The National People's Congress (NPC) Standing Committee announced Thursday that it will launch an inspection of the enforcement of the Foreign Investment Law.

An inspection team is set to carry out related work in eight provincial-level regions from July to mid-August, according to the first plenary session of the team.

In the meantime, the standing committees of local people's congresses in another eight regions will be assigned to carry out their own respective inspections.

The inspection work will focus on aspects including the implementation of pre-establishment national treatment plus a negative list for foreign investment, the establishment and optimization of a foreign investment facilitation mechanism, and the building of a stable, transparent, predictable and fair market.

The team will also inspect the protection of foreign investors' legitimate rights and interests, the implementation of the foreign investment management system, and the Foreign Investment Law's connection and coordination with other related laws and rules.

Attention will also be paid to the opinions and suggestions of all parties concerning the law.

This is first time the country has inspected the Foreign Investment Law since it came into effect on Jan. 1, 2020.

The inspection team said it will hold another plenary session in mid-September this year for analysis and discussion. The NPC Standing Committee will hear and deliberate a report on the enforcement inspection in October.

China's Nasdaq-style sci-tech innovation board, known as the STAR market, has continued to advance the innovative transformation of the Chinese economy.

Friday marks the board's third anniversary. During the past three years, 439 firms have been listed on the STAR market, raising more than 640 billion yuan (about 95 billion U.S. dollars) via initial public offerings, data from the Shanghai Stock Exchange (SSE) showed.

As of Thursday, the market's total value is over 5.5 trillion yuan, with high-tech enterprises accounting for 90 percent of the total listed companies.

Sci-tech firms listed on the board have posted stellar performance thanks to the impetus provided by technology. In the first quarter of this year, companies on the STAR market saw their net profit attributable to shareholders of the parent company soar 62 percent year on year.

As China has continued to deepen its high-level opening-up of the capital market, the board has become increasingly attractive to foreign investment. So far this year, foreign institutional transactions on the market accounted for 9 percent of the total, up 7 percentage points from 2020.

The STAR market was launched on the SSE on July 22, 2019, kicking off a trailblazing leg of the country's innovation drive and capital market reform.

The board was designed to support companies in the high-tech and strategic emerging sectors, in order to facilitate the innovative transformation of the Chinese economy and explore ways to make institutional improvements in the capital market.

To all provinces, autonomous regions, municipalities, cities specifically designated in the state plan , Xinjiang Production and Construction Corps., commerce departments of Changchun, Shenyang, Jinan, Nanjing, Hangzhou, Guangzhou, Wuhan, Chengdu and Xi'an, national economic and technological development zones and border economic cooperation zones; branch bureaus and foreign exchange administration departments of the State Administration of Foreign Exchange (SAFE) in all provinces, autonomous regions and municipalities, and SAFE branch bureaus of Shenzhen, Dalian, Qingdao, Xiamen and Ningbo,

In order to regulate the approval procedures and foreign exchange management of foreign-funded investment companies, and promote the development of foreign-invested investment companies, relevant requirements are hereby notified as follows:

1. Commerce authorities at all levels should strengthen the administration of the approval of statistical information of foreign-funded investment companies. Approved foreign-funded investment companies should be noted as “Investment Company” in the Basic Information Sheet of Foreign-invested Enterprises, and registered in the system of administration of review and approval for foreign-invested enterprises of MOFCOM. Other types of enterprises are not allowed to name themselves as “Investment Company” or “Investment Holdings”, or similar terms. These requirements will be regarded as important issues in the joint annual inspection of foreign-invested companies.

2. Domestic loan of foreign-funded investment companies shall not be used for reinvestment in China.

3. Foreign-funded investment companies may, with the approval of local foreign exchange bureau, directly use RMB profits, RMB obtained in China by way of early recovery of investment gains, liquidation, equity transfer and capital reduction for domestic investment. Foreign investors may also carry out domestic investment with the said legitimate income after register capital (investment increment) to investment companies. Foreign-funded investment companies shall provide the foreign exchange administration authorities with the following materials when applying for domestic investment approval:

(A) Written application;

(B) IC card for foreign exchange registration of foreign-funded companies

(C) Documents from commerce authorities approving domestic investment of foreign-funded investment companies

(D) Evidence of RMB funding sources and documents submitted for domestic reinvestment of profits, early recovery of investment gains, liquidation, equity transfer and capital reduction (increment) of legitimate RMB income of foreign-funded investment companies.

(E) The latest capital verification report and financial audit report (with the audit report of foreign exchange income and expenditure).

Foreign-funded investment companies may transfer RMB funds directly to the invested enterprises, or transfer to a foreign-funded investment company,before transferring to the invested enterprise after the materials are reviewed and approved by the local foreign exchange bureau.

The local foreign exchange bureau shall process capital verification with the working letter of accounting form, the application (for inflow) for capital verification, letter of inquiry for capital placement of foreign investor, and copies of the said documents for domestic investment from local foreign exchange bureau. The amount and date of verification should be marked on the original copy.

Commerce departments and foreign exchange administrative departments at all levels should contact and inform the Department of Foreign Investment Administration of MOFCOM and the Department of Capital Project of SAFE in case of any problems in implementation.

Ministry of Commerce of the People’s Republic of China

State Administration for Foreign Exchange

December 8, 2011

(All information published in this website is authentic in Chinese. English is provided for reference only. )

（Adopted at the First Session of the Seventh National Peoples Congress and promulgated by Order No. 4 of the President of the Peoples Republic of China on April 13, 1988, and effective as of the date of promulgation）

Article 1

This Law is formulated to expand economic cooperation and technological exchange with foreign countries and to promote the joint establishment, on the principle of equality and mutual benefit, by foreign enterprises and other economic organizations or individuals （hereinafter referred to as the foreign party） and Chinese enterprises or other economic organizations （hereinafter referred to as the Chinese party） of Chinese-foreign contractual joint ventures （hereinafter referred to as contractual joint ventures） within the territory of the Peoples Republic of China.

Article 2

In establishing a contractual joint venture, the Chinese and foreign parties shall, in accordance with the provisions of this Law, prescribe in their contractual joint venture contract such matters as the investment or conditions for cooperation, the distribution of earnings or products, the sharing of risks and losses, the manners of operation and management and the ownership of the property at the time of the termination of the contractual joint venture.

A contractual joint venture which meets the conditions for being considered a legal person under Chinese law, shall acquire the status of a Chinese legal person in accordance with law.

Article 3

The state shall, according to law, protect the lawful rights and interests of the contractual joint ventures and of the Chinese and foreign parties.

A contractual joint venture must abide by Chinese laws and regulations and must not injure the public interests of China.

The relevant state authorities shall exercise supervision over the contractual joint ventures according to law.

Article 4

The state shall encourage the establishment of productive contractual joint ventures that are export-oriented or technologically advanced.

Article 5

For the purpose of applying for the establishment of a contractual joint venture, such documents as the agreement, the contract and the articles of association signed by the Chinese and foreign parties shall be submitted for examination and approval to the department in charge of foreign economic relations and trade under the State Council or to the department or local government authorized by the State Council （hereinafter referred to as the examination and approval authority）. The examination and approval authority shall, within 45 days of receiving the application, decide whether or not to grant approval.

Article 6

When the application for the establishment of a contractual joint venture is approved, the parties shall, within 30 days of receiving the certificate of approval, apply to the administrative authorities for industry and commerce for registration and obtain a business license. The date of issuance of the business license of a contractual joint venture shall be the date of its establishment.

A contractual joint venture shall, within 30 days of its establishment, carry out tax registration with the tax authorities.

Article 7

If the Chinese and foreign parties, during the period of operation of their contractual joint venture, agree through consultation to make major modifications to the contractual joint venture contract, they shall report to the examination and approval authority for approval, if the modifications include items involving statutory industry and commerce registration or tax registration, they shall register the modifications with the administrative authorities for industry and commerce and with the tax authorities.

Article 8

The investment or conditions for cooperation contributed by the Chinese and foreign parties may be provided in cash or in kind, or may include the right to the use of land, industrial property rights, non-patent technology or other property rights.

Article 9

The Chinese and foreign parties shall, in accordance with the provisions of the laws an regulations and the agreements in the contractual joint venture contract, duly fulfil their obligations of contributing full investment and providing the conditions for cooperation. In case of failure to do so within the prescribed time, the administrative authorities for industry and commerce shall set another time limit for the fulfillment of such obligations; if such obligations are still not fulfilled by the new time limit, the matter shall be handled by the examination and approval authority and the administrative authorities for industry and commerce according to relevant state provisions.

The investments or conditions for cooperation provided by the Chinese and foreign parties shall be verified by an accountant registered in China or the relevant authorities, who shall provide a certificate after verification.

Article 10

If a Chinese or foreign party wishes to make an assignment of all or part of its rights and obligations prescribed in the contractual joint venture contract, it must obtain the consent of the other party or parties and report to the examination and approval authority for approval.

Article 11

A contractual joint venture shall conduct its operational and managerial activities in accordance with the approved contract and articles of association for the contractual joint venture. The right of a contractual joint venture to make its own operational and managerial decisions shall not be interfered with.

Article 12

A contractual joint venture shall establish a board of directors or a joint managerial institution which shall, according to the contract or the articles of association for the contractual joint venture, decide on the major issues concerning the venture. If the Chinese or foreign party assumes the chairmanship of the board of directors or the directorship of the joint managerial institution, the other party shall assume the vice- chairmanship of the board or the deputy directorship of the joint managerial institution. The board of directors or the joint managerial institution may decide on the appointment or employment of a general manager, who shall take charge of the daily operation and management of the contractual joint venture. The general manager shall be accountable to the board of directors or the joint managerial institution. If a contractual joint venture, after its establishment, chooses to entrust a third party with its operation and management, it must obtain the unanimous consent of the board of directors or the joint managerial institution, report to the examination and approval authority for approval, and register the change with the administrative authorities for industry and commerce.

Article 13

The employment, dismissal, remuneration, welfare, labour protection and labour insurance, etc. of the staff members and workers of a contractual joint venture shall be specified in contracts concluded in accordance with law.

Article 14

The staff and workers of a contractual joint venture shall, in accordance with law, establish their trade union organization to carry out trade union activities and protect their lawful rights and interests.

A contractual joint venture shall provide the necessary conditions for the ventures trade union to carry out its activities.

Article 15

A contractual joint venture must establish its account books within the territory of China, file its accounting statements according to relevant provisions and accept supervision by the financial and tax authorities.

If a contractual joint venture, in violation of the provisions prescribed in the preceding paragraph, does not establish its account books within the territory of China, the financial and tax authorities may impose a fine on it, and the administrative authorities for industry and commerce may order it to suspend its business operations or may revoke its business license.

Article 16

A contractual joint venture shall, by presenting its business license, open a foreign exchange account with a bank or any other financial institution which is permitted by the exchange control authorities of the state to conduct transactions in foreign exchange. A contractual joint venture shall handle its foreign exchange transactions in accordance with the provisions of the state on foreign exchange control.

Article 17

A contractual joint venture may obtain loans from financial institutions within the territory of China and may also obtain loans outside the territory of China. Loans to be used by the Chinese and foreign parties as investment or conditions for cooperation, and their guarantees, shall be provided by each party on its own.

Article 18

The various kinds of insurance coverage of a contractual joint venture shall be furnished by insurance institutions within the territory of China.

Article 19

A contractual joint venture may, within its approved scope of operation, import materials it needs and export products it produces. A contractual joint venture may purchase, on both the domestic market and the world market, the raw and processed materials, fuels, etc. within its approved scope of operation.

Article 20

A contractual joint venture shall achieve on its own the balance of its foreign exchange receipts and expenditures. If a contractual joint venture is unable to achieve the balance of its foreign exchange receipts and expenditures on its own, it may, in accordance with state provisions, apply to the relevant authorities for assistance.

Article 21

A contractual joint venture shall, in accordance with state provisions on tax, pay taxes and may enjoy the preferential treatment of tax reduction or exemption.

Article 22

The Chinese and foreign parties shall share earnings or products, undertake risks and losses in accordance with the agreements prescribed in the contractual joint venture contract.

If, upon the expiration of the period of a ventures operation, all the fixed assets of the contractual joint venture, as agreed upon by the Chinese and foreign parties in the contractual joint venture contract, are to belong to the Chinese party, the Chinese and foreign parties may prescribe in the contractual joint venture contract the ways for the foreign party to recover its investment ahead of time during the period of the ventures operation. If the foreign party, as agreed upon in the contractual joint venture contract, is to recover its investment prior to the payment of income tax, it must apply to the financial and tax authorities, which shall examine and approve the application in accordance with state provisions concerning taxes. If, according to the provisions of the preceding paragraph, the foreign party is to recover its investment ahead of time during the period of the ventures operation, the Chinese and foreign parties shall, as stipulated by the relevant laws and agreed in the contractual joint venture contract, be liable for the debts of the venture.

Article 23

After the foreign party has fulfilled its obligations under the law and the contractual joint venture contract, the profits it receives as its share, its other legitimate income and the funds it receives as its share upon the termination of the venture, may be remitted abroad according to law.

The wages, salaries or other legitimate income earned by the foreign staff and workers of contractual joint ventures, after the payment of the individual income tax according to law, may be remitted abroad.

Article 24

Upon the expiration or termination in advance of the term of a contractual joint venture, its assets, claims and debts shall be liquidated according to legal procedures. The Chinese and foreign parties shall, in accordance with the agreement specified in the contractual joint venture contract, determine the ownership of the ventures property. A contractual joint venture shall, upon the expiration or termination in advance of its term, cancel its registration with the administrative authorities for industry and commerce and the tax authorities.

Article 25

The period of operation of a contractual joint venture shall be determined through consultation by the Chinese and foreign parties and shall be clearly specified in the contractual joint venture contract. If the Chinese and foreign parties agree to extend the period of operation, they shall apply to the examination and approval authority 180 days prior to the expiration of the ventures term. The examination and approval authority shall decide whether or not to grant approval within 30 days of receiving the application.

Article 26

Any dispute between the Chinese and foreign parties arising from the execution of the contract or the articles of association for a contractual joint venture shall be settled through consultation or mediation. In case of a dispute which the Chinese or the foreign party is unwilling to settle through consultation or mediation, or of a dispute which they have failed to settle through consultation or mediation, the Chinese and foreign parties may submit it to a Chinese arbitration agency or any other arbitration agency for arbitration in accordance with the arbitration clause in the contractual joint venture contract or a written agreement on arbitration concluded afterwards. The Chinese or foreign party may bring a suit in a Chinese court, if no arbitration clause is provided in the contractual joint venture contract and if no written agreement is concluded afterwards.

Article 27

The detailed rules for the implementation of this Law shall be formulated by the department in charge of foreign economic relations and trade under the State Council and reported to the State Council for approval before implementation.

Article 28

This Law shall come into force as of the date of its promulgation.

  （Approved by the State Council on October 28, 1990, and promulgated by Decree No. 1 of the Ministry of Foreign Economic Relations and Trade on December 12, 1990）

    Chapter I General Provisions

    Article 1 These Rules are formulated in accordance with the provisions in Article 23 of The Law of the People's Republic of China on Foreign-Capital Enterprises.

    Article 2 Foreign-capital enterprises shall be under the jurisdiction of and protection by China's laws. 
   Foreign-capital enterprises, while engaged in business operational activities within the territory of China, must abide by Chinese laws and regulations and must not jeopardize the social and public interests of China.

    Article 3 A foreign-capital enterprise to be established in China must be conducive to the development of China's national economy, be capable of gaining remarkable economic results and shall meet at least one of the following conditions：
（1） The enterprise is to adopt advanced technology and equipment, engage in the development of new products, conserve energy and raw materials, and realize the upgrading of products and the replacement of old products with new ones which can be used as import substitutes；
（2） Its annual output value of export products accounts for more than 50% of the annual output value of all products, thereby realizing the balance between revenues and expenditures in foreign exchange or with a surplus.

    Article 4 No foreign-capital enterprise shall be established in the following trades：
（1） The press, publication, broadcasting, television and movies；
（2） Domestic commerce, foreign trade, and insurance；
（3） Post and telecommunications；
（4） Other trades in which the establishment of foreign-capital enterprises is forbidden, as prescribed by the Chinese government.

    Article 5 The establishment of foreign-capital enterprises shall be restricted in the following trades：
（1） Public utilities；
（2） Communications and transportation；
（3） Real estate；
（4） Trust investment；
（5） Leasing
    The application for the establishment of a foreign-capital enterprise in the trades mentioned in the preceding paragraph shall be submitted to the Ministry of Foreign Economic Relations and Trade of the People's Republic of China （hereinafter referred to as the Ministry of Foreign Economic Relations and Trade） for approval, except as otherwise provided by Chinese laws and regulations.

    Article 6 Application for the establishment of a foreign-capital enterprise shall not be approved if the proposed enterprise would involve one of the following circumstances：
（1） Injury to China's sovereignty or to social and public interests；
（2） Impairment of China's national security；
（3） Violation of Chinese laws and regulations；
（4） Incompatibility with the requirements of China's national economic development； or
（5） Possible creation of environmental pollution.

    Article 7 A foreign-capital enterprise shall make its own managerial decisions within the approved scope of business operations and shall not be subject to intervention.

    Chapter II Procedures for Establishment

    Article 8 The application for the establishment of a foreign-capital enterprise shall be submitted to the Ministry of Foreign Economic Relations and Trade, and after examination and approval, a certificate of approval shall be issued by the Ministry.
    With respect to the application for the establishment of a foreign-capital enterprise that comes under one of the following circumstances, the State Council shall authorize the people's government of the relevant province, autonomous region, municipality directly under the Central Government, municipality separately listed on the state plan, or the special economic zone, to issue the certificate of approval after examining and approving the application：
（1） The total amount of investment is within the limits of powers for the examination and approval of investments stipulated by the State Council；
（2） The proposed enterprises does not need the raw and processed materials to be allocated by the State, or does not influence unfashionably the national comprehensive balance of energy resources, communications and transportation, as well as export quotas for foreign trade.
    Where the people's government of the province, autonomous region, municipality directly under the Central Government, municipality separately listed on the state plan, or the special economic zone has approved the establishment of a foreign-capital enterprise within its limits of powers granted by the State Council, it shall within 15 days after the approval submit a report to the Ministry of Foreign Economic Relations and Trade for the record （hereinafter the Ministry of Foreign Economic Relations and Trade, the people's government of the province, autonomous region, municipality directly under the Central government, municipality separately listed on the State plan, and the special economic zone shall be called generally as the examining and approving organ）.

    Article 9 With respect to a foreign-capital enterprise, the establishment of which has been applied for, if its products are subject to export license, export quota, or import license, or are under restrictions by the State, prior consent of the department of foreign economic relations and trade shall be obtained in accordance with the limits of powers for administration.

    Article 10 A foreign investor shall, prior to the filing of an application for the establishment of a foreign-capital enterprise, submit a report to the local people's government at or above the county level at the place where the proposed enterprise is to be established. The report shall include： the aim of the establishment of the proposed enterprise； the scope and scale of business operation； the products to be produced； the technology and equipment to be adopted and used； the proportion of the sales of products between the domestic market and the foreign market； the area of land to be used and the related requirements； the conditions and quantities of water, electricity, coal, coal gas and other forms of energy resources required； and the requirement of public facilities.
    The local people's government at or above the county level shall within 30 days after receiving the report submitted by the foreign investor, give a reply in writing to the said foreign investor.

    Article 11 In case that a foreign investor wishes to establish a foreign-capital enterprise, an application shall be submitted to the examining and approving organ through the local people's government at or above the county level at the place where the enterprise is to be established, together with the following documents.
（1） The written application for the establishment of a foreign-capital enterprise；
（2） A feasibility study report；
（3） The articles of association of the foreign-capital enterprise；
（4） The name-list of the legal representatives （or the candidates for members of the board of directors） of the foreign-capital enterprise；
（5） The legal certifying documents and the credit position certifying documents of the foreign investor；
（6） The written reply given by the people's government at or above the county level at the place, where the enterprise is to be established；
（7） An inventory of goods and materials needed to be imported；
（8） Other documents that are required to be submitted.
    The documents mentioned in items （1）and （3）in the preceding paragraph must be written in the Chinese language； while the documents mentioned in Items （2）, （4） and （5） in the preceding paragraph may be written in a foreign language, but a corresponding Chinese translation shall be attached.
    In the event that two or more foreign investors jointly file an application for the establishment of a foreign capital enterprise, they shall submit a duplicate of the contract concluded and signed between them to the examining and approving organ for the record.

    Article 12 The examining and approving organ shall, within 90 days after receiving all the required documents with respect to an application for the establishment of foreign-capital enterprise, make a decision whether to approve or disapprove the application. In the event that the examining and approving organ has found that the documents mentioned above are not complete, or that some of them are inappropriate, it may call on the applicant to make up the incomplete documents, or to make necessary revisions, within a prescribed time limit.

    Article 13 After the approval of the application for the establishment of a foreign-capital enterprise by the examining and approving organ, the foreign investor shall, within 30 days after receiving the certificate of approval, file an application with the relevant administrative department for industry and commerce for registration, and obtain a business license. The date on which the business license is issued shall be the date of the establishment of the said enterprise.
    In the event that the foreign investor fails to file an application with the administrative department for industry and commerce for registration on the expiration of the 30 days after receiving the certificate of approval, the certificate of approval for the establishment of the proposed enterprise shall become invalid automatically.
    A foreign-capital enterprise shall, within 30 days after its establishment, go through the procedures for taxation registration with the tax authorities.

    Article 14 Foreign investors may appoint a Chinese service agency for enterprises with foreign investment or other economic organizations to handle, on their behalf, the affairs stipulated in Article 9, the first paragraph of Article 10 and Article 11 of these Rules, but a contract of entrustment shall be concluded and signed between them.

    Article 15 The written application for the establishment of a foreign-capital enterprise shall include the following contents：
（1） The name or designation, the residence and the place of registration of the foreign investor, and the name, nationality, and position of the legal representative；
（2） The name and residence of the foreign-capital enterprise；
（3） The scope of business operations, the varieties of products, and the scale of production；
（4） The total amount of investment, the registered capital, the source of funds, and the method of investment contribution and the operation period；
（5） The organizational form and organs, and the legal representative of the foreign-capital enterprise；
（6） The primary production equipment to be used and the degrees of depreciation, production technology, technological level and their sources；
（7） The sales orientation and areas, the sales channels and methods, and the sales proportion between China's market and foreign markets；
（8） The arrangements for the revenues and expenditures in foreign exchange；
（9） The arrangements for the establishment of relevant organs of working personnel the engagement and use of workers and staff members, their training, salaries and wages, material benefits, insurance, and labor protection；
（10） The degrees of probable environmental pollution and the measures for tackling pollution；
（11） The selection of sites and the area of land to be used；
（12） The funds, energy resources, raw and processed materials needed in capital construction and in production and business operations and the solutions thereof；
（13） The progress plan for the construction of the project； and
（14） The period of business operations of the foreign-capital enterprise to be established.

