Laws of the People's Republic of China

The Ministry of Foreign Trade and Economic Cooperation

Supplementary Circular of the Ministry of Foreign Trade and Economic Cooperation on the Relevant Issues Concerning B-share Circulation of Non-Listed Foreign-Funded Shares of Foreign-Funded Joint Stock Limited Companies

WaiJingMaoZiYiHan [2002] No.902

August 16, 2002

The commissions (departments, bureaus) of foreign trade and economic cooperation of all provinces, autonomous regions, municipalities directly under the Central Government and municipalities separately listed on the State plan:

In order to promote the healthy development of domestic securities market and to further regulate the B-share circulation of the non-listed foreign-funded shares of foreign-funded joint stock limited companies, which have B-shares, we hereby give our notice as follows regarding the relevant issues:

I.

The non-listed foreign-funded shares of foreign-funded joint stock limited companies, which have B-shares, are permitted to be circulated on the B-share market (hereinafter referred to as B-share circulation of non-listed foreign-funded shares). The B-share circulation of non-listed foreign-funded shares must be executed strictly in accordance with "Some Opinions on the Relevant Issues concerning Listed Companies involving Foreign Investments" promulgated by the Ministry of Foreign Trade and Economic Cooperation (hereinafter referred to as "the MOFTEC") and China Securities Regulatory Commission (hereinafter referred to as "CSRC") on October 8, 2001 (WaiJingMaoZiFa [2001] No.538), and shall not be approved by departments without the approving power.

II.

The foreign-funded joint stock limited companies referred to in the preceding paragraph shall mean the foreign-funded joint stock limited companies established upon approval by the MOFTEC in accordance with the "Interim Provisions on the Relevant Issues concerning the Establishment of Foreign-Funded Joint Stock Limited Companies" (Order No. 1 of the MOFTEC in 1995), and the foreign-funded joint stock limited companies established upon approval by the departments authorized by the MOFTEC in accordance with the "Circular on the Relevant Issues concerning the Establishment of Chinese-Foreign Joint Stock Limited Companies" ([1992] WaiJingMaoZiZongHanZi No. 374) prior to the promulgation of the above said Interim Provisions. The non-listed foreign-funded shares of the foreign-funded joint stock limited companies that have been established not in accordance with the above two provisions shall not be circulated on the B-share market.

III.

The B-share circulation of non-listed foreign-funded shares shall, in addition to satisfying the requirements of the State on IPOs, meet the following conditions:

(1)

the applicant shall be a foreign-funded joint stock limited company established in accordance with the relevant provisions and procedures;

(2)

the applicant shall comply with the industrial policies on foreign investments;

(3)

the holders of non-listed foreign-funded shares which are to be listed in the B-share market shall not, if required by the applicant¡¯s articles of association, the shareholders¡¯ agreement or other legal documents or laws and regulations to undertake particular obligations and responsibilities (including but not limited to the provision of shareholders¡¯ loans or guaranty of loans, the transfer of technologies, the license of trademarks, and so on), apply for B-share circulation of non-listed foreign-funded shares until they have implemented the above said obligations and responsibilities;

(4)

they have passed the joint annual inspection of foreign-funded enterprises and have been making profits in the two years prior to the application;

(5)

the holders of non-listed foreign-funded shares to be circulated in the B-share market have held the non-listed foreign-funded shares for more than one year;

(6)

after the non-listed foreign-funded shares are converted into floating stocks, its original shareholders should continue to hold the shares for more than one year.

IV.

The B-share circulation of non-listed foreign-funded shares shall be handled in accordance with the following procedures:

(1)

the applicant shall file an application to the provincial-level department in charge of foreign trade and economic cooperation at its locality;

(2)

the provincial-level department in charge of foreign trade and economic cooperation at the applicant¡¯s locality shall, within 15 days as of receipt of the application, complete the preliminary examination; and shall, if consenting the B-share circulation after the preliminary examination, report to the MOFTEC for examination and approval, or otherwise state the reason for disapproval in writing;

(3)

the MOFTEC shall, within 30 days as of receipt of the application documents, complete the examination; and shall approve the application which meets the conditions; or not approve the application which does not meet the conditions but state the reason in writing;

(4)

the applicant shall, within 30 days as of the date when CSRC approves the B-share circulation of non-listed foreign-funded shares, modify the "Approval Certificate of Foreign-Funded Enterprise" in the MOFTEC with the approval documents of the MOFTEC and CSRC; if the applicant fails to be approved by CSRC within 1 year as of the approval by the MOFTEC, the original approval documents of the MOFTEC shall be automatically invalidated;

(5)

the applicant shall, within 30 days as of modification of the "Approval Certificate of Foreign-Funded Enterprise", apply to the administrative department for industry and commerce for going through the registration formalities.

V.

The application documents mentioned in Paragraph (3) of Article 4 of this Circular shall refer to:

(1)

documents (including the preliminary examination opinions) submitted by the provincial-level department in charge of foreign trade and economic cooperation at the applicant¡¯s locality;

(2)

the application letter of the applicant on the B-share circulation of non-listed foreign-funded shares;

(3)

the resolutions of the applicant¡¯s shareholders¡¯ meeting on the B-share circulation of non-listed foreign-funded shares and amendment of the articles of association;

(4)

the resolutions of the applicant¡¯s board of directors;

(5)

the draft (original) of the amendment to the articles of association and the original articles of association (duplicate);

(6)

the written statement of the holders of the non-listed foreign-funded shares to be circulated in B-share markets on the special obligations and responsibilities they have assumed; if such holders have undertaken special obligations and responsibilities, they shall report in writing on the status of performance of such special obligations and responsibilities or make commitments to continue to fulfill the relevant obligations and responsibilities;

(7)

the proof of having passed the joint annual inspection by the applicant in the two years prior to the application;

(8)

the proof of having made profits by the applicant in the two years prior to the application (the auditor's report and the tax returns);

(9)

the certificate issued by the applicant proving that the holders of the non-listed foreign-funded shares to be circulated on the B-share market have held the non-listed foreign-funded shares for more than one year;

(10)

the written commitment made by the holders of the non-listed foreign-funded shares to be circulated on the B-share market that they will continue to hold the shares for more than one year after the conversion of the non-listed foreign-funded shares into floating stocks;

(11)

duplicates of the "Approval Certificate of Foreign-Funded Enterprise" and the "Business License" of the applicant. The foreign-funded joint stock limited companies established upon approval by the departments authorized by the MOFTEC in accordance with the "Circular on the Relevant Issues concerning the Establishment of Chinese-Foreign Joint Stock Limited Companies" ([1992] WaiJingMaoZiZongHanZi No. 374) prior to the promulgation of the Interim Provisions shall provide the approval documents issued by the original approving department.