the following conditions:

(1)

Being a legally-established legal person of enterprise with the territory of the People's Republic of China; and

(2)

Having a stable capital source for debt redemption, and gaining profits in the latest accounting year; and

(3)

Having a good liquidity, and a comparatively strong repayment capacity for the mature debt; and

(4)

Using the capital raised from the issuance of financing bonds in the operation of the enterprise hereof; and

(5)

Having no record of serious violation of laws and regulations during the past three years; and

(6)

Having no record of postponing the repayment of the principal and the interests for the issued financing bonds during the past three years; and

(7)

Having a sound internal management system and a management system governing the use and repayment of the raised capital; and

(8)

Other conditions stipulated by the People's Bank of China.

Article 11

Such an enterprise as issues financing bonds shall be subject to a credit rating by such a rating institution as is registered within the territory of the People's Republic of China and as possesses a capacity for bond rating, and the rating result shall be made publicly known in the inter-bank band market.

Such a listed company as underwent credit rating during the past three years and as has follow-up rating arrangements shall be exempted from a credit rating.

Article 12

A balance management system shall be exercised on the issuance of financing bonds of an enterprise, and the balance of financing bonds to be repaid shall not exceed 40% of its net assets.

Article 13

The maximum time limit of a financing bill shall be not more than 365 days. And such an enterprise as issues financing bonds may freely determine the time limit for the financing bonds of every term.

Article 14

The issuance interest or price of a financing bill shall be determined through a negation between an enterprise and a underwriting institution.

Article 15

The following documents shall be filed with the People's Bank of China by an enterprise through its lead underwriter when it applies for the issuance of financing bonds:

(1)

A filing report for the issuance of financing bonds; and

(2)

A resolution of the board of directors assenting the issuance of financing bonds or a document with the same legal effect; and

(3)

A recommendation letter of the lead underwriter (attached with a due diligence report); and

(4)

A raising prospectus for financing bonds (attached with an issuance plan); and

(5)

A credit rating report and the statement for follow-up rating arrangements; and

(6)

An enterprise's balance sheet of assets and liabilities, statement of losses and gains and statement of cash flow audited by a certificated public accountant in the past three accounting years and the full text of an audit statement; and

(7)

A letter of legal opinion issued by a lawyer (attached with a work report of the lawyer); and

(8)

A special report on the repayment plan and the safeguards; and

(9)

A report on the analysis of the cash flow concerning the payment of principal and interest of financing bonds; and

(10)

An underwriting agreement and a underwriting group agreement; and

(11)

A duplicated copy of the business license (copy) for a legal person of enterprise; and

(12)

Other documents required by the People's Bank of China.

Article 16

The People's Bank of China shall, within 20 workdays as of the date of the acceptance of the required documents for archival filing, deliver a notice of archival filing in accordance with the stipulated conditions and procedure, and authorize the upper limit of financing bonds issued by the enterprise concerned.

Article 17

The issuance of the financing bonds shall be underwritten by a qualified financial institution. An enterprise shall freely choose a lead underwriter, and a change of an enterprise's lead underwriter shall be filed with the People's Bank of China. An underwriting group, if necessary, shall be organized by a lead underwriter. An enterprise shall not sell financing bonds itself. And the underwriting mode and the related cost shall be determined through a negotiation between an enterprise and an underwriting institution.

Article 18

An enterprise shall, within 5 workdays before the date of the issuance of financing bonds for every term, submit the relevant issuance documents for the term hereof to the People's Bank of China for archival filing.

Article 19

An enterprise shall, within 3 workdays before the date of the issuance of financing bonds, publish the raising prospectus of the financing bonds for the term thereof through the websites of China Money (http://www.chinamoney.com.cn) and China Bond (http://www.chinabond.com.cn). A raising prospectus shall be attached with a letter of legal opinion issued by a lawyer, and its content shall be detailed and clear, specifying the rights and obligations of the parties concerned of a financing bill.

Article 20

A financing bill shall be registered for custody through a real-name accounting in China Government Securities Depository Trust and Clearing Co., Ltd. (hereinafter referred to as the CGSDTC), who shall be responsible for providing relevant services.

Article 21

After finishing the issuance of the financing bonds, such an enterprise as issues the financing bonds (hereinafter referred to as the issuer) shall, within the first workday following the day of completing the registration of the credit and debt, make publicly known to the market such information as the actual scale, actual interest rate and the time limit for the financing bonds of the term thereof etc., through the websites of China Money (http://www.chinamoney.com.cn) and China Bond (http://www.chinabond.com.cn). The CGSDTC shall periodically summarize and publish the issuance announcements, and report the issuance of financing bonds to the People's Bank of China.

Article 22

A lead underwriter shall, within 10 workdays as of the ending of the issuance of the financing bonds of every term, report the issuance of financing bonds to the People's Bank of China in written form.