    Article 16 The articles of association of a foreign-capital enterprise shall include the following contents：
（1） The name and the residence；
（2） The aim and the scope of business operations；
（3） The total amount of investments, the registered capital, and the time limit for contributing investment；
（4） The form of organization；
（5） The internal organizational structures and their functions and powers as well as their rules of procedures； the functions, duties and limits of powers of the legal representative as well as of the general manager, chief engineer, chief accountant and other staff members；
（6） The principles and system of financial affairs, accounting and auditing；
（7） Labor administration；
（8） The term of business operations, termination, and liquidation； and
（9） The procedures for the amendment of the articles of association.

    Article 17 The articles of association of a foreign-capital enterprise shall become effective after the approval by the examining and approving organ. The same procedure shall apply when amendments are made.

    Article 18 The division or merge of foreign-capital enterprises, and the significant change in capital resulting from other causes, shall be subject to the approval by the examining and approving organ； in addition, the said enterprises shall engage a Chinese registered accountant to carry out verification, and to submit a report on the verification of capital； after the approval by the examining and approving organ, the enterprises concerned shall go through the procedures for the change of the registration with the relevant administrative department for industry and commerce.

    Chapter III Form of Organization and Registered Capital

    Article 19 The organizational form of a foreign-capital enterprise shall be a limited liability company. With approval, the enterprise may also take any other liability form.
    With respect to a foreign-capital enterprise which is a limited liability company, the liability of the foreign investor to the enterprise shall be limited to the amount of investment subscribed and contributed to the enterprise by the investor.
    With respect to a foreign-capital enterprise which takes any other liability form, the liability of the foreign investor to the enterprise shall be dealt with in accordance with the provisions of Chinese laws and regulations.

    Article 20 The total amount of investment of a foreign-capital enterprise refers to the total amount of funds needed for the establishment of the enterprises, i. e. the sum total of the funds invested in capital construction in arror-dance with the scope of production and the circulating funds for production.

    Article 21 The registered capital of a foreign-capital enterprise refers to the total amount of capital registered with the administrative department for industry and commerce for the purpose of establishing the foreign-capital enterprise, i. e the total amount of investment the foreign investor undertakes to contribute.
    The registered capital of a foreign-capital enterprise shall fit in with the enterprise's scope of business operations； and the proportion between the registered capital and the total amount of investment shall conform with the provisions of the relevant Chinese laws and regulations.

    Article 22 A foreign-capital enterprise shall not reduce the registered capital during the term of business operations.

    Article 23 The increase or assignment of the registered capital of a foreign-capital enterprise shall be subject to approval by the examining and approving organ； in addition, the said enterprise shall go through the procedures for the change of the registration with the administrative department for industry and commerce.

    Article 24 In case that a foreign-capital enterprise intends to mortgage or assign its assets or rights and interests to a foreign unit, the case shall be submitted to the examining and approving organ for approval, and then to the administrative department for industry and commerce for the record.

    Article 25 The legal representative of a foreign-capital enterprise shall be the person-in-charge who, in accordance with the stipulations in the enterprise's articles of association, executes his/her functions and powers on behalf of the enterprise.
    In the event that the legal representative is unable to execute his/her functions and powers, he/she shall entrust in writing an agent with the execution of his/her functions and powers.

    Chapter IV Methods of Contributing Investment and the Time Limit

    Article 26 Foreign investors may use convertible foreign currencies for the contribution of investment, or use as their investment machinery and equipment, industrial property rights, and proprietary technology that are assigned a fixed price.
    Foreign investors may, after approval by the examining and approving organ, use, as their investment, their profits in Renminbi （RMB） earned from other enterprises with foreign investment established within the territory of China.

    Article 27 In case that foreign investors intend to use machinery and equipment, being assigned a fixed price, as their investment, the said machinery and equipment must meet the following requirements：
（1） Those that are needed for the production of the foreign-capital enterprise；
（2） Those that cannot be produced in China, or that can be produced in China but cannot be guaranteed to meet the needs in terms of technical performance or time of supply.
    The price fixed for the aforesaid machinery and equipment shall not be higher than the normal price for similar machinery and equipment sold on the international market at the time.
    With respect to the machinery and equipment, being assigned a fixed price and used as contributing investment, an inventory listing in detail the assigning of fixed prices as contributing investment, including the names, categories, quantities, and the assignment of prices, shall be made and submitted to the examining and approval organ as an appendix to the application for the establishment of the foreign-capital enterprise.

    Article 28 In case that foreign investors intend to use industrial property rights and proprietary technology, being assigned a fixed price, as their investment, the said industrial property rights and proprietary technology must meet the following requirements：
（1） Owned by the foreign investors themselves；
（2） Capable of producing new products that are urgently needed by China, or that are suitable for export and marketable abroad.
    The assigning of a fixed price for the aforesaid industrial proprty rights and proprietary technology shall be in conformity with the general pricing principles of the international market, and the amount of pricing thereof shall not exceed 20% of the registered capital of the foreign-capital enterprise.
    With respect to those industrial property rights and proprietary technology, being assigned a fixed price for contributing investment, a detailed inventory of relevant data, including a duplicate of the proprietary rights certificate, the effective condition, technological performance, the practical value, the basis and standard for the calculation of pricing, shall be prepared and submitted to the examining and approving organ as an appendix to the application for the establishment of the foreign-capital enterprise.

    Article 29 When the machinery and equipment, being assigned a fixed price and used as contributing investment, have arrived at China's port, the foreign-capital enterprise shall apply to China's commodity inspection authorities for inspection, which shall then issue an inspection report.
    In the event that the variety, quality and quantity of the machinery and equipment, being assigned a fixed price and used as contributing investment, are not in conformity with the variety, quality and quantity of the machinery and equipment, being assigned a fixed price as contributing investment and listed in the inventory submitted to the examining and approving organ, the examining and approving organ has the power to require the foreign investors to make corrections within a prescribed time limit.

    Article 30 After the industrial property rights and proprietary technology priced as contributing investment have been put to use, the examining and approving organ has the power to carry out inspection. In the event that the said industrial property rights and proprietary technology are not in conformity with the data originally provided by the foreign investors, the examining and approving organ has the power to require the foreign investors to make corrections within a prescribed time limit.

    Article 31 The time limit for a foreign investor to make the investment contributions shall be clearly stipulated in the written application for the establishment of the foreign-capital enterprise and also in the articles of association of the enterprise. A foreign investor may make the investment contribution by instalments, but the last instalment of the contribution shall be made within the period of three years beginning from the day when the business license is issued. The first instalment of investment contribution shall not be less than 15% of the total amount of investment contribution that the foreign investor undertakes to make, and shall be made in full within a period of 90 days beginning from the day when the business license is issued.
    In the event that a foreign investor fails to make in full the first instalment of the investment contribution within the time limit stipulated in the preceding paragraph, the certificate of approval for the establishment of the proposed foreign-capital enterprise shall become invalid automatically. The foreign-capital enterprise in question shall go through the procedure for registration cancellation with the relevant administrative department for industry and commerce, and hand in its business license for cancellation.
    In the event of the failure to go through the procedure for registration cancellation and to hand in the business license for cancellation, the administrative department for industry and commerce shall revoke the business license and announce the case publicly.

    Article 32 After making the first instalment of investment contribution, the foreign investor shall make the remaining instalments of contribution strictly as scheduled. In the event that a foreign investor is in arrears with the contribution for 30 days without any justification, the case shall be handled in accordance with the provisions of paragraph 2 of Article 31 of these Rules.
    In the event that a foreign investor has proper reasons for requesting the prostponement of investment contribution, prior consent of the examining and approving organ shall be obtained, and the case shall also be reported to the administrative department for industry and commerce for the record.

    Article 33 After the foreign investor's each instalment of investment contribution, the foreign-capital enterprise shall engage a Chinese registered accountant to carry out verification, and to prepare a report on the verification of capital, which shall be submitted to the examining and approving organ and the administrative department for industry and commerce for the record.

    Chapter V Use of Site and the Site Use Fees

    Article 34 With respect to the site to be used by a foreign-capital enterprise, the local people's government at or above the county level in the place where the enterprise is to be located, shall make arrangements after examination and verification in the light of the local conditions.

    Article 35 A foreign-capital enterprise shall, within 30 days from the day the business license is issued, go through the procedure for the use of land and obtain the land certificate by presenting the certificate of approval and the business license to the land administration department under the local people's government at or above the county level in the place where the enterprise is to be located.

    Article 36 The land certificate shall be the legal instrument for the foreign-capital enterprise to use land. The foreign-capital enterprise within its term of operations, may not assign its land-use right without permission.

    Article 37 A foreign-capital enterprise shall, when obtaining the land certificate, pay its land use fee to the land administrative department in the place where the enterprise is located.

    Article 38 In case that a foreign-capital enterprise uses land that has already been developed, it shall pay the land development fee.
    The land development fee, as mentioned in the preceding paragraph, includes the expense for the requisition of land, the expense for the pulling down of houses and the settlement allowance, and the expense for the construction of basic installations that match the foreign-capital enterprise. The land development fee may be calculated and collected by the land development unit in a lump-sum, or by yearly instalments.

    Article 39 In case that a foreign-capital uses land that has not been developed, it may develop the land by itself, or it may entrust a department concerned in China to develop the land.
    The infrastructure construction shall be carried out under the unified arrangement of the local people's government at or above the county level in the place where the enterprise is to be located.

    Article 40 The standard for the calculation and collection of land use fee and land development fee shall be handled in accordance with pertinent provisions of China.

    Article 41 The term for the use of land by a foreign-capital enterprise shall be the same as the approved operation period of the said enterprise.

    Article 42 foreign-capital enterprise, besides obtaining the land-use right in accordance with the provisions of this Chapter, may also obtain the same right in accordance with the pertinent provisions of other Chinese laws and regulations.

    Chapter VI Purchasing and Marketing

    Article 43 A foreign-capital enterprise shall formulate and execute its production and operation plans on its own； the said production and operation plans shall be submitted to the competent department in charge of the trade, in the place where the said enterprise is located, for the record.

    Article 44 A foreign-capital enterprise is entitled to make decisions for itself on the purchase, for its own use, of machinery and equipment, raw and processed materials, fuels, parts and components, fittings, primary parts, means of transport, and articles for office use （hereinafter uniformly called "goods and materials"）.
    A foreign-capital enterprise shall, when purchasing goods and materials in China under the same conditions, enjoy the same treatment as enjoyed by the Chinese enterprises.

    Article 45 In case that a foreign-capital enterprise sells its products on the Chinese market, it shall conduct its sales in accordance with the approved sales proportion.
    In the event that sales of products on the Chinese market by a foreign-capital enterprise exceed the approved sales proportion, the case shall be subjected to the approval by the examining and approving organ.

    Article 46 A foreign-capital enterprise is entitled to export of its own accord, goods produced by itself； it may also appoint a Chinese foreign trade company or a company outside the territory of China to sell its goods on a commission basis.
    A foreign-capital enterprise is entitled to sell, of its own accord, the products produced by itself on the Chinese market in accordance with the approved sales proportion； it may also appoint a Chinese commercial agency to sell its products on a commission basis.

    Article 47 Where machinery and equipment being assigned a fixed price and use by foreign investors as contributing investment require, according to the pertinent provisions of China, import licenses, the foreign investors shall, on the strength of the approved inventory of equipment and goods and materials of the said enterprise to be imported, file an application directly, or through an agency entrusted by them , with the license-issuing organ for obtaining due import licenses.
    Where a foreign-capital enterprise has to import, in accordance with the approved scope of business, goods and materials for its own use and needed by its production and if, according to the pertinent provisions of China, it is necessary for the said enterprise to obtain import licenses, it shall work out an annual plan for importation, and apply, every six months, to the license-issuing organ for the licenses.
    With respect to products to be exported by a foreign-capital enterprise, if, according to the pertinent provisions of China, it is necessary for the said enterprise to obtain an export license, it shall work out an annual plan for exportation, and apply, every six months, to the license-issuing organ for the license.

    Article 48 The prices of the goods and materials and technological labor service imported by a foreign-capital enterprise shall not be higher than the normal prices of similar goods and materials and technological labour service on the international market at the time. The price of export products produced by a foreign-capital enterprise shall be fixed by the enterprise itself with reference to the international market prices at the time, but the prices must not be lower that the reasonable export prices. With respect to the evasion of tax by using such methods a importing at high prices while exporting at low prices, the tax authorities shall have the power, in accordance with the pertinent provisions of the tax law, to investigate the legal responsibilities therefor.
    The pricing of products to be sold by a foreign-capital enterprise on the Chinese market in accordance with the approved sales proportion shall be governed by the pertinent provisions of China concerning the administration of prices.
    The pricing mentioned in the preceding paragraph shall be reported to the administrative authorities for prices and the tax authorities for the record, and shall be placed under their supervision.

    Article 49 A foreign-capital enterprise shall provide statistical data and submit statistical statements to the departments concerned in accordance with the provisions in the Statistics Law of the People's Republic of China and the relevant provisions of China concerning the statistical system for the utilization of foreign capital.

    Chapter VII Taxation

    Article 50 A foreign-capital enterprise shall pay taxes and duties in accordance with the provisions of Chinese laws and regulations.

    Article 51 The workers and staff members of a foreign-capital enterprise shall pay individual income tax in accordance with the provisions of Chinese laws and regulations.

    Article 52 The following goods and materials imported by a foreign-capital enterprise shall be exempted from Customs duties and consolidated industrial and commercial tax；
（1） The machinery and equipment, parts and components, building materials as well as other materials used as investment by the foreign investor and needed for construction, as well as the installation and reinforcement of machinery；
（2） The machinery and equipment, parts and components, means of communications and transportation for use in production, and equipment for use in production and management, imported, for their own use, by a foreign-capital enterprise with the funds included in the total amount of investment；
（3） The raw materials and processed materials, auxiliary materials, primary parts, parts and components, and articles and materials for packaging imported by a foreign-capital enterprise for the production of export products.
    In the event that the imported goods and materials, as mentioned in the preceding paragraph, are resold within the territory of China , or are used in the production of products to be sold within the territory of China, the foreign-capital enterprise concerned shall pay the taxes or make up the taxes in accordance with the provisions of the tax law of China.

    Article 53 The export commodities produced by a foreign-capital enterprise, except those whose exportation is restricted by China, shall be exempted form Customs duties and consolidated industrial and commercial tax in accordance with the tax law of China.

    Chapter VIII Control of Foreign Exchange

    Article 54 Foreign exchange affairs of a foreign-capital enterprise shall be handled in accordance with the pertinent laws and regulations of China concerning foreign exchange control.

    Article 55 A foreign-capital enterprise shall, on the strength of the business license issued by the administrative department for industry and commerce, open an account at a bank which may handle foreign exchange business within the territory of China, and its receipts and payments in foreign exchange shall be subject to the supervision by the interested bank.
    The foreign exchange revenue of a foreign-capital enterprise shall be deposited in the foreign exchange account of the bank where it has opened an account： and the foreign exchange expenses shall be paid from the foreign exchange account.

    Article 56 A foreign-capital enterprise shall achieve by itself the balance of revenues and expenditures in foreign exchange.
    In the event that a foreign-capital enterprise is unable to strike by itself the balance between revenuse and expenditure in foreign exchange, the foreign investor shall indicate it clearly in the application for the establishment of the enterprise, and put forward a specific plan for solving the problem； the examining and approving organ shall give a reply after consultation with departments concerned.
    In the event that the foreign investor has indicated in the application for the establishment of the foreign-capital enterprise, that the balance of revenuse and expenditure in foreign exchange would be achieved by itself no government department shall be responsible for the solution of the balance problem of revenuse and expenditure in foreign exchange for the said enterprise.
    With respect to products, manufactured by a foreign-capital enterprise, urgently needed in China, capable of replacing similar imported goods, and permitted to be sold in China, the payments may be made in foreign exchange, subject to the approval by the Chinese administrative department for foreign exchange control.

    Article 57 In case that a foreign-capital enterprise has the necessity to open a foreign exchange account at a bank outside the territory of China to meet the needs of production and business operations, the case shall be submitted the Chinese administrative department for foreign exchange control for approval and, in accordance with the provisions of the Chinese administrative department for foreign exchange control, regular reports on the conditions of revenues and expenditures in foreign exchange and statements of account shall be submitted.

    Article 58 The wages and salaries as well as other rightful earnings in foreign exchange of foreign workers and staff members and of those form Hong Kong, Macao and Taiwan working in a foreign-capital enterprise may be remitted freely out of the country after taxes have been paid in accordance with the provisions of the Chinese tax law.

    Chapter IX Financial Affairs and Accounting

    Article 59 A foreign-capital enterprise shall, in accordance with Chinese laws, regulations and the provisions of financial organs, set up financial and accounting systems, which shall be reported, for the record, to the financial departments and the tax authorities at the place where the enterprise is located.

    Article 60 The fiscal year of a foreign-capital enterprise shall begin from January 1 and end on December 31 of Gregorian calendar.

    Article 61 Reserve funds and bonus and welfare funds for workers and staff members shall be withdrawn from the profits after a foreign-capital enterprise has paid income tax in accordance with the provisions of the Chinese tax law. The proportion of reverse funds to be withdrawn shall not be lower than 10% of the total amount of profits after payment of tax； the withdrawal of reserve funds may be stopped when the total cumulative reserve has reached 50% of the registered capital. The proportion of bonus and welfare funds for workers and staff members to be withdrawn shall be determined by the foreign-capital enterprise of its own accord.
    In the event that deticits of previous fiscal years of a foreign-capital have not been made up, it may not distribute the profits, while the undistnibuted profits of previous fiscal year may be distributed together with the distributable profits of the current fiscal year.

    Article 62 Accounting vouchers, account books and accounting statements made by a foreign-capital enterprise shall be written in the Chinese language； if they are written in a foreign language, notes in the Chinese language are required.

    Article 63 Business accounting of a foreign-capital enterprise shall be conducted independently.
    The annual accounting statements and liquidation accounting statements of a foreign-capital enterprise shall be prepared in accordance with the provisions of the Chinese competent departments for financial and tax affairs. If accounting statements are prepared in foreign currencies, accounting statements in which the foreign currencies are converted into Renminbi （RMB） shall be prepared at the same time.
    The annual accounting statements and liquidation accounting statements of a foreign-capital enterprise, as stipulated in the second and third paragraphs of this Article, together with the verification report prepared by a Chinese registered accountant, shall be submitted, within a prescribed time limit, to the China competent departments for financial and tax affairs and also to the examining and approving organ and the administrative department for industry and commerce for the record.

    Article 64 The foreign investor may engage Chinese or foreign accounting personnel to consult the account books of a foreign-capital enterprise, and the expenses thus entailed shall be borne by the foreign investor.

    Article 65 A foreign-capital enterprise shall submit its annual statement of assets and liabilities and annual statement of profit and loss to the competent departments for financial and tax affairs, and also to the examining and approving organ as well as the administrative department for industry and commerce for the record.

    Article 66 A foreign-capital enterprise shall set up account books at the place where the said enterprise is located, and shall receive supervision of the competent departments for financial and tax affairs.
    With respect to any foreign-capital enterprise which violates the provisions in the preceding paragraph, the competent departments for financial and tax affairs may impose a fine, and the administrative department for industry and commerce may order to suspend its business operations or revoke its business license.

    Chapter X Workers and Staff Members

    Article 67 In case that a foreign-capital enterprise employs workers and staff members within the territory of China, both the enterprise and the workers and staff members shall, in accordance with the Chinese laws and regulations, conclude and sign a labor contract. Matters as employment, dismissal, salaries and wages, welfare labor protection and, labor insurance shall be clearly stipulated in the contract.
    Foreign-capital enterprises may not hire child labourers.

    Article 68 The workers and staff members of a foreign-capital enterprise shall have the right to set up a grass-roots trade union organization and carry out trade union activities in accordance with the provisions of the Trade Union Law of the People's Republic of China.

    Chapter XI Trade Union

    Article 69 The workers and staff members of a foreign-capital enterprise shall have the right to set up a grass-roots trade union organization and carry out trade union activities in accordance with the provisions of the Trade Union Law of the People's Republic of China.

    Article 70 The trade union in a foreign-capital enterprise shall represent the interests of workers and staff members, and have the right to conclude labor contracts with the enterprise on their behalf, and to supervise the execution of the labour contracts.

    Article 71 The basic tasks of the trade union in a foreign-capital enterprise shall be as follows： to safeguard the lawful rights and interests of workers and staff members in accordance with the provisions of Chinese laws and regulations, and to assist the enterprise in the rational arrangements and use of welfare and bonus funds for the workers and staff members； to organize workers and staff members in carrying on political study, in learning scientific, technical and professional knowledge, in carrying out cultural, artistic and sports activities； to educate workers and staff members in complying with labour discipline and in striving to fulfil various economic tasks of the enterprise.
    When a foreign-capital enterprise holds discussions on problems concerning the commendation and punishment of workers and staff members, the wage system, welfare benefits, labor protection and labor insurance, representatives of the trade union shall have the right to attend the discussions as nonvoting attendants. A foreign-capital enterprise shall listen to the opinions of the trade union, and win its cooperation.

    Article 72 A foreign-capital enterprise shall give an active support to the work of the trade union of the enterprise, and, in accordance with the provisions of the Trade Union Law of the Peoples' Republic of China, provide the trade union organization with the necessary houses and equipment for handling trade union work, holding meetings and conducting such collective undertakings as welfare benefits, and sports activities for workers and staff members. Every month, the enterprise shall appropriate a sum equal to 2% of the actual total amount of wages and salaries of workers and staff members to the trade union as outlay, and the trade union of the enterprise shall use this sum of money in accordance with the measures for the administration of trade union outlay, as formulated by the All-China Federation of Trade Unions.

    Chapter XII Term of Operations, Termination and Liquidation

    Article 73 The term of operations of a foreign-capital enterprise shall be proposed by the foreign investor in the written application for the establishment of the enterprise in the light of the specific conditions of different enterprises, and shall be subjected to the approval by the examining and approving organ.

