Laws of the People's Republic of China

The Interim Measures for the Administration of the Issuance of RMB Bonds in Hong Kong Special Administrative Region by Financial Institutions Within the Territory of China have been formulated jointly by the People's Bank of China and the National Development and Reform Commission. They are hereby promulgated for entry into force.

People's Bank of China

National Development and Reform Commission

June 8, 2007

Interim Measures for the Administration of the Issuance of RMB Bonds in Hong Kong Special Administrative Region by Financial Institutions Within the Territory of China

Article 1

In order to further promote the development of RMB business in Hong Kong Special Administrative Region (hereinafter referred to as Hong Kong) and regulate the issuance of RMB bonds in Hong Kong by financial institutions within the territory of China, the present Interim Measures are formulated in accordance with the Law of the People's Republic of China on the People's Bank of China and other relevant laws and administrative regulations.

Article 2

Financial institutions within the territory of China herein means the policy banks and commercial banks that are established within the territory of the People's Republic of China (excluding those in Hong Kong SAR, Macao SAR or Taiwan Area) according to relevant laws.

Article 3

RMB bonds herein means the securities that are issued in Hong Kong by financial institutions within the territory of China, valued by RMB, have a term of one year or more, and for which the principal and interests are repaid according to stipulation. The detailed term for bond issuance may be determined in light of the macro economic and financial status of the Mainland and the convertibility process of capital accounts.

Article 4

In the case of issuing RMB bonds in Hong Kong, a financial institution within the territory of China shall submit application materials to the People's Bank of China (PBC), and transmit a photocopy thereof to the National Development and Reform Commission (NDRC) as well. The PBC shall, jointly with the NDRC, verify the qualification and scale of RMB bonds to be issued by financial institutions within the territory of China in Hong Kong, and report the decision to the State Council.

Article 5

The State Administration of Foreign Exchange (SAFE) shall make registration and statistical monitoring upon the RMB bonds that are issued in Hong Kong by financial institutions within the territory of China, check and ratify the repayment of principal and interests by financial institutions within the territory of China as well.

Article 6

In the case of issuing RMB bonds in Hong Kong, a commercial bank shall satisfy the requirements as follows:

1.

It has a sound corporate governance mechanism;

2.

With adequacy ratio of the core capital not less than 4 percent;

3.

It has had continuous profits for the last three years;

4.

It has adequate reserves for loan losses;

5.

Its risk surveillant indicator is consistent with the relevant provisions of the regulatory organ;

6.

It has committed no major illegal or law-breaking act in the last three years; and

7.

Other requirements as prescribed by the PBC.

As for the issuance of RMB bonds in Hong Kong by a policy bank, it shall be handled by referring to the requirements for commercial banks.

Article 7

The application materials for the issuance of RMB bonds by a financial institution shall include:

1.

an application report concerning the issuance of RMB bonds;

2.

the resolution of the board of directors on the approval of the issuance of RMB bonds or documents with equal legal force;

3.

the scale and term of the bonds to be issued;

4.

the introduction for collecting RMB bonds (with an attachment of issuance scheme);

5.

financial statements of the financial institution within the territory of China for the last three years as audited by certified public accountants, and the full text of audit opinions in written form;

6.

legal opinions in written form as issued by attorneys;

7.

the (duplicate) photocopy of the Enterprise Legal Person Business License, and the (duplicate) photocopy of the Financial Permit; and

8.

other documents as required by the PBC.

Article 8

The PBC shall, jointly with the NDRC, make a decision of approval or disapproval to the application for the issuance of RMB bonds by a financial institution within the territory of China within the time limit as provided in the Administrative License Law of the People's Republic of China. The NDRC shall give a reply on the scale of RMB bonds at the same time if approved.

Article 9

A financial institution within the territory of China shall initiate the issuance of RMB bonds in Hong Kong within 60 workdays as of the approval of the PBC on issuance of RMB bonds, and complete the issuance within the time limit as prescribed. Where a financial institution within the territory of China fails to complete the issuance within the time limit as prescribed, the document relating to approving the issuance of RMB bonds shall be invalid automatically, and this issuance of bonds shall not be continued; if it is necessary to issue such bonds, a new application shall be separately submitted in accordance with the present Interim Measures. The standards for the completion of issuance within the time limit as prescribed shall be determined in accordance with the legal provisions of Hong Kong on the administration of the financial market.

Article 10

The financial institution within the territory of China and the underwriting institution shall determine the interest rate or price for the issuance of RMB bonds through negotiations.

Article 11

A financial institution within the territory of China shall report the circumstances concerning the issuance of RMB bonds to the PBC, the NDRC and the SAFE within 10 workdays after conclusion of the issuance of RMB bonds, and apply for the registration of bond funds to the local SAFE branch office subject to the relevant provisions.

Article 12

The funds involving the return of money raised through issuance of RMB bonds by financial institutions within the territory of China as well as the repayment of principal and interests of bonds shall be transferred through the clearing bank for RMB business in Hong Kong.

Article 13

A financial institution within the territory of China shall transfer back the money as deducted by relevant issuance expenses to the Mainland within 30 workdays after the money raised through issuance of RMB bonds is in place, and such money shall be used in strict accordance with the purposes as disclosed in the introduction.

Article 14

The principal and interests of RMB bonds shall be repaid in RMB. In the case of paying the principal and interests of RMB bonds, a financial institution within the territory of China shall submit an application to the local SAFE branch office prior to five workdays. The bank shall go through the formalities for overseas repayment of the principal and interests of RMB bonds for the financial institution within the territory of China upon an approval document as issued by the local SAFE branch office.

Article 15

With respect to the return of the money as raised through issuance of RMB bonds and the follow-up funds as well as the repayment of the principal and interests, a financial institution within the territory of China shall make a report on the international balance of payments in accordance with the Operational Rules for the Overseas Assets, Liabilities, Losses and Proceeds of Financial Institutions (Hui Guo Fa Zi [1996] No. 13).

Article 16

The sales, trading, registration, trusteeship, settlement of and information disclosure regarding RMB bonds in Hong Kong shall be subject to the relevant provisions as prescribed by Hong Kong.

Article 17

The present Interim Measures are subject to the interpretation of the PBC.

Article 18

The present Interim Measures shall enter into force as of the promulgation date.