Chapter III Trading, Settlement and Payment

Article 23

A financing bill may, within the next workday following the registration of the credit and debt, circulate in the national inter-bank bond market and be transferred among the institutional investors.

Article 24

The settlement of a financing bill shall be conducted through an institution approved by the CGSDTC or the People's Bank of China.

Article 25

An issuer shall pay the principal and interest on schedule, and shall not change the date of payment against the commitment in a contract.

Article 26

An issuer shall, within 5 workdays before the payment of the principal and interest, publish the item of the payment of the principal and interest through the websites of China Money (http://www.chinamoney.com.cn) and China Bond (http://www.chinabond.com.cn).

Article 27

An issuer shall, in accordance with the stipulated procedure and time limit, transfer a full amount of the principal and interest to be paid to a capital account designated by a payment agency, who shall then transfer timely and in full amount the capital to the investors of the financing bonds.

Where an issuer fails to transfer a full amount of the principal and interest to be paid to a designated capital account, a payment agency shall timely publish the default of the issuer hereof through the websites of China Money (http://www.chinamoney.com.cn) and China Bond (http://www.chinabond.com.cn) on the day for the payment of the principal and interest of the financing bonds.

Article 28

A lead underwriter shall, within 10 workdays as of the ending of the payment for the financing bonds, report the payment for the financing bonds to the People's Bank of China in written form.

Chapter IV Information Disclosure

Article 29

An issuer shall disclose information to the inter-bank bond market in accordance with relevant provisions.

Article 30

The director or legal representative of an issuer shall ensure the authenticity, accuracy and integrity of the disclosed information.

Article 31

An issuer shall periodically disclose its financial information during the period of continued existence of the financing bonds.

The Inter-bank Funding Center shall well keep the electronic edition of the information disclosed by an issuer, and provide the investors of financing bonds with a service of information inquiry.

Article 32

An issuer shall publicly disclose to the market such a major event as may affect the credit fulfillment of an investor of financing bonds that occurs during the period of continued existence of the financing bonds.

A major event as mention above shall include:

(1)

A major change in the business policy and scope of an issuer; and

(2)

Occurrence of an issuer's default in failing to repay the mature debts; and

(3)

Occurrence of an issuer's major losses or any loss that exceeds more than 10% of its net assets; and

(4)

An issuer's decision of capital reduction, merger, split, dissolution and application for bankruptcy; and

(5)

Occurrence of a major litigation involving an issuer; and

(6)

Other items stipulates in laws and administrative regulations.

Chapter V Supervision and Administration

Article 33

Where an issuer fails to disclose information in accordance with the relevant provisions, or its disclosed information has an unauthentic recordation, misleading statement or major omission, the People's Bank of China shall be entitled to discontinue the enterprise's issuance of financing bonds, and grant penalties in accordance with the provisions in Article 46 of the Law of the People's Republic of China on the People's Bank of China.

Such a director, top-ranking officer as is directly responsible for the unauthentic information disclosed by an issuer and other persons directly responsible shall be punished in accordance with the provisions in Article 46 of the Law of the People's Republic of China on the People's Bank of China.

Such a lead underwriter as fails to fulfill its duty of urging and assisting an enterprise to disclose information shall be suspended of its underwriting business.

Article 34

Such an underwriting institution as fails to fulfill its duty against the provisions shall be refrained from undertaking the business of financing bonds.

Article 35

An underwriting institution, credit rating institution, certificated public accountant, lawyer and other special institutions and personnel, whose documents issued have unauthentic recordation, misleading statements or major omissions, shall be refrained from providing special services to the issuance and trading of financial bonds any more, and, if causing other people losses, shall assume the civil liability for their responsible parts according to law.

Article 36

The CGSDTC shall, on each trading day, timely disclose to the market a list of the single investors who hold more than 30% of the total custody amount of financing bonds of the term concerned and their respective holding ratios at the end of the previous trading day.

Article 37

The Inter-bank Funding Center shall be responsible for the daily monitoring of the trading of financing bonds, while the CGSDTC shall be responsible for the daily monitoring of the settlement of financing bonds. The Inter-bank Funding Center and the CGSDTC shall timely report any abnormal trading and settlement to the People's Bank of China.

Article 38

The trading of financing bonds shall also be in line with other relevant provisions of the national inter-bank bond market besides these Measures.

Such a participant in the trading of financing bonds as violates these Measures and other relevant provisions shall be punished in accordance with the provisions in Article 46 of the Law of the People's Republic of China on the People's Bank of China.

Chapter VI Supplementary Provisions

Article 39

Regulations on the issuance of short-term financing bonds by a financial institution shall be formulated separately.

Article 40

The People's Bank of China shall be responsible for the interpretation of these Measures.

Article 41

These Measures shall enter into force as of the date of promulgation.