    Article 74 The term of operations of a foreign-capital enterprise shall be calculated form the day when the business license is issued.  
    In the event that the term of operations of a foreign-capital enterprise has to be extended upon its expiration, the enterprise shall, 180 days before the expiration of the term of operations, file an application for the extension of the term of operations with the examining and approving organ. The examining and approving organ shall, within 30 days from the day of receiving the application, determine whether to approve or disapprove the extension.
    The foreign-capital enterprise shall, after obtaining the approval for an extension of its term of operations and within 30 days from the day of receiving the approval for the extension, go through the procedure for the change of registration with the administrative department for industry and commerce.

    Article 75 A foreign-capital enterprise that falls under one of the following circumstances shall terminate its business operations：
（1） The term of operations expires；
（2） The foreign investor decides to dissolve it because of poor operation and management resulting in serious losses；
（3） Business cannot be carried on because of heavy losses as a result of natural disasers, wars or other force majeure；
（4） Bankrupcy；
（5） Disbanded by law because it has violated Chinese laws and regulations or jeopardized social and public interests；
（6） Other causes for dissolution, as stipulated in the enterprise's articles of association, have occurred.
    If a foreign-capital enterprise falls under any of the circumstances as stipulated in Items （2）, （3） and （4） of the preceding paragraph, it shall submit, of its own accord, an application for the termination of business operations to the examining and approving organ for verification and approval. The date of approval after verification by the examining and approving organ shall be the date of the said enterprise's termination.

    Article 76 In case that a foreign-capital enterprise terminates its business operations in accordance with the provisions in Items （1）, （2）, （3） and （6） of Article 75, the enterprise shall, make a public announcement and notify the creditors； and, it shall, within 15 days from the day of the public termination announcement for liquidation, the principles of liquidation, and the candidates for the liquidation committee to the examining and approving organ for verification and approval before liquidation is carried out.

    Article 77 The liquidation committee shall be composed of the legal representatives of the foreign-capital enterprise, the representatives of the creditors, the representatives from the competent authorities concerned； Chinese registered accountants and lawyers shall be engaged in the liquidation.
    Priority shall be given to the payment of expenses for liquidation made from the existing property of the foreign-capital enterprise.

    Article 78 The liquidation committee shall execute the following functions and powers：
（1） To convene a meeting of creditors；
（2） To take over and liquidate the property of the enterprise in question, and to prepare the statement of assets and liabilities and the inventory of property；
（3） To propose a basis for the valuation and computation of the property of the enterprise in question；
（4） To work out a liquidation plan；
（5） To recover creditor's rights and to pay the debts；
（6） To receive the payments from shareholders which have not yet been made；
（7） To distributs the remaining property；
（8） To represent the foreign-capital enterprise in bringing a suit or responding to a suit.

    Article 79 Prior to the conclusion of the liquidation of foreign-capital enterprise, the foreign investor shall not remit or carry the said enterprise's funds out of the territory of China, nor dispose of the enterprise's property privately.
    If , upon the conclusion of the liquidation of a foreign-capital enterprise, its net assets and remaining property exceed its registered capital, the excess portion shall be regarded as profit on which income tax shall be imposed in accordance with the Chinese tax law.

    Article 80 Upon the conclusion of the liquidation of a foreign-capital enterprise, it shall go through the procedures for the cancellation of registration with the administrative department for industry and commerce, and to hand in the business license for cancellation.

    Article 81 While disposing of the assets and properties of a foreign-capital enterprise, Chinese enterprises or other economic organizations shall, under equal conditions, have the priority in purchasing the aforesaid assets and properties.

    Article 82 In case that a foreign-capital enterprise terminates its business operations in accordance with the provisions in Item （4） of Article 75, its liquidation shall be carried out with reference to the pertinent laws and regulations of China.

    Chapter XIII Supplementary Provisions

    Article 83 With respect to the various categories of insurance for a foreign-capital enterprise, it shall take out insurance from insurance companies within the territory of China.

    Article 84 If a foreign-capital enterprise concludes economic contracts with any other Chinese enterprise or economic organization, the Economic Contract Law of the People's Republic of China shall be applied.
    If a foreign-capital enterprise concludes economic contracts with any foreign company, enterprise or individual, the Law of the People's Republic of China on Economic Contracts Involving Foreign Interests shall be applied.

    Article 85 Cases concerning the establishment, in China's mainland, of enterprises, the capital of which is owned solely by the companies, enterprises, and other economic organizations or individuals in the regions of Hong Kong, Macao or Taiwan, or by Chinese citizens residing in foreign countries, shall be handled with reference to these Rules.

    Article 86 Foreign workers and staff members, and workers and staff members from Hong Kong, Macao and Taiwan, who are working in a foreign-capital enterprise, may carry into the country means of transport and articles for daily use that are within reasonable quantities and for their own use, and they shall go through the import procedures in accordance with pertinent provisions of China.

    Article 87 The right to interpret these Rules shall reside in the Ministry of Foreign Economic Relations and Trade.

    Article 88 These Rules shall go into effect as of the date of promulgation.

    Article 1 This Law is enacted in order to promote employment, coordination between economic development and employment increase, and harmony and stability of society.

    Article 2 The State lays great stress on employment increase in economic and social development, implements a proactive employment policy, and upholds the guideline under which workers keep the initiative in their own hands when choosing jobs, employment is regulated by the market, and the government promotes employment, in order to increase employment through multiple channels.

    A rticle 3 The workers enjoy the right to employment on an equal footing and to choice of jobs on their own initiative in accordance with law.
In seeking employment, the workers shall not be subject to discrimination because of their ethnic backgrounds, races, gender, religious beliefs, etc.

    Article 4 People's governments at or above the county level shall make employment increase one of their important goals in their endeavors for economic and social development, incorporate it in their plans for national economic and social development, and formulate medium- and long-term plans and annual work plans for promotion of employment.

    Article 5 People's governments at or above the county level shall create conditions for employment and increase employment by taking such measures as developing the economy, adjusting the industrial structure, regulating the market of human resources, improving employment services, strengthening vocational education and training, providing employment aid, etc.

    The Administrative Measures for the Bidding and Submission of Tendering for Construction Projects were approved at the 17th executive meeting of the Ministry on November 6, 1992, and are hereby published, and shall be implemented as of the date of its publishing.

    Chapter I General Principles

　Article 1. These measures are formulated to suit the needs of the socialist market economy economic structure, enhance the government's administration of the bidding and submission of tendering for construction projects to ensure that developers and construction entities trade and compete on a fair and equal basis in the building market, to control the construction schedule, ensure quality of construction, and improve investment efficiency.

  Article 2. Bidding and tendering shall be required for all construction projects invested by any government department, State-owned enterprise or institution, including those involving new construction, modification, expansion or technological renovation, with the exception of any special projects in which bidding is not suitable.

  Article 3. Bidding and tendering for construction projects shall be conducted under the principles of fairness, equal value, compensation and good faith, with room for competition based on levels of technology and management, social reputation and reasonable quotation, without any regional or departmental restrictions.

  Article 4. Bidding and tendering for construction is an economic activity conducted by the parties to construction projects pursuant to law, and shall be governed and bound by the laws and regulations of the State, and any developer meeting the criteria and construction enterprises with relevant qualifications may participate in the process.

   Chapter II Organization and Function

  Article 5. The Ministry of Construction shall be responsible for the administration of bidding and tendering for construction projects all over the country. Its major functions are as follows：
  （1） To comply with and observe the relevant laws, regulations and policies of the State governing bidding and tendering for construction projects, and formulate the relevant rules and regulations thereof；
  （2） To direct and inspect bidding and tendering work in each region and department；
  （3） To summarize and exchange experiences regarding bidding and tendering work, and provide relevant services；
  （4） To protect national interests and supervise the bidding and tendering activities of all major projects；
  （5） To examine and approve the inter-provincial agencies for construction bidding and tendering.

　Article 6. The competent department in charge of construction in the people's government in each province, autonomous region and municipality shall be responsible for the administration of bidding and tendering for construction projects within their jurisdiction. Its major functions are as follows：
（1）To comply with and observe the relevant regulations and policies of the State governing bidding and tendering for construction projects, and formulate the relevant rules and regulations thereof；
（2）To supervise and inspect the relevant bidding and tendering work, and summarize and exchange work experiences；
（3）To examine and approve the qualifications of agencies engaged in consulting and construction supervision for construction bidding and tendering；
（4）To mediate any disputes arising from bidding and tendering activities；
（5）To veto any bidding results in violation of the regulations governing bidding and tendering.

  Article 7. The competent construction department in each province, autonomous region or municipality may, with reference to actual conditions and subject to the approval of the people's government on the same level, determine the institutional set up and source of operating funds of the bodies at each level in charge of bidding and tendering.
  As authorized by the competent construction department of the people's government at the same level, the institutional bodies at each level shall be specifically responsible for the administration of the bidding and tendering within their jurisdictions. Their major functions are as follows：
（1）To examine the qualifications of bid invitation units；
（2）To examine bidding applications and bidding documents；
（3）To examine pre-tender estimates；
（4）To supervise bid openings, evaluations, selections and negotiations；
（5）To mediate any disputes arising from bidding and tendering activities；
（6）To veto any bidding results in violation of the regulations governing bidding and tendering；
（7）To penalize any act in violation of the regulations governing bidding and tendering；
（8）To supervise the execution and performance of the contract and awards.

  Article 8. Industrial and communications departments under the State Council shall, in conjunction with the local competent construction departments, complete to the best of their ability the administrative work relevant to the bidding and tendering of any major construction projects invested directly by the department and its affiliated investment company. Their major functions are as follows：
（1）To observe the relevant regulations and policies of the State governing bidding and tendering for construction projects；
（2）To direct and organize the bidding and tendering work of any major construction projects invested directly by the department and its affiliated investment company, as well as the bidding work of the construction under its direct subordination；
（3）To supervise and inspect the bidding and tendering activities conducted by the relevant entities of the department；
（4）To handle the relevant matters for project bidding with the competent construction department in the province, autonomous region or municipality where the project is to be conducted.

  Chapter III Bid Invitation

  Article 9. Based on the principle of holding the owner responsible for construction projects, the developer shall be entitled to the following rights and interests as both the investor and the owner：
（1）To organize bid invitation in accordance with the relevant procedures；
（2）To appropriately select and identify tendering units based on the enterprise qualifications standards stipulated by the government；
（3）To select and determine the bid-winning price and bid winner in accordance with the relevant bid assessment principles and price control stipulations.

  Article 10. The project developer shall meet the following requirements in order to organize bid invitation：
（1）It is a legal person or other type of organization established under the law；
（2）It has the economic and technological management personnel required for the project for which bid invitation is organized；
（3）It has the ability to organize and prepare bid documents；
（4）It has the capability to examine the qualifications of the tendering units；
（5）It has the ability to organize bid opening, bid assessment and selection.
  If the project developer does not meet the relevant conditions set forth above in Subsection 2-5, it shall entrust a consulting/supervising unit with corresponding qualifications to act as its agent in organizing the bidding.

  Article 11. Construction projects shall meet the following conditions in order for bid invitation to go ahead：
（1）The project budget has been approved；
（2）The construction project has been included in the State, departmental or regional annual fixed asset investment plan；
（3）Expropriation of land for use by the construction project has been completed；
（4）Construction drawings and technical materials are adequate to meet the needs of the construction work；
（5）Construction funds and sources of major building materials and equipment have been made available；
（6）Approval has been obtained from the local planning department where the construction project is located； the construction site has been leveled and is connected to water, electric supply and to traffic, or the leveling work and connection to water, electricity and roads has been made as a part of the bid package.

  Article 12. Bidding for construction may utilize such methods as entire project bidding, unit project bidding or special professional project bidding. However, no bidding is permitted for a partial or itemized project of a unit project.

  Article 13. Bidding for construction may adopt the following methods：
（1）Public bidding. The unit offering bid invitation publishes public announcement for bidding through newspapers, radio or television；
（2）Invitational bidding. The unit offering bid invitation gives out bid invitation letters to three or more enterprises which have the capability to undertake the construction project；
（3）Bid negotiation. With respect to special projects for which neither public bidding nor invitational bidding is appropriate, application shall be made to the department in charge of construction at county or higher level or to a bid institution authorized thereby to conduct bid negotiation upon approval.
  The number of units participating in the bid negotiation shall not be less than two （including two）.

  Article 14. Bidding for construction shall generally be conducted via the following procedure：
（1）Organization of a bid committee by the developer in accordance with the requirements of Article 10 hereof；
（2）Submission of a bidding application to the institution in charge of bidding and tendering.
The application letter shall mainly include： qualifications of the bid inviting unit, conditions of the bidding project, the proposed bidding method and requirements of the tendering units；
（3）Preparation of the bidding documents and pre-tender estimate, which shall be reported to the to the institution in charge of bidding and tendering for approval；
（4）Publishing of the bidding announcement or sending of the bid invitations；
（5）Submission of the tender applications by the tendering units；
（6）Examination of the qualifications of the tendering units and notification of the tender applicants of the examination results；
（7）Delivery of bid documents, design drawings and technical materials to the qualified tendering units；
（8）Organization of visits to the construction site by the tendering units and answering of questions regarding the bid documents；
（9）Organization of a bid appraisal organization and formulation of bid assessment and selection methods；
（10）Convention of a bid opening meeting and examination of the tendering offers；
（11）Organization of bid assessment work and decision on the bid winner；
（12）Sending out the bid winning notice；
（13）Execution of the construction contract between the project developer and the bid winner.

  Article 15. The bid documents shall generally include：
（1）Overall introduction to the project： name, address of the project, projects under bidding, project occupation area, floor space and technical requirements, quality standards and site conditions, bidding method and the required project commencement and completion schedule, and requirements regarding the qualifications of the tendering units；
（2）Necessary design drawings and technical materials；
（3）Detailed list of project works；
（4）Construction fund certificate, project payment method and percentage of advanced payment issued by a bank；
（5）Method of supply of major materials （steel, wood, cement, etc.） and equipment； good processing and ordering situation, and method for handling material and equipment price differences；
（6）Construction requirements for special projects and the technical specifications to be adopted；
（7）Requirements regarding the preparation of bid documents and principles of bid assessment and selection；
（8）Agenda for such activities as tender offering, bid opening, bid assessment and selection；
（9）"Conditions for the Project Construction Contract" and adjustment requirements；
（10）The amount of bid bond required, which shall be determined on the basis of the scale of the construction project and shall be a maximum of RMB1,000.00；
（11）Other matters requiring explanation.

  Article 16. Once the bid documents are issued, the bid inviting unit may not alter their content or add supplementary conditions of its own free will.
If any alteration or supplement is indeed required, application shall be submitted to the institution in charge of bidding and tendering, and the notice of such alteration or supplement shall be served to the tendering units seven days before the tender offering deadline.

  Article 17. Within 10 days of the issuance of the bid documents, the bid inviting unit shall call meetings to answer any questions regarding the bid documents and such meeting minutes shall be regarded as a supplement to the bid documents and shall be filed with the institution in charge of bidding and tendering, and served through written notification to all the tendering units.

  Article 18. The time period from the date of issuance of bid documents to the deadline of tender submission shall not be fewer than 15 days for small-scale projects and shall not be fewer than 30 days for large or medium-scale projects.

  Chapter IV Pre-tender Estimate

  Article 19. A pre-tender estimate must be prepared for the bidding invitation of any construction project. The pre-tender estimate shall be prepared by the bid invitation unit on its own or through an entrusted consulting or construction supervising agency approved by the competent construction department as capable of preparing a pre-tender estimate.

　Article 20. The following principles shall be observed in the preparation of a pre-tender estimate：
（1）The volume of construction work shall be determined and the pre-tender estimate shall be prepared in accordance with the designs and relevant materials and bidding documents and with reference to the State-stipulated norm and code for technical and economic standards；
（2）The pre-tender estimate price shall consist of the cost, profit and taxes, which shall generally be limited within the amount of the approved general estimate （or the revised estimate） and the investment of the lump sum contract；
（3）As a price contemplated by the construction developer, the pre-tender estimate price shall seek to comply with actual market changes, and shall be favorable to competition and guarantee the project quality；
（4）The pre-tender price shall take into consideration factors affecting price fluctuation, including labor, materials, number and shift of machinery, etc., as well as the contingency sum, lump sum fee and measure-taking fee.
  For a project of which excellence is required, relevant fees shall be added；
（5）Only one pre-tender estimate shall be prepared per project.

   Article 21. A pre-tender estimate shall be subject to the examination and approval of an institutional body for bidding and tendering.

  Article 22. Once it is examined and approved, the pre-tender estimate shall be sealed until the time when it is opened. All those who have had access to the pre-tender estimate shall be liable for keeping the estimate confidential, without any disclosure.

  Article 23. For a project the price of which is subject to negotiation, its contract price shall be discussed and agreed upon by the parties thereto, and be filed with the institutional body for bidding and tendering.

  Chapter V Tender Submission

  Article 24. As the producer of the architectural product, the construction enterprise shall be entitled to the following rights during the bidding and tendering process：
（1）Any construction enterprise or consortium with the business license and the required certificate of qualifications may participate in the tendering as required in the bidding documents；
（2）The enterprise shall have the right to decide the bid price with reference to its operating conditions and the marketing information available；
（3）The enterprise shall have the right to decide special prices for any project requiring excellent quality；
（4）The enterprise shall have the right decide whether or not to participate in the bid competition in light of its operating conditions.

  Article 25. The tender submitting entity shall provide the following information to the bid inviting entity：
（1）Enterprise business license and qualification certificate；
（2）History of the enterprise；
（3）Internal capital situation；
（4）Number of full-time staff, including the number of technicians and skilled workers, and the average skill levels； a list of main construction equipment and machinery owned by the enterprise；
（5）A list of the major construction projects undertaken over the past three years and the status of the quality；
（6）A list of current construction projects, including those under construction and those which have not yet commenced.

  Article 26. The tenderer shall pay a deposit for bidding documents upon receipt of such documents.

  Article 27. The tenderer shall conscientiously prepare the book of tender as required by the bidding documents. The book of tender shall contain the following：
（1）Overall descriptions；
（2）The bidding price as calculated per the volume of the construction project and the quantity of consumption of the major materials, including steel, wood and cement.
  The tenderer may submit the bidding price at its sole discretion based on the unified rules for work volume calculation；
（3）The construction plan and the major construction equipment as selected；
（4）Major technical measures to guarantee the quality, progress and construction safety of the project；
（5）Proposed schedule of commencement and completion and the general schedule；
（6）Confirmation of the major terms and conditions of the contract.

  Article 28. The book of tender shall be sealed by the entity and the legal representative or the proxy authorized by the legal representative.
  The tenderer shall seal the book of tender and submit it to the bid invitation unit within the stipulated period.
I  f any error is found in the book of tender, amendment shall be made officially in writing before the deadline of the bid, or otherwise the original book of tender shall prevail.

　Article 29. The tenderer may propose any amendment to the design and the terms and conditions of the contract, work out the corresponding bid price and book of tender, seal these off and send them to the bid invitation unit for reference.

  Chapter VI Bid Opening, Evaluation and Selection

  Article 30. The activities of the bid opening, evaluation and selection shall be performed by the bid invitation unit under the auspices of the institutional body for bidding and tendering.

  Article 31. The bid invitation unit shall invite the representatives from the relevant departments to attend the bid opening meeting, publicly announce the methods of bid evaluation and selection, unseal the books of tender and additional materials, and publicize the main contents and pre-tender estimate of the books.

  Article 32. The book of tender shall become invalid if：
（1）It is not sealed；
（2）It does not contain the seal or stamp of the tenderer and its legal representative or the proxy as authorized by the legal representative；
（3）It fails to follow the stipulated format, or the contents are incomplete, blurred or illegible；
（4）It misses the deadline for submission；
（5）The tenderer does not attend the bid opening meeting.

  Article 33. The bid evaluation team shall consist of representatives from the construction developer and its superior competent department （including the consulting and supervising agencies entrusted by the developer） and the entities invited by the developer.
  Relevant experts shall be invited if it is a special or large-scale project.

  Article 34. Bid evaluation and selection shall be conducted by using scientific methods and on the basis of equal competition, fairness and justice. The accepted tenderer shall be decided on a selective basis after a general overall evaluation is conducted of the bid price, term of construction, quantity of consumption of major materials, construction plan, actual quality records and the reputation of the tenderer.

  Article 35. The period from the bid opening （or the commencement of the bid negotiation） to the final bid selection shall be no more than 10 days for a small-scale project, and no more than 30 days for a large-scale project. Such period may be properly extended under special circumstances.

  Article 36. After the successful tenderer is selected, the bid invitation unit shall send out the tender award notification within 7 days, with copies to each unsuccessful tenderer and submission to the institutional body.
  Unsuccessful tenderers shall return the bidding documents and relevant materials within 7 days upon receipt of notification, and the bid invitation unit shall refund the tenderer the deposit.

  Article 37. Thirty days after the tender award notification is sent out, the successful tenderer and the construction developer shall execute the project contract on the basis of the bidding documents and the book of tender.

  Chapter VII Penalty Provisions

  Article 38. In case of any of the following actions in violation of these Regulations, the administrative department in charge of construction of the people's government at the county or higher level or the agency authorized thereby may, based on the seriousness of the case, give out warnings or mete out such penalties as a public notice of criticism, termination of bidding, cancellation of tendering right for a certain period, disapproval for commencement of work, ordered cessation of construction work, and fines：
（1）No bidding is carried out for projects which should be subject to bidding；
（2）The bid inviting unit conceals any facts about the project （i.e., the construction scale, construction conditions, guarantee of investment and materials, etc.）；
（3）The pre-tender estimate is disclosed, which affects the normal proceeding of the bidding work；
（4）The bid inviting unit fails to truthfully complete the application form and makes false declaration regarding its enterprise qualification ratings；
（5）The tendering units conspire with one another to commit corrupt practices and drive the bid price up, making bid selection difficult or impossible；
（6）After bid selection, the winner refuses to sign the construction contract within the stipulated time period.

  Article 39. If the developer utilizes its bid invitation right to seek bribes or kick-backs, or if the tendering unit wins the bid through such illegal means as bribing or offering kick-backs, they shall be dealt with in accordance with the relevant stipulations of the "Administrative Regulations Governing the Construction Market".

  Article 40. After the tendering units submit their offers, if the bidding fails due to the fault of the bid inviting unit （developer）, the bid inviting unit （developer） shall make certain economic compensations to each of the tendering units.

  Article 41. In case of any malpractice for personal benefit, such as the seeking or taking of bribes by the staff of the administrative department in charge of construction of the people's government or the agency authorized thereby, the practitioners of such malpractice shall be given administrative penalties by their unit or higher level authorities. If their acts constitute a crime, they shall be pursued for their criminal liabilities by the judicial department in accordance with the law.

  Article 42. In case of any dispute arising from bidding or tendering activities, the relevant parties shall endeavor to resolve such dispute through mutual consultation or with the mediation of the institution in charge of bidding and tendering. If such mediation fails, the dispute may be resolved through legal proceedings.

  Article 43. If a relevant party disputes the penalties, such party may apply to the higher level authority of the penalty-issuing agency for review of the penalty decision within 15 days of receipt of the penalty decision.
  If the party disputes the review decision, such party may file a suit to the people's court within 15 days of receipt of the review decision. Such party may also directly file a suit with the people's court without undergoing the review process.
  If a party fails both to apply for a review or to file a suit with the people's court and to implement penalty decisions, the penalty-issuing agency may apply to the people's court for enforcement.

  Chapter VIII Supplementary Provisions

  Article 44. The administrative departments in charge of construction in each of the provinces, autonomous regions and municipalities may, based on local specific actual conditions, formulate detailed implementing rules or regulations governing construction bidding and tendering, which shall be reported to the Ministry of Construction for filing.

  Article 45. Separate regulations will be formulated for projects involving foreign participation.

  Article 46. The Ministry of Construction shall be responsible for the interpretation of these Regulations.

  Article 47. These Regulations shall come into force as of the date of promulgation. If there are any discrepancies between these Regulation and past rules and regulations, these Regulations shall prevail.

    Article 1 This law is enacted for the purpose of promoting the transformation of scientific and technological achievements into real productive forces, standardizing such transformation, hastening scientific and technological progress and facilitating economic and social development.

   Article 2 The phrase "transformation of scientific and technological achievements" as used in this Law means the entire process of the follow-up tests, development, application and widespread use of the applicable scientific and technological achievements, made as a result of scientific research and technological development, through to the final creation of new products, new techniques, new materials and new industries ―― all for the purpose of enhancing the productive forces.

    Article 3 Transformation of scientific and technological achievements shall be instrumental to increasing economic and social results and protecting the environment and natural resources, as well as to promoting economic and social development and strengthening national defense.
    In transforming scientific and technological achievements, the persons concerned shall abide by the principles of voluntariness, mutual benefit, fairness and good faith and shall, in accordance with law or contractual agreement, enjoy interests and bear risks. Intellectual property involved in transformation of scientific and technological achievements shall be protected by law.
    In transformation of scientific and technological achievements, laws shall be observed and State interests safeguarded, and no public interests shall be damaged.

    Article 4 The administrative department for science and technology, the planning department, the administrative department for comprehensive economic and trade affairs and other relevant administrative departments under the State Council shall, within their functions and responsibilities as prescribed by the State Council, administer, guide and coordinate efforts for the transformation of scientific and technological achievements.
    The local people's governments at various levels shall be responsible for administering, guiding and coordinating efforts for the transformation of scientific and technological achievements within their respective administrative regions.

    CHAPTER II Arrangements For Implementation

    Article 5 The State Council and the local people's governments at various levels shall incorporate the transformation of scientific and technological achievements in their notional economic and social development plans and make arrangements and coordinate efforts for the transformation of scientific and technological achievements.

    Article 6 The relevant departments under the State Council and the people's governments of provinces, autonomous regions and municipalities directly under the Central Government shall, at regular intervals, publish catalogues of scientific and technological achievements and handbooks of major projects for transformation of scientific and technological achievements and shall give first priority and assistance to the following：
（1） projects that will noticeably help raise the industrial and technical level and increase economic results；
（2） projects of an industrial scale that can compete among the economies of the world；
（3） projects that can help rationally develop and utilize the natural resources, conserve energy, reduce material consumption and prevent and control environmental pollution；
（4） projects that can facilitate high-yield, high-quality and high- efficiency farming and promote economic development in the countryside； and
（5） projects that can help accelerate the social and economic development in areas inhabited by minority nationalities and outlying and poverty-stricken areas.

    Article 7 The State, by adopting appropriate policies and measures, promotes and encourages the use of advanced technology, techniques and equipment and continued improvement, restricted use and elimination of backward technology, techniques and equipment.

    Article 8 When making arrangements for transformation of major scientific and technological achievements, the people's governments at various levels may have relevant departments to arrange for the transformation through public bidding. These departments shall provide the successful tender with the funds and other conditions that they decided to offer when making the bidding.

    Article 9 Holders of scientific and technological achievements may have their achievements transformed in the following ways：
（1） investing in the transformation themselves；
（2） transferring their achievements to another；
（3） allowing another to use their achievements；
（4） working together with another for the transformation with their achievements as the conditions for cooperation；
（5） investing with their achievements as trade-in, as converted shares or as proportions of contribution to the investment.

    Article 10 An enterprise may, for the purpose of adopting new technology, new techniques and new materials and manufacturing new products, publish information on its own or entrust an intermediate institution engaged in trade of technology to solicit the scientific and technological achievements that it needs or to find collaborators for the transformation of scientific and technological achievements.

    Article 11 An enterprise shall, according to law, have the right to conduct transformation of scientific and technological achievements independently or jointly with domestic or foreign enterprises or institutions or other collaborators.
    An enterprise may, through fair competition, undertake the projects, arranged by the government, for scientific and technological research and development or for the transformation of scientific and technological achievements independently or jointly with another.

    Article 12 The State encourages research and development institutions, colleges and universities and other institutions to join efforts with manufacturers for the transformation of scientific and technological achievements.
    Research and development institutions, colleges and universities and other institutions may participate in the bidding or tendering conducted by relevant departments of the government or enterprises for transformation of scientific and technological achievements.

    Article 13 The State encourages agricultural research institutions and agricultural experiment and demonstration stations to transform scientific and technological achievements independently or in cooperation with another.
    Agricultural research institutions may, for the purpose of advancing the transformation of their scientific and technological achievements and in accordance with law, deal in the fine strains which they breed through their own research or in cooperation with another and which are approved after examination.

    Article 14 With regard to scientific and technological achievements worth applying that are made by persons while holding positions in the research and development institutions set up by the State or in colleges and universities, if the units concerned fail to make timely transformation of the achievements, the persons who made the achievements and the participants may, on condition that ownership of the achievements remains unchanged and in accordance with the agreement they reached with the units they belong to, transform the achievements, and they shall enjoy the rights and interests as stipulated in the agreement. And the units concerned should assist in the transformation of the scientific and technological achievements mentioned above.
    Persons who made the scientific and technological achievements or leading members of a research project may not obstruct transformation of the scientific and technological achievements they made while holding positions in the units or take into their own possession such achievements or thus encroach upon the lawful rights and interests of the units they belong to.

    Article 15 Units that made scientific and technological achievements, units that conduct transformation of the achievements and units that invest in such transformation shall sign a contract if they intend to cooperate in the follow-up tests, development and application of the achievements as well as their putting into production and operation, in which to stipulate the rights to be enjoyed and the risks to be borne by each party.

    Article 16 In testing and evaluating scientific and technological achievements in the course of their transformation, the principles of impartiality and objectiveness shall be adhered to； it is not allowed to provide false testing results or evaluation certificates.
    When research and development institutions that are set up by the State, colleges and universities or State-owned enterprises work together with enterprises, other organizations or individuals from outside China in transforming scientific and technological achievements, they must evaluate the achievements in accordance with relevant regulations of the State.
    Where State secrets are involved in transforming scientific and technological achievements with the cooperation of other countries, prior approval must be obtained through the procedures stipulated by law.

    Article 17 In places or agencies set up according to law for the exchange of technology, the following activities to promote transformation of scientific and technological achievements may be conducted：
（1） introducing or recommending scientific and technological achievements that are advanced, matured and applicable；
（2） providing economic, technological, environmental and other information needed for transformation of scientific and technological achievements；
（3） trading in technologies； and
（4） providing other advisory services for transformation of scientific and technological achievements.

    Article 18 Intermediate institutions acting as agent or intermediaries or providing other paid services in the exchange of technologies must obtain business licenses as required by relevant State regulations. Brokers of these institutions must have qualification certificates as required by relevant State regulations.

    Article 19 The State encourages enterprises and institutions and economic cooperative organizations engaged in scientific and technological activities in the countryside to conduct intermediate and industrial experiments, agricultural experiments and demonstrations and other technological innovations and to provide technical services.
    The following activities may be engaged in the bases for conducting intermediate and industrial experiments, agricultural experiments and demonstrations for the purpose of transforming scientific and technological achievements and in other institutions that are engaged in technical innovations or provide technical services：
（1） conducting intermediate and industrial experiments with regard to new products and new techniques；
（2） engaging in ancillary development and technical innovation for the systematization and engineering of scientific and technological achievements in different areas or trades to serve the community；
（3） providing technology or technical services to small and mediumsized enterprises, township enterprises, and economic cooperative organizations engaged in scientific and technological activities in the countryside； and
（4） providing all-round services in support of transforming high- technology achievements and establishing enterprises for the transformation.
    Capital construction of the bases and institutions mentioned in the preceding paragraph shall have to be approved by the relevant department under the State Council and the people's governments of provinces, autonomous regions and municipalities directly under the Central Government and shall be included in the relevant plans of the State or the local authorities.

    Article 20 Trial products from the transformation of scientific and technological achievements may be provided for test marketing within the verified period for trial sale, in accordance with State regulations governing products for trial sale and after approval by the relevant department. Trial manufacturing and test marketing of the products mentioned above shall meet the technical, quality, safety, health and other standards prescribed by the State.

    Article 21 Of the funds the government allocates to scientific and technological undertakings, to investment in fixed assets and to technological updating, a certain proportion shall be used for transforming scientific and technological achievements.
    This proportion of government funds shall be chiefly used as initiation funds, discount loans, subsidy funds, risk investment and other funds for promoting transformation of scientific and technological achievements.

    Article 22 The State adopts a preferential tax policy regarding transformation of scientific and technological achievements. Specific measures shall be formulated by the State Council.

    Article 23 State banking institutions shall support transformation of scientific and technological achievements in matters of loans and gradually increase the amount of loans extended for such transformation.

    Article 24 The State encourages establishment of funds or risk funds for transformation of scientific and technological achievements, such funds shall be raised by the State, local authorities, enterprises, institutions and other organizations and individuals and shall be used to aid transformation of such scientific and technological achievements as need substantial investment, involve considerable risks and promise high yields and to accelerate the application of major scientific and technological achievements in industrial production.
    Funds and risk funds for transformation of scientific and technological achievements shall be established and used in accordance with relevant regulations of the State.

    Article 25 The State promotes the establishment and expansion of scientific and technological information networks and the establishment of a data bank of scientific and technological achievements, both of which shall provide information services regarding such achievements throughout the country.

    CHAPTER IV Technological Rights And Interests

    Article 26 When a unit that made scientific and technological achievements and another unit join efforts to transform the achievements, the ownership of rights and interests related to the achievements shall be stipulated in a contract in accordance with law. What is not stipulated in the contract shall be handled according to the following principles：
（1） Where no invention or creation ensures from transformation of a scientific or technological achievement, the rights and interests related to the scientific or technological achievement shall belong to the unit that made the achievement；
（2） Where inventions or creations ensue from collaborated transformation of a scientific or technological achievement, the rights and interests related to the inventions or creations shall belong to both parties in collaboration； and
（3） As to the scientific and technological achievements made through collaborated transformation, both parties shall have the right to put into practice the achievements thus made； consent shall have to be obtained from both parties in collaboration for transfer of the said achievements.

    Article 27 When a unit, that made scientific and technological achievements, and another unit collaborate to transform the achievements, both parties shall reach an agreement on protection of the technical know-how； the parties may not, running counter to the agreement or the request of the obligee for keeping the technical know-how, disclose or let another use the technical know-how.
    Agencies of technological exchange and intermediate institutions shall be obligated to keep secret the technical know-how of the parties concerned, which they come to know while serving as an agent or an intermediary.

    Article 28 Enterprises and institutions shall establish a system for protection of the technical know-how and keep improving it, in order to guard the technical know-how of their own. Employees shall adhere to the system of their own units for protection of the technical know-how.
    Enterprises and institutions may sign an agreement on protection of their technical know-how with the employees who participate in the transformation of scientific and technological achievements during the period when they remain in employment or within a specified period of time after they leave office or retire； the said employees may not, in violation of what is agreed on, disclose the technical know-how of their own units or engage in transforming the same scientific or technological achievement as that of their own units.
    No employees may transfer, without authorization, the scientific or technological achievements they made while holding positions in their units or do so in disguised form.

    Article 29 When transferring a scientific or technological achievement made by employees while holding positions in a unit, the unit shall take not less than 20 percent of the net income, obtained from transfer of the achievement, to award persons who made important contributions to the scientific or technological achievement or to its transformation.

    Article 30 If a scientific or technological achievement, that is made through the independent research and development of an enterprise or institution or through research and development of the enterprise or institution with the collaboration of another unit, is transformed successfully and is adopted in production, the unit or units shall take, for three to five years running, not less than five percent of the added profits from adoption of the achievement, that they are entitled to retain, to award persons who made important contributions to the scientific or technological achievement or to its transformation.
    In respect of the remunerations or rewards given to persons who made important contributions to research and development of scientific and technological achievements or their transformation, joint stock enterprises may convert them into shares or proportions of contribution to investment in accordance with relevant regulations of the State. The persons, as shareholders, shall draw proceeds on the strength of the shares they hold or their proportions of contribution to investment.

    Article 31 Anyone who, in violation of the provisions of this Law, resorts to deception in transformation of scientific or technological achievements and thus gets an award or honorary title, fraudulent money or illegal profits, shall be ordered to put it right, the award and honorary title shall be annulled, the illegal gains confiscated, and a fine also imposed on him.
    If he causes economic losses to another, he shall bear civil liability for compensation in accordance with law. If a crime is constituted, criminal responsibility shall be investigated according to law.

    Article 32 Anyone who, in violation of the provisions of this Law, deliberately provides a false testing result or evaluation certificate after testing or evaluating a scientific or technological achievement shall be ordered to put it right and given a disciplinary warning, his illegal gains shall be confiscated, and the institution that arranged for the testing and the evaluation institution shall each be imposed with a fine. If the cases is serious, the business license and qualification certificate shall be revoked. If economic losses are caused to another, civil liability for compensation shall be borne in accordance with law.

    Article 33 Employees of administrative departments for science and technology and other relevant departments of the people's governments at various levels who neglect their duties or practise irregularities for personal gain shall be given administrative sanctions； if the case constitutes a crime, criminal responsibility shall be investigated in accordance with law.

    Article 34 Whoever, in violation of the provisions of this Law, usurps another's scientific or technological achievement by means of instigation, luring or coercion and thus encroaches upon the rights and interests of that person shall bear civil liability for compensation in accordance with law and may be imposed with a fine. If the case constitutes a crime, criminal responsibility shall be investigated in accordance with law.

    Article 35 If, in violation of the provisions of this Law, an employee who, without permission of his unit, discloses the technical know-how of the unit or, without authorization, transfers or does so in disguised form the scientific or technological achievement made while holding a position in the unit, or if a person who took part in the transformation of a scientific or technological achievement, running counter to the agreement reached with his unit, engages in transforming the same scientific or technological achievement as that of his unit during the agreed period of time after leaving office or retiring shall bear legal responsibility in accordance with relevant regulations.

    Article 36 If in the exchange of technologies the intermediate institution that serves as an agent or provides intermediary services or the broker deceives the client or colludes with one party to deceive another party, it or he shall be ordered to put it right, given a disciplinary warning and, in addition to bearing civil liability for compensation in accordance with law, the illegal gains shall be confiscated and a fine imposed. If the case is serious, the business license and qualification certificate shall be revoked in accordance with law. If the case constitutes a crime, criminal responsibility shall be investigated in accordance with law.

    Article 37 This Law shall be put into force as of October 1,1996.

(Promulgated by Order No. 489 of the State Council of the People’s Republic of China on March 6, 2007; according to the Decision of the State Council on Amending the Regulation on the Administration of Futures Trading on October 24, 2012 and promulgate by Order No.627 of the State Council)

　 Chapter I General Provisions

　 Article 1 This Regulation is formulated for the purposes of regulating futures trading, intensifying the supervision and administration over futures trading, maintaining the futures market order, preventing risks, protecting the legitimate rights and interests of all parties to futures trading as well as the public interests, and promoting the vigorous but stable development of the futures market.

　 Article 2 All entities and individuals engaging in futures trading and relevant activities shall comply with this Regulation.
For the purposes of this Regulation, “futures trading” means trading activities with futures contracts or option contracts as the subject matter of trading conducted in the manner of centralized public trading or any other manner approved by the futures regulatory authority of the State Council.
For the purposes of this Regulation, “futures contract” means a standard contract uniformly prepared by a futures trading place under which a certain quantity of the subject matter shall be delivered on a given future date at a specified location. Futures contracts include commodity futures contracts, financial futures contracts and other futures contracts.
For the purposes of this Regulation, “option contract” means a standard contract uniformly prepared by a futures trading place under which the buyer is entitled to buy or sell the subject matter (including a futures contract) at a specific price on a given future date.

　 Article 3 The principle of openness, fairness, impartiality and good faith shall be observed in the futures trading activities. It is prohibited to conduct violations such as fraud, inside transactions and manipulated futures trading prices.

　 Article 4 Futures trading shall be conducted in a futures trading place established in accordance with paragraph 1 of Article 6 of this Regulation or in any other futures trading place approved by the State Council or the futures regulatory authority of the State Council.
No futures trading may be conducted outside of the futures trading places prescribed in the preceding paragraph.

　 Article 5 The futures regulatory institution of the State Council shall supervise and administer the futures markets in a centralized manner.
The offices dispatched by the futures regulatory institution of the State Council shall perform their supervisory functions according to the relevant provisions of this Regulation and under the authorization of the futures regulatory institution of the State Council.

　 Chapter II Futures Exchange

　 Article 6 The establishment of a futures exchange shall be subject to the examination and approval of the futures regulatory institution of the State Council.
Without the approval of the State Council or the futures regulatory authority of the State Council, no entity or individual may establish any futures trading place or organize futures trading and relevant activities in any form.

　 Article 7 A futures exchange shall not take profit-making as its purpose. It shall conduct self-disciplinary management according to its Articles of association. It shall bear civil liabilities to the extent of all of its properties. Its person-in-charge shall be appointed and dismissed by the futures regulatory institution of the State Council.
The administrative measures for futures exchanges shall be formulated by the futures regulatory institution of the State Council.

　 Article 8 The members of a futures exchange shall be enterprises with legal person status or other economic organizations established and registered within the territory of the People’s Republic of China.
A futures exchange may adopt a graded member clearing system. The members under the graded member clearing system comprise of clearing members and non-clearing members.

　 Article 9 Anyone who is under any of the circumstances as described in Article 147 of the Company Law of the People’s Republic of China or under any of the following circumstances shall not assume the post of the person-in-charge or accountant of the futures exchange:
(1)Five years have not lapsed from the day when the person-in-charge of a futures exchange, stock exchange or securities register & clearing institution, or the director, supervisor or senior manager of a futures company or securities company, or any other person as prescribed by the futures regulatory institution, is removed from his post because of his violation of disciplines; or
(2) Five years have not lapsed from the day when a lawyer, certified public accountant, or professional of an investment consultation institution, financial consultancy institution, credit rating institution, asset appraisal institution or verification institution, is removed from post because of his violation of disciplines.

　 Article 10 A futures exchange shall, in pursuance of this Regulation and the provisions of the futures regulatory institution of the State Council, formulate and improve various rules and strengthen the control of risks of trading activities as well as the supervision and administration over its members and staff. It shall perform the following duties:
(1)To provide a trading place and relevant facilities and services;
(2)To design contracts and arrange the listing of contracts;
(3)To organize and supervise the transactions, clearing and delivery;
(4)To provide centralized performance guarantee for futures trading;
(5)To supervise and administer its members according to its Articles of association and trading rules; and
(6)Other duties as prescribed by the futures regulatory institution of the State Council.
No futures exchange may directly or indirectly participate in futures transactions. No futures exchange may, without passing the examination of the futures regulatory institution of the State Council and being approved by the State Council, make trust investments, stock investments, investments in non-self-use real property or engage in any other business irrelevant to its duties.

　 Article 11 A futures exchange shall, under the relevant provisions of the State, establish sound systems for the management of risks:
(1)The margin system;
(2)The mark-to-market system;
(3)The system of price limits;
(4)The system of position limits as well as reports of big position holders;
(5)The rules on the reserve for risks;
(6)Other risk management systems as prescribed by the futures regulatory institution of the State Council.
A futures exchange which adopts the graded member clearing system shall establish a sound system of security.

　 Article 12 At the occurrence of any abnormal circumstance in the futures market, the futures exchange shall, according to the power and procedures as prescribed in its Articles of association, decide to take the following urgent measures and shall immediately report it to the futures regulatory institution of the State Council:
(1)To uplift the margin;
(2)To adjust the price limits;
(3)To limit the maximum amount of futures held by its members or clients;
(4)To suspend the transactions;
(5)To take other urgent measures.
The term “abnormal circumstance” as mentioned in the preceding paragraph refers to the acts of manipulating the futures trading prices or the occurrence of emergencies due for any force majeure and other circumstances as prescribed by the futures regulatory institution of the State Council.
After the disappearance of an abnormal circumstance, the futures exchange shall timely cancel the urgent measures.

　 Article 13 To handle the following affairs, a futures exchange shall be subject to the approval of the futures regulatory institution of the State Council:
(1)The formulation of or modification to its Articles of association or trading rules;
(2)The listing, suspension, cancellation or resumption of any type of transaction;
(3)The listing, modification or termination of any contract;
(4)The change of its domicile or business place;
(5)The merger, split-up or dissolution;
(6)Other affairs as prescribed by the futures regulatory institution of the State Council.
To approve the listing of new transaction type in a futures exchange, the futures regulatory institution of the State Council shall consult the opinions of the relevant department of the State Council

　 Article 14 The revenues of a futures exchange shall be managed and used in accordance with the relevant provisions of the state, but shall first be utilized to ensure the operation and improvement of the futures exchange and the facilities thereof.

　 Chapter III Futures Companies

　 Article 15 A futures company refers to a financial institution which is established according to the Company Law of the People’s Republic of China and this Regulation and which engages in the business of futures. The establishment of a futures company shall be subject to the approval of the futures regulatory institution of the State Council and shall be registered in the company registration organ.
Without approval of the futures regulatory institution of the State Council, no entity or individual may establish any futures company to engage in the business of futures, or do so in any disguised form.

　 Article 16 To apply for establishing a futures company, the applicant shall satisfy the requirements in the Company Law of the People’s Republic of China and the following conditions:
(1)Its minimum registered capital shall be 30 million yuan;
(2)Its directors, supervisors and senior managers have obtained the qualifications for assuming their posts and its employees have obtained the futures practicing qualifications;
(3)It has its Articles of association which conform to the laws and administrative regulations;
(4)Its main shareholders and actual controllers have a sustainable profit-making capacity and a good reputation, and none of them has any record of serious violation during the recent 3 years;
(5)It has a qualified business place and operation facilities;
(6)It has sound risk management and internal control systems;
(7)Other conditions as prescribed by the futures regulatory institution of the State Council.
The futures regulatory institution of the State Council may, according to the principle of prudent supervision and the degree of risks of various businesses, increase the minimum amount of the registered capital. The registered capital shall be actually paid-in capital. The shareholders shall make capital contributions in cash or in kind essential to the business operations of a futures company and the capital contributions in cash shall not be less than 85% of the total.
The futures regulatory institution of the State Council shall, within 6 months after it accepts an application for the establishment of a futures company, examine it according to the principle of prudent supervision, and make a decision of approval or disapproval.
Without approval of the futures regulatory institution of the State Council, no entity or individual may entrust any other person or accept any other person’s entrustment to hold or manage the stock rights of any futures company.

　 Article 17 A futures company shall be subject to the licensing system. The futures regulatory institution of the State Council shall grant it a permit according to the business type such as commodity futures and financial futures. Besides the domestic futures brokerage, a futures company may apply for engaging in overseas futures brokerage, futures investment consultation and other futures businesses as prescribed by the futures regulatory institution of the State Council.
No futures company may engage in any activity which has nothing to do with the business of futures, unless it is otherwise provided for by any law, administrative regulation, or by the futures regulatory institution of the State Council.
No futures company may engage in any self-operation business of futures or do so in any disguised form.
No futures company may provide financing service to its shareholders, actual controllers or other affiliated parties, or provide guaranty to outsiders.

　 Article 18 For a futures company engaging in brokerage business, if it accepts the entrustment of any client and conducts, in its own name, any futures transaction for its client, the transaction results shall belong to the client.

　 Article 19 Where a futures company intends to handle the following affairs, it shall be subject to the approval of the futures regulatory institution of the State Council:
(1)The merger, split-up, suspension of business, dissolution or bankruptcy;
(2) The change of its business scope;
(3) The modification of registered capital and adjustment of equity structure;
(4)The addition of a shareholder holding 5% or more of equity or modification of the controlling shareholder;
(5)The establishment, acquisition, taking shares, or termination of any overseas futures institution; or
(6) Other affairs as prescribed by the futures regulatory institution of the State Council.
The affairs as mentioned in Items (3) and (6) of the preceding paragraph, the futures regulatory institution of the State Council shall, within 20 days after it accepts an application, make a decision of approval or disapproval. For other affairs as described in the preceding paragraph, the futures regulatory institution of the State Council shall, within 2 months after it accepts an application, make a decision of approval or disapproval.

　 Article 20 Where a futures company intends to handle any of the following affairs, it shall be subject to the approval of the office dispatched by the futures regulatory institution of the State Council:
(1)To change its legal representative;
(2)To change its domicile or business place;
(3)To establish or terminates branch within China;
(4)To modify the business scope of a domestic branch office; or
(5)Other affairs as prescribed by the futures regulatory institution of the State Council.
The affairs as mentioned in Items (1), (2), (4) and (5) of the preceding paragraph, the office dispatched by the futures regulatory institution of the State Council shall, within 20 days after it accepts an application, make a decision of approval or disapproval. For the affairs as described Item (3) in the preceding paragraph, the office dispatched by the futures regulatory institution of the State Council shall, within 2 months after it accepts an application, make a decision of approval or disapproval.

　 Article 21 Where a futures company or any of its branches is under any of the circumstances as described in Article 70 of the Administrative License Law of the People’s Republic of China or under any of the following circumstances, the futures regulatory institution of the State Council shall cancel its futures business permit:
(1)Its business license is cancelled by the company registration organ;
(2)Without any justifiable reason, it fails to start business operations after the lapse of 3 months as of its establishment or suspends its business operations for 3 consecutive months or longer;
(3)Its files a cancellation application on its own initiative; and
(4)Other circumstances as prescribed by the futures regulatory institution of the State Council.
Before a futures company cancels its futures business permit, it shall settle the relevant futures businesses and return the margin and other assets to its clients in pursuance of the law. Any branch of the futures company shall, prior to the cancellation of the business permit, terminate its business activities and shall properly settle the clients’ assets.

　 Article 22 A futures company shall formulate sound business management rules and risk management rules and strictly implement them. It shall abide by the information disclosure rules, ensure the safe custody of the clients’ margin, and under the provisions of the futures exchange, report to the futures exchange the name list of its big clients and the relevant transactions.

　 Article 23 Other futures trading institutions engaging in the futures investment consulting business shall hold a business qualification granted by the futures regulatory authority of the State Council, and the specific administrative measures shall be developed by the futures regulatory authority of the State Council.

　 Chapter IV Basic Rules on Futures Trading

　 Article 24 The parties conducting futures trading in a futures exchange shall be members of the futures exchange.
Overseas institutions meeting the prescribed conditions may engage in specific types of futures trading on futures exchanges. The specific measures shall be developed by the futures regulatory authority of the State Council.

　 Article 25 A futures company which accepts a client’s entrustment to trade futures on his account shall provide the client in advance with a risk disclosure statement, and after the client has confirmed this with his signature, it shall sign a written contract with the client. No futures company may conduct futures trading without client’s entrustment or without following the client’s entrustment.
No futures company may make any promise of profits to its clients or agree on sharing profits or risks with its clients.

　 Article 26 The following entities and individuals shall not engage in futures trading. No futures company may accept their entrustment to trade futures on their account:
(1)The state organs and public institutions;
(2)The futures regulatory institution of the State Council, the futures exchanges, the institution monitoring the safe custody of futures margin, as well as the personnel of the associations of the futures industry;
(3) The persons prohibited to enter into the futures market;
(4)The entities and individuals offer documents certifying that they have opened an account; and
(5)Other entities and individuals not allowed to trade futures as prescribed by futures regulatory institution of the State Council.

　 Article 27 A client may give trading instructions to the futures company in writing, by telephone, through the internet or other methods as prescribed by the futures regulatory institution of the State Council. The client’s trading instructions shall be clear and complete.
No futures company may induce any client to give trading instructions by concealing any important event or by any other improper means.

　 Article 28 A futures exchange shall timely announce the details concerning the futures contracts of the marketed varieties, including the trading volume, trading price, volume of positions held, the highest and lowest prices, opening and closing prices, and other real time market information which should be announced, and ensure that the information announced is truthful and accurate. No futures exchange may release any information on price forecasts.
Without permission of the futures exchange, no entity or individual may release the real time market information about futures trading.

　 Article 29 The margin system shall be strictly observed in the futures trading. The margin, which a futures company collects from its clients, shall not be lower than the rates as prescribed by the futures regulatory institution of the State Council, or by the stock exchange, and shall be separated from the futures company’s own money and be deposited in a special account.
The margin, which a futures company collects from its clients, belongs to the clients. Such margin shall be strictly prohibited from being used for any other purpose except for the settlement among its members.
The margin, which a futures company collects from its clients, belongs to the clients. Such margin shall be strictly prohibited from being used for any other purpose except for the following transferable circumstances:
(1)To pay the money available at the request of the clients;
(2)To deposit the margin or pay commissions or taxes on the clients’ account; and
(3)Other circumstances as prescribed by the futures regulatory institution of the State Council.

　 Article 30 A futures company shall open a separate account and set up a separate trading code for each of its clients and may not mix up the codes in its futures trading.

　 Article 31 For a futures company engaging in the futures brokerage business and other futures businesses, it shall strictly follow the principle of separation of business and separation of funds, and shall not mix them up.

　 Article 32 The clearing members of a futures exchange, futures company or non-futures company shall, in accordance with the provisions of the futures regulatory institution of the State Council and of the finance department, prepare, manage and use the risk reserve, shall not misappropriate it.
　 Article 33 The items of, rates and administrative measures for service fees shall be uniformly formulated and announced by the relevant administrative department of the State Council.

　 Article 34 The settlement of futures trading shall be uniformly organized by the futures exchange.
The futures exchange shall adopt the mark-to-market system. It shall timely inform its members of the trading results on the current day.
A futures company shall settle its transactions according to the settlement result of the futures exchange and shall timely inform the client of the settlement result in a form as agreed to between it and the client. The client shall timely consult and properly deal with his trading positions.

　 Article 35 If the margin of a member of a futures exchange is not sufficient, such member shall timely replenish the margin or close his positions on his own initiative. If the said member fails to do so within the time limit as prescribed by the futures exchange, the futures exchange shall forcibly close his futures contract, and the relevant expenses or losses so incurred shall be borne by the member.
If the margin of a client of a futures exchange is not sufficient, such client shall timely replenish the margin or close his positions on his own initiative. If the said member fails to do so within the time limit as prescribed by the futures exchange, the futures exchange shall forcibly close his futures contract, and the relevant expenses or losses so incurred shall be borne by the client.

　 Article 36 The delivery in futures trading shall be uniformly organized by the futures exchange.
The delivery warehouse shall be designated by a futures exchange. The futures exchange shall sign an agreement with the delivery warehouse to specify their respective rights and obligations. The delivery warehouse shall not:
(1) issue any false warehouse receipt;
(2) violate the business rules of the futures exchange by imposing restrictions on the goods to enter or leave the delivery warehouse;
(3) divulge any business secret relating to the futures trading;
(4) violate the relevant provisions of the state by participating in the futures trading; or
(5) conduct any other acts as prescribed by the futures regulatory institution of the State Council.

　 Article 37 Where any member breaches the contract in futures trading, the futures exchange shall first use the member’s margin to bear the liability for breach contract. If the margin is not enough, the futures exchange shall use its risk reserve and its own funds to bear the liabilities on that member’s account, and be entitled to claim repayment afterwards against the member in question.
Where a client breaches a contract in futures trading, the futures exchange shall first use the client’s margin to bear the liability for breach of contract. If the margin is not enough, the futures exchange shall use its risk reserve and its own funds to bear the liabilities on that client’s account, and be entitled to claim repayment afterwards against the client in question.

　 Article 38 A futures exchange which adopts a graded member clearing system shall collect a sum of security from each of its clearing members. It merely makes settlement with the clearing members, collect security money and supplemental security money, and bear the liabilities for breach of contract on the clearing members’ account with the clearing security money, risk reserve and its own fund, and take other relevant measures. The clearing members shall make settlement with the non-clearing members, collect security money and supplemental security money, and bear the liabilities for breach of contract on the non-clearing members’ account with the clearing security money, risk reserve and their own fund, and take other relevant measures.

　 Article 39 The clearing members of a futures exchange or future company or non-futures company shall ensure the completeness and safety of the futures trading, settlement and delivery materials.

　 Article 40 No entity or individual may make up or spread any false information about futures trading, or manipulate the futures trading prices by malicious collusion, joint trading or by other means.

　 Article 41 No entity or individual may use any credit fund or treasury fund to conduct futures trading.
The qualifications of a banking financial institution to engage in the financing or guaranty business relating to futures trading shall be subject to the approval of the banking regulatory institution of the State Council.

　 Article 42 To conduct futures trading at home and abroad, the state-owned or state controlled enterprises shall follow the hedging principle and strictly abide by the relevant provisions of the state-owned asset supervision and administration institution of the State Council and other relevant departments on enterprises’ entering the futures market with state-owned assets.

　 Article 43 The commerce administrative department of the State Council shall examine and verify the varieties of overseas commodity futures which may be traded by the domestic entities or individuals.
The purchase, settlement, incomes and expenses of foreign exchange under the overseas futures shall conform to the relevant provisions of the state on the administration of foreign exchange.
The measures for domestic entities or individuals to conduct overseas futures trading shall be formulated by futures regulatory institution of the State Council jointly with the commerce administrative department, state-owned asset supervision and administration institution, banking regulatory institution, foreign exchange administrative department and other relevant departments of the State Council, and shall be implemented upon approval of the State Council.

　 Chapter V Associations of the Futures Industry

　 Article 44 An association of the futures industry shall be a self-disciplinary organization of the futures industry. It is a social organization with the legal person status.
The futures companies and other institutions specially engaging in futures business operations shall join an association of the futures industry and pay the membership fee.

　 Article 45 The organ of power of an association of the futures industry shall be the general assembly of its members.
The Articles of association of the association of the futures industry shall be worked out by the general assembly of members and shall be submitted to the futures regulatory institution of the State Council for archival purposes.
The association of futures industry shall set up a council. The members of the council shall be elected under the Articles of association.

　 Article 46 The association of the futures industry shall perform the following duties:
(1)To organize the members and educate them to abide by the laws, regulations and policies on futures;
(2)To work out industrial self-disciplinary rules which shall be followed by the members, to supervise and inspect the members’ acts, and give a disciplinary sanction to any member who violates the Articles of association or self-disciplinary rules of the association;
(3)To be responsible for the recognition, management and revocation of the qualifications of the practitioners;
(4)To accept the clients’ complaints relating to the futures business, and to mediate the disputes between the members and between the members and clients;
(5)To protect the legitimate rights and interests of the members, and to report to the futures regulatory institution of the State Council the suggestions and demands of the members;
(6)To organize the vocational training for the practitioners and carrying out vocational exchanges between its members;
(7)To organize its members to do research on the development and operation of the futures industry; and
(8)Other duties as prescribed in the Articles of association of the futures industry.
The activities of the association of the futures industry shall be subject to the guidance and supervision of the futures regulatory institution of the State Council.

　 Chapter VI Supervision and Administration

　 Article 47 The futures regulatory institution of the State Council shall exercise supervision and administration on the futures market. It shall perform the following duties:
(1)To formulate rules and regulations on the supervision and administration of the futures market and to exercise the power of examination and approval;
(2)To supervise and administer the listing of the varieties of futures, the trading, settlement, delivery and other relevant activities relating to the futures trading;
(3)To supervise and administer the futures business activities conducted by the futures exchanges, futures companies and other futures institutions, clearing members of non-futures companies, institution monitoring the safe custody of futures margin, custodian bank of the futures margin, delivery warehouses and other market participants;
(4)To formulate the qualification standards and administrative measures for the futures practitioners, and to exercise supervision;
(5)To supervise the publicity of information about supervision and inspection on futures trading;
(6)To guide and supervise the activities of associations of the futures industry;
(7)To punish any violation of law or administrative regarding the supervision and administration of futures market;
(8)To carry out international communication and cooperation activities relating to the supervision and administration of the futures market; and
(9)Other duties as prescribed by the laws and administrative regulations.

　 Article 48 The futures regulatory institution of the State Council may take the following measures when performing its duties:
(1)To conduct on-the-spot inspections on the futures exchanges, futures companies and other futures institutions, clearing members of non-futures companies, institution monitoring the safe custody of futures margin, custodian bank of the futures margin and delivery warehouses;
(2)To make investigation and collect evidence in a place where a suspected violation has occurred;
(3)To question the parties concerned or any entity or individual relating to a case under investigation and requiring the relevant entity or person to give explanations on the matters relating to a case under investigation;
(4)To consult and copy such materials as the register of property right relating to the case under investigation;
(5)To consult and copy the futures trading records, financial materials and other relevant documents and materials of the parties concerned and other entities and individuals relating to the case under investigation, and to seal up the documents and material that may be transferred, concealed or damaged;
(6)To consult the margin account and bank account of the relevant entities relating to the case under investigation;
(7) When investigating into any serious violation such as manipulation of the futures trading price or insider trading, it may, upon the approval of the person-in-charge of the futures trading regulatory institution of the State Council, restrict the futures trading of the parties concerned in a case under investigation, whereby the restriction term shall not exceed 15 trading days. Under any complicated circumstance, the term of restriction may be extended for another 30 trading days; and
(8)Other measures as prescribed by the laws and administrative regulations.

　 Article 49 The futures exchanges, futures companies, other futures institutions, as well as institution monitoring the safe custody of futures margin shall submit to the futures regulatory institution of the State Council their financial statements, operation materials and other relevant materials.
With regard to the annual reports submitted by the futures companies and by other futures institutions, the futures regulatory institution of the State Council shall designate special persons to examine them and work out examination reports. The examiners shall affix their signatures to the examination reports. Where any problem is found in the examination, the futures regulatory institution of the State Council shall take corresponding measures.
Where necessary, the futures regulatory institution of the State Council may require the clearing members of non-futures companies, delivery warehouses, as well as the shareholders, actual controllers or other affiliated parties of futures companies to submit relevant materials.

　 Article 50 The futures regulatory institution of the State Council performs its duties such as carrying out supervision and inspection or making an investigation, the entities and individuals under inspection or investigation shall cooperate with it, faithfully provide relevant documents and materials, shall not refuse to do so, hamper the inspection or investigation or conceal any relevant information. Other relevant departments and entities shall support and cooperate with it.

　 Article 51 The state shall set up a futures investor guarantee fund geared to the development of the futures market.
The concrete measures for the raising, management and use of the futures investment fund shall be formulated by the futures regulatory institution of the State Council jointly with the finance department of the State Council.

　 Article 52 The futures regulatory institution of the State Council shall establish a sound system for the monitoring of the safe custody of margins and set up an institution to monitor the safe custody of margins.
The clients and the futures exchange, futures companies and other futures institutions, clearing members of non-futures companies as well as the custodian banks of futures margins shall observe the provisions of the futures regulatory institution of the State Council on the monitoring of the safe custody of margins.

　 Article 53 The institution monitoring the safe custody of futures margins shall, in accordance with the relevant provisions, monitor the safety of the margins, check it everyday and immediately report to the futures regulatory institution of the State Council the problems it finds, if any. The futures regulatory institution of the State Council shall, in light of different circumstances, timely tackle such problems under the relevant provisions of this Regulation.

　 Article 54 The futures regulatory institution of the State Council shall adopt a qualification administration system for the directors, supervisors, senior managers and other futures practitioners of futures exchanges, futures companies, other futures institutions, as well as of institutions monitoring the safe custody of futures margin.

　 Article 55 A futures regulatory institution of the State Council shall formulate rules on the sustainable business operation of futures companies, which shall contain such risk supervision indicators as the ratio between the net capital and the net assets, the ratio between the net capital and the business scale of domestic and overseas futures brokerage businesses, as well as the ratio between the current assets and the current liabilities of a futures company, and specify the requirements for the business operation conditions, risk management, internal control, custody of margins, and affiliated transactions of the futures company and its branches.

　 Article 56 Where a futures company or any of its branches does not conform to the sustainable business operation rules or where any business operation risk occurs in a futures company or in any of its branches, the futures regulatory institution of the State Council may take such supervisory measures as arranging for an interview with or giving a warning to or keeping a credit record of the futures company and its directors, supervisors and senior managers, or order the futures company to make a correction within a time limit and check the rectification result.
If the futures company fails to make a correction and if its act severely endangers the stable and sound operation of the futures company and impairs the legitimate rights and interests of its clients, or if it is under investigation of the futures regulatory institution of the State Council because it is suspected of committing any serious violation, the futures regulatory institution of the State Council may, in light of different circumstances, take the following measures:
(1)To limit or suspend some of its futures businesses;
(2)To stop the approval of any new business or new branch;
(3)To restrict the distribution of bonuses, to restrict the payment of remunerations or provision of welfares to the directors, supervisors and senior managers;
(4)To limit the transfer of properties or setting any other right to his properties;
(5)To order the futures company to change its directors, supervisors, senior managers or the persons-in-charge of the relevant business departments or to limit their rights;
(6)To restrict the allocation, transfer and utilization of the futures company’s own fund or risk reserve; and
(7)To order the controlling shareholders to transfer their stock rights or to impose restrictions on the relevant shareholders’ exercise of the shareholders’ rights.
After the rectification, if the futures company conforms to the relevant laws, administrative regulations, as well as the requirements of the sustainable business operation rules, the futures regulatory institution of the State Council shall, within 3 days after the completion of a check, lift the relevant measures taken against the futures company.
If, after the rectification, the futures company still fails to satisfy the requirements of the sustainable business operation rules and if its normal business operation is severely affected, the futures regulatory institution of the State Council shall have the power to revoke the permit for some or all of its futures b, , , usinesses, or close down its branches.

　 Article 57 If the illegal business operation or serious risk of any futures company grossly disturbs the order of the futures market or impairs the clients’ interests, the futures regulatory institution of the State Council may take such supervisory measures as ordering it to stop its business for rectification or designating any other institution to manage or take it over. Upon approval of the futures regulatory institution of the State Council, the following measures may be taken against the directly liable directors, supervisors and senior managers, as well as other directly liable persons:
(1)To notify the exit administrative organ to prevent them from leaving China; and
(2)To request the judicial organ to prohibit him from moving, transferring his properties or disposing of his properties by any other means, or setting any other right to his properties.

　 Article 58 Where a shareholder of a futures company makes any fake capital contribution or spirits away the registered capital, the futures regulatory institution of the State Council shall order it to make a correction within a time limit and may order him to transfer the stock rights of the futures company it holds.
Before the shareholder as prescribed in the preceding paragraph herein corrects its violation and transfers the stock right of the futures company it holds according to the relevant requirements, the futures regulatory authority of the State Council may restrict the shareholders’ rights thereof.

　 Article 59 At the occurrence of any abnormity in the futures market, the futures regulatory institution of the State Council may take necessary risk measures.

　 Article 60 The trading software and clearing software of a futures company shall satisfy the requirements for the prudent business operation and risk management of the futures company as well as the relevant requirements of the futures regulatory institution of the State Council for the monitoring of safe custody of margins. If the trading software or clearing software does not meet the relevant requirements, the futures regulatory institution of the State Council shall have the power to require the futures company to improve it or replace it with another one.
The future regulatory institution of the State Council may require the supplier of the trading software or clearing software of the futures company to offer materials relevant to the software, the supplier shall be cooperative. The futures regulatory institution of the State Council has the obligation to keep confidential the pertinent materials provided by the supplier.

　 Article 61 Where a future company is involved in a major lawsuit or arbitration, or where the stock rights of a futures company are frozen or used as a collateral, or where any other major event occurs, the futures company and its relevant shareholders and actual controllers shall, within 5 days after the occurrence of the event, submit a written report to the futures regulatory institution of the State Council.

　 Article 62 When an accounting firm, law firm, asset appraisal institution or any other intermediary service institution provides relevant services to futures companies and other market participants, it shall abide by the laws, administrative regulations and other relevant provisions of the state on futures and shall provide pertinent materials as required by the futures regulatory institution of the State Council.

　 Article 63 The futures regulatory institution of the State Council shall, jointly with other relevant departments, establish a mechanism of information sharing, coordination and cooperation in terms of supervision and administration.
The futures regulatory institution of the State Council may, jointly with the futures regulatory authorities of other countries or regions, establish a regulatory cooperative mechanism to exercise transnational supervision and administration.

　 Article 64 Any of the personnel of the futures regulatory institution of the State Council, or of a futures exchange, institution monitoring the safe custody of futures margin or custodian bank of futures margins shall be duteous, impartial and clean, and handle matters according to law, and shall not take advantage of his post to seek improper benefits or divulge any commercial secret of the party concerned he has access to during his performance of duties.

　 Chapter VII Legal Liabilities

　 Article 65 Where a futures exchange or a clearing member of a non-futures company commits any of the following acts, it shall be ordered to make a correction, be given a warning, and its illegal gains shall be confiscated:
(1)Admitting any member in violation the relevant provisions;
(2) Charging commissions in violation of the relevant provisions;
(3) Using or distributing its proceeds in violation of relevant provisions;
(4) Failing to publish the real-time information as stipulated, or releasing any information of price forecast;
(5) Failing to fulfill its obligation to report to the futures regulatory institution of the State Council as required;
(6)Failing to submit relevant documents or materials to the futures regulatory institution of the State Council as required;
(7)Failing to establish a sound system of margin;
(8)Failing to prepare, manage or use risk reserves as required;
(9)Violating the provisions of the futures regulatory institution of the State Council on the monitoring of safe custody of margin;
(10)Imposing restrictions on the total volume of goods to be delivered by its members;
(11)Employing persons unqualified for the futures business; or
(12) Other acts in violation of the provisions of the futures regulatory institution of the State Council.
Where a futures exchange commits any of the acts as specified in the preceding paragraph, the directly liable person-in-charge and other directly liable persons shall be given a disciplinary sanction and shall be fined not less than 10, 000 yuan but not more than 100, 000 yuan.
Any futures exchange which commits the act described in Item (2) of the first paragraph in this Article shall be ordered to refund the overcharged commissions.
Where an institution monitoring the safe custody of futures margin commits any of the acts as described in Items (5), (6), (9), (11) and (12) of the second paragraph of this Article, it shall be punished and given a sanction in accordance with the provisions in the first and second paragraphs. If a custodian bank of futures margin commits any of the acts as mentioned in Item (9) and (12) of the first paragraph of this Article, it shall be punished and given a sanction in accordance with the provisions of the first and second paragraphs.

　 Article 66 Where a futures exchange commits any of the following conduct, it shall be ordered to make correction and warned, its illegal income shall be confiscated, and a fine of one up to five times the amount of illegal income shall be imposed on it; or if it has no illegal income or its illegal income is less than 100,000 yuan, it shall be fined100,000 yuan up to 500,000 yuan; and if the circumstances are serious, it shall be ordered to cease business operation for rectification:
(1) Handling any of the affairs set out in Article 13 of this Regulation without approval.
(2) Allowing a member to conduct futures trading without a sufficient margin.
(3) Directly or indirectly participating in future trading or, in violation of relevant provisions, engaging in any business irrelevant to its functions.
(4) Collecting margins in violation of relevant provisions or misappropriating margins.
(5) Forging, altering or failing to preserve as required the futures trading, settlement and delivery documents and data.
(6) Failing to establish or implement the mark-to-market clearing, price limit, position limit or reporting limit system.
(7) Rejecting or obstructing the supervisory inspection conducted by the future regulatory authority of the State Council.
(8) Committing any other conduct in violation of the provisions of the futures regulatory authority of the State Council.
Where a fixtures exchange or any clearing member of a non-futures company commits any of the acts specified in the preceding paragraph, the directly liable person-in-charge and other directly liable person shall be given a disciplinary sanction and fined not less than 10,000 yuan but not more than 100,000 yuan.
Where a non-futures-company clearing member commits any of the conduct set out in item (2), (4), (5), (6), (7) and (8), paragraph 1 of this Article, the member shall be punished or be subject to a disciplinary action under paragraphs 1 and 2 of this Article.

　 Article 67 Where a futures company commits any of the following acts, it shall be ordered to make a correction, be given a warning, have its illegal gains confiscated, and shall be fined not less than one time but not more than three times the illegal gains. If there are no illegal gains or if the amount of illegal gains is less than 100, 000 yuan, it shall be fined not less than 100, 000 yuan but not more than 300, 000 yuan. If the circumstance is serious, it shall be ordered to stop business for rectification or have its futures business permit revoked:
(1)Accepting the entrustment of any entity or individual who does meet the relevant conditions;
(2)Allowing any client to conduct futures trading when its margin is insufficient;
(3)Handling the matters as listed in Articles 19 and 20 of this Regulation without approval;
(4)Carrying out any activities which have nothing to do with the futures business;
(5)Engaging in self-operation business of futures or doing so in any disguised form;
(6)Providing financing service to its shareholders, actual controllers or other affiliated parties, or providing guaranties to outsiders;
(7)Violating the provisions of the futures regulatory institution of the State Council on the monitoring of the safe custody of margins;
(8)Failing to perform the obligation to report to or submit the relevant documents and materials to the futures regulatory institution of the State Council under the relevant provisions;
(9)Using any trading software or clearing software which does not satisfy the requirements for the prudent business operation and risk management of the futures company or the relevant requirements of the futures regulatory institution of the State Council for the monitoring of safe custody of margins;
(10)Failing to prepare, manage or use risk reserves as required;
(11) Falsifying or altering futures trading, settlement and clearing materials, or failing to preserve such materials in accordance with the relevant provisions;
(12)Employing persons unqualified for the futures business;
(13)Counterfeiting, altering, renting, lending, buying or selling any futures business permit or business license;
(14)Conducting any dealings by mixing up the codes;
(15)Rejecting or obstructing the supervision or inspection by the futures regulatory institution of the State Council; or
(16)Other acts in violation of the provisions of the futures regulatory institution of the State Council.
Where a fixtures company commits any of the acts as specified in the preceding paragraph, the directly liable person-in-charge and other directly liable persons shall be given a disciplinary sanction and be fined not less than 10, 000 yuan but not more than 50, 000 yuan. If the circumstance is serious, the qualifications for assuming the relevant posts and the futures practitioners’ qualifications shall be suspended or revoked.
Where a futures institution other than a futures company commits any of the acts as described in Items (8), (12), (13), (15) and (16) of the first paragraph, it shall be punished in accordance with the first and second paragraphs of this Article.
Where a shareholder, actual controller or any other affiliate of a futures company, without approval, entrusts others or accepts others’ entrustment to hold or manage the stock rights of the futures company, or refuses to be cooperative during the inspection of the futures regulatory institution of the State Council, or refuses to perform the obligation to report or submit the relevant information and materials as required, or submits or provides any information or materials with any false record or misleading statement or serious omission, it shall be punished in accordance with the first and second paragraphs of this Article.

　 Article 68 Where a futures company commits any of the following acts cheating the clients, it shall be ordered to make a correction, be given a warning, have its illegal gains confiscated and be fined not less than one time but not more than 5 times the illegal gains. If there are no illegal gains or the amount of illegal gains is less than 100, 000 yuan, it shall be fined not less than 100, 000 yuan but not more than 500, 000 yuan. If the circumstance is serious, it shall be ordered to make a rectification or have its futures business permit revoked:
(1) Making a promise of profits to its clients or failing to provide the clients in advance with a risk disclosure statement as required;
(2)Agreeing to share profits or risks with its clients in the business of brokerage;
(3)Failing to accept the entrustment of any client or failing to conduct futures trading according to the entrustment of any client;
(4)Inducing any client to give trading instructions by concealing any important event or by other improper means;
(5)Providing any client with false return on dealings;
(6)Failing to transmit any client’s trading instruction to the futures exchange;
(7)Diverting the clients’ margin to other purposes;
(8)Failing to open a margin account in the custodian bank of futures margin or illegally transferring the clients’ margin; or
(9)Other acts cheating the clients as prescribed by the futures regulatory institution of the State Council.
Where a futures company commits any of the acts as mentioned in the preceding paragraph, the directly liable person-in-charge and other directly liable persons shall be given a warning and fined not less than 10, 00 yuan but not more than 100, 000 yuan. If the circumstance is serious, the qualifications for assuming the relevant posts and the futures practitioners’ qualifications shall be suspended or revoked.
Where an entity or individual who makes up or spread false information about futures trading, if it (he) disturbs the futures trading market, it (he) shall be punished in accordance with the first and second paragraphs of this Article.

　 Article 69 Where a futures company, or any other futures institution, or clearing member of a non-futures company, or custodian bank of the futures margin obtains a futures business permit by providing false application documents or by concealing any important fact by other means of cheating, its futures business permit shall be revoked and its illegal gains shall be confiscated.

　 Article 70 For an insider of the inside information about futures trading or person who illegally obtains the inside information about futures trading, prior to the publicity of the information which may considerably affect the futures trading price, if he conducts futures trading by taking advantage of the inside information, or if he divulges the inside information to any other person so that such person conducts futures trading by taking advantage of the inside information, the illegal gains shall be confiscated and he shall be concurrently fined not less than one time but not more than 5 times the illegal gains. If there are no illegal gains or if the amount of illegal gains is less than 100, 000 yuan, he shall be fined not less than 100, 000 yuan but not more than 500, 000 yuan. Where an entity conducts any inside transaction, the directly liable person-in-charge and other directly liable persons shall be given a warning and fined not less than 30, 000 yuan but not more than 300, 000 yuan.
Where any of the personnel of the futures regulatory institution of the State Council, or of a futures exchange, or of an institution monitoring the safe custody of futures margin conducts any inside transaction, he shall be given a heavier punishment.

　 Article 71 Where any entity or individual commits any of the following acts manipulating the futures trading prices, it shall be ordered to make a correction, have its (his) illegal gains confiscated, and be concurrently fined not less than one time but not more than five times the illegal gains. If there are no illegal gains or if the amount of the illegal gains is less than 200, 000 yuan, it (he) shall be fined not less than 200, 000 yuan but not more than 1 million yuan:
(1)Manipulating fixtures trading prices individually or in collusion by buying and selling futures contracts by jointly or successively taking advantage of funds or positions it holds or by taking its advantage in information;
(2)Deliberately colluding with another party to conduct futures transactions with each other at a time, at a price and in a method agreed upon in advance so as to influence the futures trading prices or the fixtures trading volume;
(3)Using oneself as the trading party, acting as the buyer and seller simultaneously so as to influence the futures trading prices or the futures trading volume;
(4)Hoarding goods in order to influence futures market prices; or
(5)Committing other acts manipulating fixtures trading prices as prescribed by the futures regulatory institution of the State Council.
Where an entity or individual commits any of the acts as specified in the preceding paragraph, the directly liable person-in-charge and other directly liable persons shall be given a disciplinary sanction and fined not less than 10,000 yuan but not more than 100,000 yuan.

　 Article 72 Any delivery warehouse that commits any of the acts stipulated in Paragraph 2, Article 39 of this Regulation shall be ordered to make a correction, be given a warning, have its illegal gains confiscated, and shall be fined concurrently not less than one time but not more than five times the illegal gains. If there are no illegal gains or the amount of the illegal gains is less than 100, 000 yuan, it shall be fined not less than 100,000 yuan but not more than 500,000 yuan. If the circumstance is serious, the futures exchange shall be ordered to suspend or cancel the qualification of the delivery warehouse. The directly liable person-in-charge and other directly liable persons shall be given a warning and fined not less than 10, 000 yuan but not more than 100, 000 yuan.

　 Article 73 Where a state-owned enterprise or state controlled enterprise conduct futures trading in violation of this Regulation or in violation of the relevant provisions of the futures regulatory institution of the State Council and other relevant departments regarding the enterprises’ entering the futures market with the state-owned assets, or where an entity or individual conducts futures trading by illegally using any credit fund, treasury fund, it (he) shall be given a warning with its (his) illegal gains being confiscated, and it shall be fined concurrently not less than one time but not more than 5 times the illegal gains. If there are no illegal gains or the amount of the illegal gains is less than 100, 000 yuan, it (he) shall be fined not less than 100,000 yuan but not more than 500,000 yuan. The directly liable person-in-charge and other directly liable persons shall be given a disciplinary sanction such as demotion or even removal.

　 Article 74 Where a domestic entity or individual conducts overseas futures trading in violation of the relevant provisions, it (he) shall be ordered to make a correction, be given a warning, have its (his) illegal gains confiscated, and shall be concurrently fined not less than one time but not more than 5 times the illegal gains. If there are no illegal gains or if the amount of illegal gains is less than 200, 000 yuan, it (he) shall be fined not less than 200, 000 yuan but not more than 1 million yuan. If the circumstance is serious, it (he) shall suspend the overseas futures trading. The directly liable person-in-charge and other directly liable persons shall be given a warning and concurrently fined not less than 10, 000 yuan but not more than 100, 000 yuan.

　 Article 75 Where anyone illegally establishes a futures trading place or organizes futures trading activities in any other form, such establishment or activities shall be banned by the local people’s government at or above the county level, any illegal income shall be confiscated, and a fine of one up to five times the amount of illegal income shall be imposed on the violator; or if there is no illegal income or the illegal income is less than 200,000 yuan, the violator shall be fined 200,000 yuan up to one million yuan. If the violator is an entity, its direct person in charge and other directly liable persons shall be warned and each fined 10,000 yuan up to 100,000 yuan.
Where anyone illegally establishes a futures company or any other futures trading institutions or engages in the futures business without approval, the establishment or engagement shall be banned, the illegal income shall be confiscated, and a fine of one up to five times the amount of illegal income shall be imposed on the violator; or if there is no illegal income or the illegal income is less than 200,000 yuan, the violator shall be fined 200,000 yuan up to one million yuan. If the violator is an entity, its direct person in charge and other directly liable persons shall be warned and fined 10,000 yuan up to 100,000 yuan.

　 Article 76 Where a futures company’s supplier of trading software or clearing software refuses to cooperate with the futures regulatory institution of the State Council in an investigation, or fails to provide the futures regulatory institution of the State Council with the relevant software materials as required, or provides the futures regulatory institution of the State Council with software materials with false information or serious omission, it shall be ordered to make a correction and fined not less than 30, 000 yuan but not more than 100, 000 yuan. The directly liable person-in-charge and other directly liable persons shall be given a warning and concurrently fined not less than 10, 000 yuan but not more than 50, 000 yuan.

　 Article 77 Where an accounting firm, law firm, asset appraisal institution or any other intermediary service institution fails to be duteous, or issues documents with any false record, misleading statement or serious omission, it shall be ordered to make a correction, have its business income confiscated, have its relevant business license suspended or revoked, and be concurrently fined not less than one time but not more than 5 times the business income. The directly liable person-in-charge and other directly liable persons shall be given a warning and be concurrently fined not less than 30, 000 yuan but not more than 100, 000 yuan.

　 Article 78 Where an entity or individual violates this Regulation, if the circumstance is serious, the futures regulatory institution of the State Council shall announce that this individual, this entity or the directly liable persons of this entity are prohibited to enter the futures market.

　 Article 79 Where any of the personnel of the futures regulatory institution of the State Council, or of a futures exchange, or of an institution monitoring the safe custody of futures margin, or of a custodian bank of futures margin divulges any state secret or any client’s business secret he has access to, or seeks private benefits, neglects his duties, abuses his power or accepts any bribe, he shall be given an administrative or disciplinary sanction.

　 Article 80 Anyone who violates this Regulation and constitutes any crime shall be subject to the criminal liabilities.

　 Article 81 The administrative punishments for violations prescribed in this Regulation, except as otherwise provided for in this Regulation, shall be decided by the futures regulatory authority of the State Council; if the statutory functions of other relevant departments are involved, the futures regulatory authority of the State Council shall, jointly with other relevant departments, handle such violations; and if the violations fall within the statutory functions of other relevant departments, the futures regulatory authority of the State Council shall transfer such cases to other relevant departments for handling.

　 Chapter VIII Supplementary Provisions

　 Article 82 Definitions of the following terms:
(1) “Commodity futures contract” means a futures contract with agricultural products, industrial products, energy and other commodities, and their relevant index products as the subject matter.
(2) “Financial futures contract” means a futures contract with negotiable securities, interest rate, exchange rate and other financial products, and their relevant index products as the subject matter.
(3) “Margin” means the funds paid or standard warehouse receipts, treasury bonds and other negotiable securities with stable values and high liquidity submitted by futures traders, which are used for settlement and performance guarantee purposes.
(4) “Settlement” means the clearing and transfer of funds for the trading results of both trading parties at the settlement price published by a futures exchange.
(5) “delivery” means the procedure by which, on the maturity of a futures contract, both trading parties settle the contract having not yet closed out on the maturity by transferring the ownership of goods stipulated in the futures contract in accordance with the rules and procedures of the futures exchange, or settle the difference in cash at a settlement price as prescribed.
(6) “closing position” means the activity by which a futures trader purchases or sells a futures contract containing the same variety, quantity and month of delivery as those of the fixtures contract he has held, but is opposite in the direction of trading, in order to close out futures trading.
(7) “volume of positions held” refers to the volume of open contracts held by a futures trader.
(8) “position limit” means the maximum volume of positions held by a futures trader as prescribed by the futures exchange.
(9) “Standard warehouse receipt” means a standard delivery document issued by a warehouse and recognized by a futures exchange.
(10) “price limits” means that the trading price of a futures contract may not be higher or lower than the stipulated range on a certain trading day, and a quoted price which outgoes that range shall be regarded as invalid and the transaction cannot be completed.
(11) “inside information” refers to the information which has not been made public and might produce a major influence on futures trading prices, including the policies formulated by the futures regulatory institution of the State Council and other related departments which might produce a major influence on futures trading prices, decisions made by a futures exchange which might generate a major influence on fixtures trading prices, details of the financial status and trading trends of members and clients of a futures exchange, and other important information which the futures regulator institution of the State Council deems to have a conspicuous impact on futures trading prices.
(12) “insiders who have access to inside information” refers to persons who, by virtue of their management position, supervisory role or profession, or who, through their duties as an employee or professional consultant, have access to or obtain inside information, including the senior managing personnel of a futures exchange, other employees who, by virtue of their posts, can obtain inside information, personnel of the futures regulatory institution of the State Council, personnel of other related departments, and other persons as prescribed by the futures regulatory institution of the State Council.

　 Article 83 The futures regulatory institution of the State Council may approve the establishment of a special settlement institution, which is specially responsible for the settlement of futures exchanges, performs other relevant duties and bears the corresponding legal liabilities.

　 Article 84 The administrative measures for overseas institutions’ establishment, merger or taking shares of futures institutions within China, as well as for overseas futures institutions’ establishment of branches (representative offices) within China shall be formulated by the futures regulatory institution of the State Council jointly with the commerce administrative department, foreign exchange administrative department and other relevant departments of the State Council and shall be implemented upon approval of the State Council.

　 Article 85 The futures trading conducted in a trading place approved by the futures regulatory institution of the State Council other than in a futures exchange shall be governed by this Regulation.

　 Article 86 Other trading activities of commodities or financial products which do not fall into the category of futures trading shall be subject to the supervision and administration of the relevant competent departments of the state and are not governed by this Regulation.

　 Article 87 This Regulation shall come into forces as of April 15, 2007. The Interim Regulation on the Administration of Futures Trading as promulgated by the State Council on June 2, 1999, shall be repealed simultaneously.

(Deliberated and adopted at the 21st chairman’s executive meeting of the China Securities Regulatory Commission on August 1, 2012, and revised in accordance with the Decision of the China Securities Regulatory Commission on Amending the Measures for the Administration of the Customer Asset Management Business of Securities Companies by the Order No. 93 of the China Securities Regulatory Commission on June 26, 2013)

Chapter I General Provisions

Article 1 In order to regulate the customer asset management activities of securities companies, protect the lawful rights and interests of investors, and maintain the order of the securities market, these Measures are formulated in accordance with the Securities Law of the People’s Republic of China, the Securities Investment Fund Law of the People’s Republic of China, the Regulation on Supervision and Administration of Securities Companies, and other relevant laws and administrative regulations.

Article 2 These Measures shall apply to the securities companies engaging in the customer asset management business within the territory of the People’s Republic of China.
Where there are otherwise different provisions on the customer asset management business of securities companies in any law or administrative regulation or as required by the China Securities Regulatory Commission (hereinafter referred to as the CSRC), such provisions shall apply.

Article 3 A securities company engaging in the customer asset management business shall comply with relevant laws, administrative regulations and the provisions of the CSRC, adhere to the principles of fairness and impartiality, maintain the legitimate rights and interests of customers, being honest and trustworthy as well as diligent and duteous, and avoid conflict of interest.
A securities company engaging in the customer asset management business shall obtain a complete understanding of the customers, classify the customers, and recommend appropriate products or services to customers in the principle of risk matching, and is prohibited to mislead customers to purchasing the products or services which do not conform to their risk tolerance.
Customers shall independently assume investment risks and may not impair the national interest, the public interest, and the legitimate rights and interests of others.

Article 4 A securities company engaging in the customer asset management business shall, in accordance with the provisions of these Measures, apply to the CSRC for the qualification for the customer asset management business. The securities companies without obtaining the qualification for the customer asset management business shall not engage in the customer asset management business.

Article 5 A securities company engaging in the customer asset management business shall, in accordance with the provisions of these Measures, conclude asset management contracts with its customers, operate the customer assets according to the methods, conditions, requirements and limitations as agreed upon in the asset management contracts, and provide the customers with the investment management services regarding securities and other financial products.

Article 6 A securities company engaging in the customer asset management business shall conduct centralized operation management, and conclude uniformly asset management contracts with other parties.

Article 7 A securities company engaging in the customer asset management business shall establish sound risk control system and compliance management system, take effective measures to separate the customer asset management business from its other businesses, control the improper flow and usage of sensitive information, and prevent insider trading and conflict of interest.

Article 8 Stock exchanges, securities registration and settlement institutions and the Securities Association of China (the “SAC”) shall, in accordance with laws, administrative regulations and the provisions of the CSRC, conduct standardized and orderly self-disciplinary management and industry guidance on the customer asset management business of securities companies.

Article 9 The CSRC and the local CSRC offices shall, in accordance with laws, administrative regulations and the provisions of these Measures, conduct supervision and administration on the customer asset management activities of securities companies.

Article 10 Securities companies shall be encouraged, on the premise of effectively controlling risks, to make innovations for the asset management business in accordance with law.
The CSRC and the local CSRC offices shall, in the principle of prudential supervision, take effective measures to promote the standardized and orderly implementation of the innovation activities regarding asset management of the securities companies.

Chapter II Scope of Business

Article 11 A securities company may engage in the following customer asset management businesses in accordance with law:
(1) handling the directional asset management business for a single customer;
(2) handling the collective asset management business for two or more customers; and
(3) handling the special asset management business with special purpose for customers.

Article 12 A securities company shall, when handling the directional asset management business for a single customer, conclude a directional asset management contract with the customer, and provide the customer with asset management services through a special account.

Article 13 A securities company shall, when handling the collective asset management business for more than one customer, create a collective asset management plan, enter into a collective asset management contract with each customers, transfer customer assets to an asset custody institution qualified for the fund custody business for custody, and provide customers with asset management services through special accounts.

Article 14 A securities company shall, when handling the special asset management business for specific purpose for a customer, enter into a special asset management contract, design specific investment objectives tailored to the customer’s special requirements and the specific circumstances of underlying assets, and provide customers with asset management services through a special account.
A securities company shall fully understand and disclose to a customer the information on the credibility and compliance of the owners of underlying assets or the parties raising funds, the ownership of underlying assets, any collateral arrangements and the details thereof, the risk-return characteristics of the investment targets, and other relevant major matters.
A securities company may handle the special asset management business by creating a general collective asset management plan.

Article 15 A securities company which has obtained the qualification for the customer asset management business may handle the directional asset management business, and shall, when handling the special asset management business, file an application to the CSRC item by item in accordance with the provisions of these Measures.

Article 16 A securities company conducting the customer asset management business shall have no less than five investment sponsors. Each investment sponsor shall have three or more years of experience in securities investment, research or investment consultation or other similar experience, have good integrity records and professional ethics, and pass the registration of the SAC.

Article 17 A securities company shall, within five working days after its initiation and formation of the collective asset management plan, report the circumstances of the initiation and formation of the collective asset management plan to the SAC for filing, and concurrently forward them to the domicile of the securities company, and the local CSRC office in the place where an asset management branch is located.

Article 18 A securities company shall, when filing the initiated and formed collective asset management plan, submit the following materials:
(1) filing report;
(2) statement, contract text and risk disclosure statement on the collective asset management plan;
(3) agreement on custody of assets;
(4) compliance review opinions of the compliance director; and
(5) other materials as required by the CSRC.

Chapter III Basic Business Rules

Article 19 A securities company conducting the customer asset management business shall, in accordance with laws, administrative regulations, and the provisions of these Measures, enter into a written asset management contract with each customer to explicitly agree on the rights and obligations of both parties and other relevant matters. An asset management contract shall include the required content as prescribed in Articles 93 and 94 of the Securities Investment Fund Law of the People’s Republic of China.

Article 20 A securities company shall, in accordance with relevant laws and regulations, formulate sound and effective valuation policies and procedures, and conduct evaluation on the implementation effects thereof on a regular basis to ensure the fairness and reasonableness of the valuation of the collective asset management plan. The specific provisions on valuation shall be formulated separately by the SAC.

Article 21 When a securities company handles the directional asset management business, the net value of the assets it receives from a single customer may not be less than RMB 1 million.

Article 22 A securities company may, when handling the collective asset management business, only accept the assets in the form of money funds.

Article 23 A securities company shall divide its collective asset management plan into equal shares, and classify such shares into different categories according to risk-return characteristics. The shares of the same category under the collective asset management plan shall enjoy the equal rights and interests, and assume equivalent risks, except as otherwise required by the provisions of Article 27 of these Measures.

Article 24 A securities company may, when establishing a collective asset management plan, either formulate or not the provisions regarding the period of continual existence of the plan.
A collective asset management contract shall explicitly specify the time, methods, prices, procedures and other matters for customers’ participation in or withdrawal from the collective asset management plan.
Any customer who participates in a collective asset management plan shall not transfer its shares, except as otherwise provided for by any law or administrative regulation or the provisions of the CSRC.

Article 25 A securities company may participate, with its own funds, in the collective asset management plan established by the company itself, and may not withdraw its self-owned funds invested during the period of raising and popularization and for which it undertakes liabilities as agreed upon by the contract. The participation and withdrawal of self-owned funds during the period of continual existence of the plan shall comply with relevant provisions.
Securities companies, asset custodian institutions and customers shall expressly agree on, in the asset management contract, the conditions, procedures, risks disclosure, information disclosure and other matters for the participation and withdrawal of self-owned funds. Where the liabilities for self-owned funds are agreed upon by the contract, the amount of the funds shall also be specified. Securities companies shall take measures to effectively prevent conflict of interest and protect the interests of customers.
The funds invested by a securities company shall be deducted correspondingly according to the liabilities undertaken by the company when the amount of its net capital is calculated.

Article 26 A securities company may promote collective asset management plans by itself or authorize another securities company, a commercial bank, or any other institution recognized by the CSRC to do so.
A collective asset management plan shall be promoted to qualified investors, and the number of qualified investors may not exceed 200 in total. A qualified investor means an entity or individual possessing the appropriate risk identification ability and the tolerance for the risks associated with the collective asset management plan for investment and meeting any of the following conditions:
(1) The total financial assets of the individual or household are not less than 1 million yuan.
(2) The net assets of the institution, such as company or enterprise, are not less than 10 million yuan.
A collective investment product of any description legally created and supervised shall be regarded as a single qualified investor.

Article 27 Before the formation of a collective asset management plan is completed, the participating funds of a customer may only be deposited into the special account designated by the shares registration agency for collective asset management plan, and shall not be used.

Article 28 Where a securities companies operates the investments of the collective asset management business, and conduct securities trading in stock and futures exchanges or other exchanges, it shall comply with the relevant provisions of the exchanges. Securities companies may also conduct the securities trading in stock exchanges through special trading booths.
The securities companies conducting trading out of the exchanges shall abide by the relevant management rules.

Article 29 Where a securities company invests the customer assets under its management in the securities issued or underwritten during the underwriting period by the company itself or a company affiliated to it or in other material affiliated transactions, it shall adhere to the principle of giving priority to the interests of customers, obtain the prior consent of the customers, inform the asset custody institution and the customer thereafter, concurrently report to the stock exchange, and take effective measures to prevent conflicts of interest and protect the lawful rights and interests of customers.

Article 30 Where any factor out of a securities company, such as fluctuation in the securities market, merger of securities issuers, change of the scale of an asset management plan and so forth, causes any inconformity of an investment under the asset management plan with the proportion as set forth by Article 31 and Article 32 of these Measures or with the investment proportion as agreed upon by the asset management contract, the securities company shall explicitly specify the corresponding handling principles in the contract, make adjustments in a timely manner according to law, and report to the domicile of the securities company, the local CSRC office in the place where an asset management branch is located and the SAC.

Article 31 When a securities company handles the directional asset management business, its customers shall voluntarily exercise the rights to the securities it holds, and perform corresponding obligations.
Where, when a securities company invests the customer assets regarding the directional asset management business in the stocks of a listed company, the customer is required to perform its obligations of announcement, report, tender offer and so forth as provided for by any law or administrative regulation or by the CSRC, the securities company shall promptly notify the customer concerned, and urge it to perform the corresponding obligations. If the customer refuses to perform the said obligations, the securities company shall report to the stock exchange.

Article 32 A securities company shall exercise, on behalf of its customers, the rights to the securities under the collective asset management plan, and perform the corresponding obligations.

Article 33 A securities company shall not commit any of the following acts when engaging in the customer asset management business:
(1) appropriation of customer assets;
(2) promising a customer that the principal of its assets will not suffer any loss or may obtain the lowest income at a minimum;
(3) misleading or inducing any customer by fraud or any other improper means;
(4) operating the customer asset management business and other businesses in a mixed manner;
(5) conducting securities trading between the proprietary securities account and the asset management account or among different asset management accounts for the purpose of transferring the income or loss in the asset management account, thus impairing the benefits of customers;
(6) seeking illegal interests for a third party by making use of the customer assets under its management so as to conduct tunneling;
(7) conducting the trading of self-operated business in preference to that of the asset management business, thus impairing the benefits of customers;
(8) conducting unnecessary securities trading with customer assets for the purpose of obtaining commissions or other benefits;
(9) conducting insider trading or manipulating the market; and
(10) other acts as prohibited by any law or administrative regulation or any provision of the CSRC.

Article 34 A securities company shall, when handling the collective asset management business, abide by the following provisions in addition to those as set forth in the preceding article:
(1) It shall not illegally use the assets under the collective asset management plan for lending of funds, loans, mortgage financing, external guarantee or other purposes.
(2) It shall not use the assets under the collective asset management plan for the investment for which it may bear unlimited liabilities.

Chapter IV Risk Control and Customer Assets Custody

Article 35 A securities company shall, when conducting the customer asset management business, explicitly set forth in the asset management contract that a customer shall assume investment risks by itself.

Article 36 A securities company shall truthfully disclose to the customers its qualification for the customer asset management business, management capacities, performance and other circumstances, and shall completely disclose market risks, the legal risks incurred by the securities company to its customers due to the loss of its qualification for the customer asset management business, and other investment risks.
A securities company shall, when introducing the expected investment incomes to its customers, scrupulously comply with the principle of being honest and trustworthy, provide sufficient and reasonable bases, and issue a special statement in writing that the said expected incomes are only for customers’ reference, and may not constitute a commitment of the securities company to its customers.

Article 37 A securities company and its popularizations institution shall, before concluding an asset management contract, get understanding of a customers’ assets and income status, risk tolerance, investment preference and other basic information, and the customer shall truthfully provide the relevant information. The securities company and its popularization institutions shall recommend an appropriate asset management plan to the customer according to the information they learn about the customer.
A securities company shall, when establishing a collective asset management plan, make a clear definition of the conditions of the customer, and the popularization scope of the collective asset management plan. The customer participating in the collective asset management plan shall have corresponding financial investment experience and risk tolerance.

Article 38 A customer shall make a commitment on the legality of the source and use of its assets. If the customer fails to make such a commitment or the securities company clearly knows that the source or use of the customer’s assets is illegal, it shall not conclude an asset management contract.
No one shall illegally collect funds from others to participate in a collective asset management plan.

Article 39 A securities company and other promotion institutions shall take effective measures and utilize the electronic information disclosure platforms of the securities company, the SAC and the CSRC or any other information disclosure platform recognized by the CSRC to disclose information on the approval or recordation, risk-return characteristics, and complaints hotline, among others, of asset management plans in an objective and accurate manner, so as to enable the customers to have a full understanding of the characteristics and risk, among others, of asset management plans, as well as the customers’ rights and obligations, but may not promote asset management plans through radio, television, newspapers, periodicals, internet or other public media.

Article 40 A securities company shall, each quarter at a minimum, provide a customer with an accurate and complete asset management report to make a detailed description on the allocation of customer assets, value variations and other circumstances within the period of the report.
A securities company shall ensure the customers to be able to inquire the information on the allocation of customer assets and so forth at the time and in the form as set forth in the asset management contract. In case of any major matter which may affect a customer’s benefits, as mentioned in the asset management contract, the securities company shall inform the customer in a timely manner.

Article 41 A securities company shall, when handling the directional asset management business, ensure that customer assets are independent of its self-owned assets and the assets of different customers. It shall also establish separate accounts for the assets of different customers to conduct independent accounting and manage the assets in separate accounts.

Article 42 A securities company shall, when handling the collective asset management business, ensure that the assets under the collective asset management plan are independent of its self-owned assets and the assets of other customers, and that the assets under different collective asset management plans are independent of each other. It shall also set up separate accounts to conduct independent accounting and manage the assets in separate accounts.

Article 43 A securities company shall, when handling the directional asset management business, hand over the entrusted assets of a customer to the designated commercial bank responsible for depository of customer trading settlement funds, the China Securities Depository and Clearing Corporation Limited or the securities companies approved by the CSRC and other asset custodian institutions for custody.

Article 44 A securities company shall, when handling the collective asset management business, deliver the assets under a collective asset management plan to an asset custody institution qualified for the fund custody business for custody.
A securities company and an asset custody institution shall open separate securities accounts, capital accounts and other relevant accounts for the collective asset management plans. The name of a securities account shall indicate the name of the securities company and the title of the collective asset management plan, among others.

Article 45 A securities company shall establish the fair trading system and the abnormal trading daily monitoring mechanism to fairly treat different assets under its management, monitor the obverse and reverse transactions occurred between different investment portfolios, and regularly report such transactions to the domicile of the securities company, the local CSRC office in the place where an asset management branch is located and the SAC.

Article 46 An asset custodian institution shall have a special department responsible for the custody of the assets of the asset management business, and shall strictly separate the assets in custody of the asset management business from its self-owned assets and other assets under its management.

Article 47 An asset custodian institution shall, when handling the asset custody business with respect to asset management, perform the following duties:
(1) safekeeping the assets of the asset management business;
(2) enforcing the securities company’s investment or liquidation instructions, and handling the fund inflow and outflow in the operation of the assets of the asset management business;
(3) supervising the operation of the securities company’s asset management business, and requiring the securities company to make a correction if the securities company’s investment or liquidation instructions are found having violated any law or administrative regulation, any provision of the CSRC, or any agreement in the asset management contract; if the securities company fails to make a correction, the asset custodian institution shall refuse to enforce the said instructions, and report to the domicile of the securities company, the local CSRC office in the place where an asset management branch is located and the SAC ;
(4) issuing the report on custody of assets; and
(5) other matters as agreed upon in the asset management contract.

Article 48 An asset custodian institution shall have the right to inquire the information on the operation of the asset management business at any time, and shall verify the information on the assets of the asset management business on a regular basis, so as to prevent the assets from being appropriated or lost.

Article 49 Where, due to expiry of the term of investment management as agreed upon by a directional asset management contract or for any other reason as set forth in the contract, the asset management contract shall be terminated, the securities company shall, after deducting all the expenses as set forth in the contract, return all the assets in the customer’s account to the customer for the management by itself.
Where, due to expiry of the term of investment management as agreed upon by a collective asset management contract or for any other reason as set forth in the contract, the operation of the collective asset management plan shall be terminated, the securities company and its asset custodian institution shall, after deducting all the expenses as set forth in the contract, assign all the assets under the collective asset management plan to the customer in the form of currency funds according to the shareholding of the customer or according to the agreements of the collective asset management contract, and cancel the securities account, the funds account and other relevant accounts.

Chapter V Regulatory Measures and Legal Liabilities

Article 50 Where a securities company is subject to any of the following circumstances, the CSRC shall not accept the application for the establishment of a special asset management plan; where any application has been accepted, the examination and verification shall be temporarily postponed. The securities company shall be ordered to suspend the signing of new collective and directional asset management contracts:
(1) where a securities company is investigated by the CSRC as it is suspected of any violation of law or regulation, except when the securities company can prove that the placing of a case on file for investigation is evidently irrelevant with the asset management business;
(2) where the securities company falls in the period of rectification as a result of the occurrence of major risk events, eligibility management invalidation, major information safety events, and other matters able to indicate material defects exist in the internal control of the company; or
(3) any other circumstance as provided for by the CSRC.

Article 51 A securities company shall formulate an internal inspection system for the operation of the customer asset management business, and conduct self-inspections on a regular basis.
A securities company shall work out reports on the customer asset management business on a quarterly basis, submit them to the SAC for filing, and concurrently forward them to the domicile of the securities company and the local CSRC office in the place where an asset management branch is located.

Article 52 A securities company shall, when popularizing a collective asset management plan, place the collective asset management contract, the description on the collective asset management plan and other formal popularization documents at the business places for popularizing the collective asset management plan of the securities company and other popularization institutions.

Article 53 A securities company shall, when making an annual audit, audit the information on the operation of the customer asset management business, and require the accounting firm to issue a single audit opinion regarding each collective asset management plan.
A securities company shall report the audit results to the CSRC for filing and concurrently forward them to the domicile of the security company, the local CSRC office in the place where an asset management branch is located, and provide customers and asset custodian institutions with the single audit opinion of each collective asset management plan.

Article 54 A securities company or an asset custodian institution shall preserve the accounting books on the customer asset management business in accordance with the provisions of relevant laws and administrative regulations, and appropriately preserve relevant contracts, agreements, trading records and other documents and materials.

Article 55 The CSRC and its local offices shall conduct, on a regular or unscheduled basis, inspections on the customer asset management business conducted by securities companies and asset custody institutions, and securities companies and asset custodian institutions shall provide assistance.

Article 56 Where a senior executive, directly liable person in charge, or any other directly liable person of a securities company, an asset custody institution, or a promotion institution violates these Measures, the CSRC and its local office shall, according to different circumstances, take an administrative regulatory measure against such a person, such as a regulatory interview, an order of desisting from performing duties, or a determination of unfitness for a position.
A securities company, an asset custody institution or a promotion institution or a senior executive, the directly liable person in charge or any other directly liable person thereof which cause damage to a customer’s lawful rights and interests in engaging in the customer asset management business shall assume civil liabilities in accordance with the law.

Article 57 Where a securities company, an asset custody institution, or a promotion institution violates these Measures, the CSRC and its local office shall, according to different circumstances, take an administrative regulatory measure against it in accordance with the law, such as an order of correction, an order of increasing the frequency of internal compliance inspection, an order of taking disciplinary actions against relevant persons, or suspension of business.

Article 58 A securities company, an asset custody institution, or a promotion institution or a senior executive, the directly liable person in charge, or any other directly liable person thereof which violates any law or regulation shall be subject to administrative punishment in accordance with the Securities Law of the People’s Republic of China, the Securities Investment Fund Law of the People’s Republic of China, and the Regulation on the Supervision and Administration of Securities Companies.

Article 59 A securities company, an asset custody institution, or a promotion institution or a senior executive, the directly liable person in charge, or any other directly liable person thereof which is suspected of a crime shall be transferred to the judicial authority for criminal liability in accordance with the law.

Article 60 Where a securities company is ordered by CSRC to suspend its customer asset management business due to its violation of any law or regulation in its business operations or the inconformity of any of its financial indices with the provisions of CSRC, it shall not conclude any new asset management contract during the period of suspension; if its qualification for the customer asset management business is revoked by the CSRC in accordance with law, it shall stop its asset management activities, and handle the matters regarding the termination of the contract in accordance with the provisions of Article 49 of these Measures.

Chapter VI Supplementary Provisions

Article 61 The meaning of “affiliated parties to” shall be the same as that as mentioned in the Accounting Standards for Enterprises No.36 � Disclosure of Affiliated Parties.

Article 62 Other institutions approved by the CSRC to engage in the customer asset management business shall abide by and implement these Measures.

Article 63 These Measures shall come into force on the date of issuance. The Measures for the Administration of the Customer Asset Management Business of Securities Companies (Order No. 87 of the CSRC) issued by the CSRC on October 18, 2012 shall be repealed simultaneously.

The People’s Bank of China Decree No.1 [2006]

In line with the Law of the People’s Republic of China on Anti-Money Laundering, the Law of the People’s Republic of China on the People’s Bank of China and other relevant laws and regulations, the People’s Republic of China has formulated the Rules for Anti-money Laundering by Financial Institutions. The Rules, adopted at the 25th Governor’s Meeting on November 6, 2006, is hereby promulgated and shall enter into force as of January 1, 2007.
Zhou Xiaochuan
Governor of the People’s Bank of China
November 14, 2006

Article 1 These Rules are formulated in line with the Law of the People’s Republic of China on Anti-Money Laundering, the Law of the People’s Republic of China on the People’s Bank of China and other relevant laws, administrative rules and regulations with a view to prevent money laundering, standardize anti-money laundering regulatory activities and anti-money laundering activities of financial institutions so as to safeguard the order of financial industry.

Article 2 These Rules are applicable to the following financial institutions legally established within the territory of the People’s Republic of China:
(1) commercial banks, city credit cooperatives, rural credit cooperatives, postal savings institutions and policy banks;
(2) securities companies, future brokerage companies and fund management companies;
(3) insurance companies and insurance asset management companies;
(4) trust and investment companies, financial asset management companies, finance companies, financial leasing companies, auto finance companies and money brokerage companies;
(5) other financial institutions specified and announced by the People’s Bank of China.
Articles in these Rules on anti-money laundering management and supervision over financial institutions are applicable to institutions involved in business such as currency exchange, payment and settlement, and fund sales.

Article 3 The People’s Bank of China, as the competent administrative authority for anti-money laundering under the State Council, shall supervise and manage the anti-money laundering work of financial institutions according to laws. The China Banking Regulatory Commission, China Securities Regulatory Commission, and China Insurance Regulatory Commission shall each undertake anti-money laundering supervision and management responsibilities with in its competence.
The People’s Bank of China should cooperate with relevant agencies and institutions under the State Council and law enforcement agencies in fulfilling the obligations of anti-money laundering.

Article 4 The People’s Bank of China, as authorized by the State Council, participates in international anti-money laundering cooperation on behalf of the People’s Republic of China. The People’s Bank of China can establish anti-money laundering cooperation mechanisms with other countries and regions, and conduct cross-border anti-money laundering supervision and management.

Article 5 The People’s Bank of China undertakes the following anti-money laundering supervision and management responsibilities according to law:
(1) To stipulate anti-money laundering regulations for financial institutions solely or jointly with the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission;
(2) To monitor fund flow in both RMB and foreign currencies for anti-money laundering purposes;
(3) To supervise and inspect the fulfilling of anti-money laundering obligations by financial institutions;
(4) To investigate suspicious transactions within its competence;
(5) To report transactions suspected of money laundering crime to law enforcement agencies;
(6) To exchange information and documents relevant to anti-money laundering with overseas anti-money laundering institutions in line with relevant laws and administrative regulations;
(7) And other responsibilities as defined by the State Council.

Article 6 The China Anti-Money Laundering Monitoring and Analysis Center, established by the People’s Bank of China, shall undertake the following responsibilities according to laws:
(1) To receive and analyze reports of large-value transactions and suspicious transactions both in RMB and foreign currencies;
(2) To establish a national anti-money laundering database and properly store large-value and suspicious transaction reports submitted by financial institutions;
(3) To report analysis results to the People’s Bank of China;
(4) To require financial institutions to promptly supplement and revise reports of large-value transactions and suspicious transactions in RMB and foreign currencies;
(5) To exchange relevant information and materials with foreign institutions with authorization of the People’s Bank of China;
(6) And other responsibilities as specified by the People’s Bank of China.

Article 7 The People’s Bank of China and its staff shall keep all information obtained in fulfilling its anti-money laundering responsibilities confidential, and must not disclose to outsiders in violation of regulations.
The China Anti-Money Laundering Monitoring and Analysis Center and its staff shall keep confidential information on clients’ identities, large-value and suspicious transactions obtained while legally discharging the anti-money laundering responsibilities; unless otherwise specified by law, such information shall not be disclosed to any other organization or individual.

Article 8 Financial institutions and their branch offices shall establish a sound anti-money laundering internal control system, establish a specialized unit or designate a unit to be responsible for anti-money laundering tasks, formulate internal operational procedures and control measures for anti-money laundering tasks and carry out staff training on anti-money laundering so as to strengthen their working capacities.
Responsible persons of financial institutions and their branch offices shall take responsibility in effective operation of the anti-money laundering internal control system.

Article 9 Financial institutions shall establish and implement a customer identification system according to rules and regulations.
(1) To identify the identity of a customer who requests to establish business relations or requires occasional financial services above the prescribed amount by requiring the customer to present authentic and valid identity card or other identity documents, verifying and registering such documents and timely updating any change in a customers’ identity information;
(2) To understand the purpose and nature of customer’s transaction and effectively identify beneficiaries of the transaction in line with relevant rules and regulations;
(3) To re-identify a customer’ s identity when detecting any abnormal phenomenon in the process of business operation or suspecting the authenticity, validity and integrity of customer’s identity documents obtained previously.
(4) To make sure that an overseas financial institution with which it has correspondent or similar relationship effectively conduct customer identification and that it can obtain a customer’s identity information from such overseas financial institutions.
The provisions on implementation of the afore-mentioned shall be stipulated by the People’s Bank of China along with China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission.

Article 10 Financial institutions shall properly keep customers’ identity records and transaction information such as a transaction’s statistics, vouchers and accounting materials.
The provisions on implementation of the afore-mentioned shall be stipulated by the People’s Bank of China along with the China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission.

Article 11 Financial institutions shall report to the China Anti-Money Laundering Monitoring and Analysis Center large-value and suspicious transactions denominated both in RMB and foreign currencies in line with relevant rules and regulations.
The provisions on implementation of the afore-mentioned shall be stipulated by the People’s Bank of China.

Article 12 The People’s Bank of China along with the China Banking Regulatory Commission, China Securities Regulatory Commission and China Insurance Regulatory Commission shall guide the financial sector self-disciplinary organizations to stipulate guiding principles for sector specific anti-money laundering work.

Article 13 When discovering any suspected crime in carrying out its anti-money laundering responsibilities, a financial institution shall promptly report in a written form to the local branch office of the People’s Bank of China and the public security agency.

Article 14 Financial institutions and their staff shall assist and cooperate with, according to provisions of laws, judicial and administrative law enforcement agencies in their anti-money laundering activities.
The overseas branches and subsidiaries of financial institutions shall abide by the laws and provisions of the host country on anti-money laundering, and assist and cooperate with the national or regional anti-money laundering agency in their anti-money laundering work.

Article 15 Financial institutions and their staff shall keep confidential customer identity material and transaction information acquired when fulfilling their anti-money laundering obligations; and shall provide such material and information to other institution or individual in strict accordance with relevant laws.
Financial institutions and their staff shall keep confidential information of their anti-money laundering work such as reporting of suspicious transactions, cooperation with the People’s Bank of China in suspicious transaction investigation, and shall not provide such information to their customers or other individuals in violation of regulations.

Article 16 Financial institutions and their staff shall report large-value and suspicious transactions in accordance with law and enjoy legal protection in such reporting.

Article 17 Financial institutions shall submit, in accordance with regulations issued by the People’s Bank of China, anti-money laundering statistical reports, information and material, and the anti-money laundering related content in their audit report.

Article 18 The People’s Bank of China and its branch offices may take the following measures of anti-money laundering on-site examination as needed in the undertaking of its anti-money laundering responsibilities:
(1) To enter the premise of a financial institution to conduct on-site examination;
(2) To inquire staff of the financial institution and require explanation and clarification with regard to the matter under examination;
(3) To examine and make a copy of the document and material related to the matter under examination, and seal up for keeping the document and material that are at risk of being transferred, destroyed, concealed or tampered with;
(4) To examine the computer system that the financial institution uses to manage its business statistics.
Prior to an on-site examination, the People’s Bank of China or its branch offices shall fill in an application form for on-site examination, specify the institution to be examined, the content and intended time of examination and conduct the examination after approval by the responsible person of the People’s Bank of China, or its branch offices.
An on-site examination shall be conducted by at least two examiners, with the presentation of a law-enforcement warrant and an examination notice. In the case that less than two examiners show up for an on-site examination, or no law-enforcement warrant or examination notice is presented, a financial institution has a right to refuse examination.
After the completion of an on-site examination, the People’s Bank of China, and its branch offices shall produce an on-site examination opinion, affix the official seal on and deliver it to the examined institution. The content of an on-site examination opinion shall include a description of the examination, assessment, and advice on the necessary improvement and measures.

Article 19 The People’s Bank of China and its branch offices may, as needed in the undertaking of its anti-money laundering responsibilities, initiate a conversation with member(s) of the Board of directors or senior management member(s) of a financial institution and request the person(s) to explain major matters of the financial institution in fulfilling its anti-money laundering obligations.

Article 20 The People’s Bank of China conducts an on-site examination over a financial institution, and when necessary, may inform the China Banking Regulatory Commission, the China Securities Regulatory Commission or the China Insurance Regulatory Commission of the examination.

Article 21 When the People’s Bank of China or its provincial branch offices finds that a suspicious transaction needs investigation or verification, it can request from the financial institution information of the customer account(s) involved in the transaction, record of the transaction and other related material. The financial institution shall provide cooperation.
The above-mentioned People’s Bank of China or its provincial branch offices include the headquarters, Shanghai Head Office, branches, operations offices, sub-branches in provincial capitals and sub-provincial cities.

Article 22 In its investigation of a suspicious transaction, the People’s Bank of China or its provincial branch offices can request relevant staff of a financial institution to provide information; examine and make a copy of the account information of the customer under investigation, transaction record and other relevant material; and seal up for keeping the document and material that are at risk of being transferred, destroyed, concealed or tampered with.
At least two investigators shall take part in an investigation of a suspicious transaction, and present a law enforcement warrant and an investigation notice issued by the People’s Bank of China or its provincial branch offices. Examining, copying, and sealing up for keeping customer account information, transaction record and other relevant material shall be approved by the responsible person of the People’s Bank of China or its provincial branch offices. In the case that investigators violate the prescribed procedures, a financial institution has a right to refuse the investigation.
An enquiry record shall be made for the enquiry, and shall be verified by the enquired. In the case that the record contains omission or errors, the enquired can request inclusion of the omission and corrections. The enquired shall sign his or her name or affix personal seal on the enquiry record after verification; the investigators shall also sign their names on the enquiry record.
When sealing up for keeping documents and materials, investigators shall check and count them jointly with the financial institution staff present at the investigation, and produce on the spot a list in two copies, both to be signed or affixed a seal by the investigators and the financial institution staff present at the investigation, one to be kept by the financial institution and one to be kept in the investigation file of the People’s Bank of China.

Article 23 In the case that money-laundering suspicions cannot be removed upon the completion of investigation, the case shall be immediately reported to law enforcement agency with proper jurisdiction. In the case that a customer wants fund in the account involved in the investigation to be transferred abroad, the financial institution shall immediately report to the local branch office of the People’s Bank of China. With approval of its responsible person, the People’s Bank of China can take a temporary freezing measure, and inform the financial institution in writing, which shall immediately execute the measure upon receiving the notice.
When the law enforcement agency deems it necessary to continue the freezing after it receives the reported case, the financial institution shall provide cooperation upon receiving the continued freezing notice from the law enforcement agency. In the case that the law enforcement agency deems it not necessary to continue the freezing, the People’s Bank of China shall immediately inform the financial institution in writing to lift the temporary freezing after it receives the notice from the law enforcement agency.
A temporary freezing shall not exceed 48 hours. In the case that no notice on continued freezing is received from the law enforcement agency within 48 hours after a financial institution takes a temporary freezing measure according to the request of the People’s Bank of China, it shall immediately lift the temporary freezing.

Article 24 When the anti-money laundering staff of the People’s Bank of China and its branch offices has one of following behaviors, administrative penalty shall be imposed in accordance with relevant laws:
(1) Having conducted examination, investigation or take temporary freezing measure in violation of regulations;
(2) Having disclosed state secret, business secret, or individual privacy that comes to his or her knowledge in anti-money laundering work;
(3) Having imposed administrative penalty on a financial institution or staff in violation of relevant regulations;
(4) Other behaviors in the fulfilling of responsibility not consistent with laws.

Article 25 When a financial institution violates these Rules, the People’s Bank of China or its branch offices above the district or municipal level shall impose punishments in line with Article 31 and 32 of the Law of the People’s Republic of China on Anti-Money Laundering; the China Banking Regulatory Commission, the China Securities Regulatory Commission and the China Insurance Regulatory Commission are advised to take the following measures based on the specific circumstances:
(1) To order the financial institution to suspend business and take remedial actions or revoke its business license;
(2) To disqualify directors, senior executives and other employees held immediately accountable for the misconduct from holding any positions and ban them from working in the financial industry;
(3) To order financial institutions to issue a disciplinary warning to directors, senior executives and other employees held immediately accountable for the misconduct.
When a branch office at the county or city level of the People’s Bank of China detects any violation of these Rules by a financial institution, it shall report to its next-higher-level branch office, which shall impose punishment or give relevant suggestions according to the afore-mentioned clause.

Article 26 When the People’s Bank of China and any branch office above the district or municipal level impose administrative penalty on financial institutions for violation of these Rules, it should act according to provisions in the Rules of Administrative Penalty Procedure of the People’s Bank of China.

Article 27 These Rules shall enter into effect on January 1, 2007 and the Rules for Anti-money Laundering by Financial Institutions promulgated by the People’s Bank of China on January 3, 2003 are abolished at the same time.

(Promulgated by Order No. 8 of the China Securities Regulatory Commission on June 1, 2002, and amended according to the Decision of the China Securities Regulatory Commission on Amending the Rules for the Formation of Securities Companies with Foreign Shareholder on December 28, 2007, and amended according to the Decision of the China Securities Regulatory Commission on Amending the Rules for the Formation of Securities Companies with Foreign Shareholder on October 11, 2012)

Article 1 In order to meet the demands of opening up the securities market, to strengthen and improve the supervision and administration of securities companies with foreign shareholders and to define the conditions and procedures for the formation of securities companies with foreign shareholders, these Rules have been formulated according to the relevant provisions of the Company Law and the Securities Law.

Article 2 The “securities companies with foreign shareholders” as mentioned in these Rules refers to:
1. The securities companies that are jointly contributed and established by the foreign and domestic shareholders; and
2. The securities companies that are changed from domestic-funded securities companies through the acceptance or purchase of shares by foreign shareholders.

Article 3 The China Securities Regulatory Commission (hereinafter referred to as the CSRC) shall be responsible for the examination and approval, supervision and administration of securities companies with foreign shareholders.

Article 4 The name, form of organization, registered capital, establishment and duties of the departments of a securities company with foreign shareholders shall comply with the relevant provisions of the Company Law, the Securities Law and the CSRC.

Article 5 A securities companies with foreign shareholders may engage in the following businesses:
1. Underwriting and recommendation of stocks (including RMB common stocks and foreign capital stocks) and bonds (including government bonds and corporate bonds);
2. Brokerage of foreign capital stocks;
3. Brokerage and proprietary trading of bonds (including government bonds and corporate bonds); and
4. Other businesses approved by the CSRC.

Article 6 A securities companies with foreign shareholders shall meet the following conditions:
1. The registered capital is in compliance with the provisions of the Securities Law;
2. The shareholders have the qualifications as provided for by these Rules, and the proportion and form of their capital contribution comply with the provisions of these Rules;
3. The numbers of persons who have obtained the qualification for securities dealing according to the provisions of the CSRC should be 30 or more, and there are necessary professionals for accounting, legal affairs, and computing;
4. Having sound internal management, risk control, as well as the separated management system of underwriting, brokerage and proprietary trading in the aspects of institution, personnel, information and business execution, etc., and having an appropriate internal control technical system;
5. Having the business premises that meet the requirements and the qualified business facilities; and
6. Other prudential conditions as provided for by the CSRC.

Article 7 The foreign shareholders of a securities company with foreign shareholders shall meet the following conditions:
1. Their home countries or regions have a sound legal and regulatory system of securities, and the securities regulatory bodies have signed the memorandum of understanding on securities regulation and kept an effective cooperative relation with the CSRC or the institution accepted by the CSRC;
2. They have been lawfully formed in their home countries or regions, at least one of them is an institution that has the lawful financial business qualification; and they shall not transfer their equities in the foreign-shared securities company within three years after the equity participation;
3. They have engaged in the financial business for five years or more, and haven’t been given major punishment by the securities regulatory body, the administrative or justice department of their respective home countries or regions in last three years;
4. All of their financial indicators in last three years are in compliance with the legal provisions of their respective home countries or regions and the requirements of their respective securities regulatory bodies;
5.They have a sound internal control system;
6. They have a good reputation and business performance; and
7. Other prudential conditions as provided for by the CSRC.

Article 8 The domestic shareholders of a securities company with foreign shareholders shall have the qualification requirements for the shareholders of securities companies as provided for by the CSRC.
Among the domestic shareholders of a securities company with foreign shareholders, at least one shall be a domestic-funded securities company. But the foreign-shared securities company changed from a domestic-funded securities company shall be an exception.

Article 9 The domestic shareholders may invest by cash or tangible goods that are necessary for the business operation. The foreign shareholders shall use freely exchangeable currencies to invest.

Article 10 The shareholding of foreign shareholders or the stake of foreign shareholders in a securities company with foreign shareholders shall not exceed 49% cumulatively (including direct shareholding and indirect control).
The shareholding or stake of one domestic-funded securities company at a minimum among domestic shareholders in a securities company with foreign shareholders shall not be lower than 49%.
After a domestic-funded securities company is changed into a securities company with foreign shareholders, the shareholding of one domestic shareholder at a minimum shall not be lower than 49%.

Article 11 The directors, supervisors and senior managers of a securities company with foreign shareholders shall have the qualification requirements as provided for by the CSRC.

Article 12 To apply for establishing a securities company with foreign shareholders, the representatives appointed by all the shareholders or the agents entrusted by them shall submit the following documents to the CSRC:
1. Application form jointly signed by the legal representatives or the authorized representatives of the domestic and foreign shareholders;
2. Contract for formation the securities company with foreign shareholders and the draft of the company’s bylaw;
3. Explanatory documents on the competence of principal senior managers to be appointed by the securities company with foreign shareholders;
4. Copies of business licenses, registration certificates, or securities business qualification certificates of the shareholders;
5. Audited financial statements of the foreign and domestic shareholders for the three years prior to the application;
6. Explanatory letters issued by the securities regulatory bodies of the home countries or regions of the foreign shareholders or the foreign institutions accepted by the CSRC on whether these shareholders have met the conditions as provided for in Items (2) up to (4) of Article 7 of these Rules;
7. Legal opinions issued by the law firms within the territory of China; and
8. Other documents required by the CSRC.

Article 13 The CSRC shall, according to the relevant laws, administrative regulations and these Rules, examine the application documents as provided for in the preceding article, make the decision on whether to approve the application within the stipulated time limit, and notify the applicant in written form. For those not approved, reasons shall be explained in written form.

Article 14 The shareholders shall contribute the capital in full amount or provide the cooperative conditions agreed upon, elect directors and supervisors, appoint senior officers, and apply to the administration for industry and commerce for registration of establishment and get the business license within six months from the day on which the CSRC issued the document of approval.

Article 15 The board chairman or the authorized representative of a securities company with foreign shareholders shall, within 15 workdays from the day on which the business license is granted, submit the following documents to the CSRC to apply for the License for Securities Business:
1. Copy of the business license;
2. The company’s bylaw;
3. Capital verification report produced by the accounting firm that is qualified for securities-related business within the territory of China;
4. Name list of the directors, supervisors, senior officers and principal business operators, and the copies of their post holding qualification certificates and their securities business qualification certificates;
5. Documents about the internal control system;
6. Explanatory documents about the business premises and business facilities; and
7. Other documents required by the CSRC.

Article 16 The CSRC shall, according to the relevant laws, administrative regulations and these Rules, examine the application documents as provided for in the preceding article, and shall make its decision within 15 workdays from the day on which the application documents meeting the requirements are received. For those meeting the conditions, the License for Securities Business shall be granted; for those not meeting the conditions, the license shall not be granted and reasons shall be explained in written form.

Article 17 A securities company with foreign shareholders that hasn’t obtained the License for Securities Business as granted by the CSRC may not start business or engage in the securities business.

Article 18 Where a domestic-funded securities company applies for changing into a securities company with foreign shareholders, the conditions as provided for in Article 6 of these Rules shall be met.
The foreign shareholders purchasing or holding shares of domestic-funded securities companies shall meet the conditions as provided for in Article 7 of these Rules, and the proportion of the purchased shares or the capital contribution thereof shall meet the provisions of Article 10 of these Rules.

Article 19 A domestic-funded securities company applying for changing itself into a securities company with foreign shareholders shall submit the following documents to the CSRC:
1. Application form signed by the legal representative;
2. Decision of the shareholders’ meeting on changing itself into a foreign-shared securities company;
3. Draft of company’s bylaw;
4. Share transfer or capital contribution agreements (share purchasing agreement);
5. Name list and resumes of the persons appointed by the foreign investors to take position in that securities company, and their corresponding business qualification certificates and position qualification certificates;
6. Copies of business licenses or registration certificates and securities business qualification certificates of the foreign shareholders;
7. Audited financial statements of the foreign shareholders for the three years prior to the application;
8. Explanatory letters issued by the securities regulatory bodies of the home countries or regions of the foreign shareholders or the foreign institutions accepted by the CSRC on whether these shareholders have met the conditions as provided for in Items (2) up to (4) of Article 7 of these Rules;
9. Plans for the business settlements that cannot be conducted by securities company with foreign shareholders according to law;
10. Legal opinions issued by the law firms within the territory of China; and
11. Other documents required by the CSRC.

Article 20 The CSRC shall, according to the relevant laws, administrative regulations and these Rules, examine the application documents proscribed by the preceding article, make the decision to approve or disapprove the application within the stipulated time limit, and notify the applicant in written form. For those not approved, the reasons shall be explained in written form.

Article 21 The securities companies that receive approvals for changes shall, within six months from the day when the CSRC issued the document of approval, handle the matters of shares transfer or capital increase, clean up the business that cannot be operated by securities company with foreign shareholders, and shall apply to the Administration for Industry and Commerce for the registration of business alteration and obtain the new business license by turning in the original one.

Article 22 A securities company that receives approvals for change shall, within 15 workdays from the day of the registration of change, submit the following documents to the CSRC and apply for a new License for Securities Business:
1. Duplicate copies of the business license;
2. The bylaw of the foreign-shared securities company;
3. The original license for securities business and its duplicate copies;
4. Capital verification report issued by the accounting firm resided in the territory of China and qualified for securities-related business;
5. Report on the business settlements that can’t be operated by foreign-shared securities companies according to law;
6. Legal opinions and verification report on the aforesaid business settlements issued by the law firm resided in the territory of China and the accounting firm qualified for securities-related businesses; and
7. Other documents required by the CSRC.

Article 23 The CSRC shall, according to the relevant laws, administrative regulations and these Rules, examine the application documents prescribed in the preceding article, and shall make the decision on whether to approve it within 15 workdays from the day when the application documents meeting the requirements are received. For those meeting the conditions, the new License for Securities Business shall be granted to them; and for those not meeting the conditions, no new license may be granted, and reasons shall be explained in written form.

Article 24 A securities company newly established or continuing to exist after the merger of foreign-shared securities companies or the merger of securities companies with foreign shareholders and domestic-funded securities companies shall meet the conditions for establishment of securities company with foreign shareholders prescribed in these Rules; its business scope, the proportion of the shares or equities held by foreign shareholders shall be in compliance with the provisions of these Rules.
Where there are foreign shareholders in a securities company established upon the split-up of a securities company with foreign shareholders, its business scope and the proportion of the shares or equities held by the foreign shareholders shall be in compliance with the provisions of these Rules.

Article 25 Foreign investors may legally hold the shares in a listed domestic-funded securities company through securities trading on a stock exchange or hold shares in a listed domestic-funded securities company with the approval of the CSRC by establishing a strategic partnership with the listed domestic-funded securities company, and the approved business scope of the listed domestic-funded securities company shall remain unchanged. The restriction that the shareholding of one domestic shareholder at a minimum shall not be lower than 49% shall not apply to the listed domestic-funded securities company provided that its controlling shareholder is a domestic shareholder.
Where a foreign investor holds 5% or more of the shares of a listed domestic-funded securities company through purchasing securities from the stock exchanges or holding shares jointly with others by entering agreements or any other arrangements, the investor shall comply with the conditions provided for in Article 7 of these Rules, and abide by Article 129 of the Securities Law.
The proportion of the shares of a listed domestic-funded securities company held (including both directly held and indirectly controlled) by a single foreign investor shall not be more than 20%; and the proportion of the shares of a listed domestic-funded securities company held (including both directly held and indirectly controlled) by all the foreign investors shall not be more than 25%.

Article 26 The application documents submitted to the CSRC and the materials reported to the CSRC according to these Rules shall be in Chinese. Where the documents and materials of the foreign shareholders and those issued by the securities regulatory bodies of their home countries or regions or the foreign institutions accepted by the CSRC are in foreign languages, the Chinese versions that are consistent with the original documents shall be attached.
Where the documents and materials submitted by the applicant fail to sufficiently explain the situation of the applicant, the CSRC may ask the applicant to make supplementary explanations.

Article 27 Where investors from Hong Kong Special Administrative Region, Macao Special Administrative Region and Taiwan Area hold shares in securities companies, these Rules shall apply mutatis mutandis, except as otherwise required by any state provisions.

Article 28 The establishment, alteration, termination, business activities, supervision and management of securities companies with foreign shareholders shall be governed by other relevant provisions of the CSRC if there is no such provisions in there Rules.

Article 29 These Rules shall come into force from July 1, 2002.